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Does Competition Ordinance Result in Consumer Protection Does Competition Ordinance Result In Consumer Protection By Qaiser Javed Mian (Director Research/Faculty member Punjab Judicial Academy) There can be “prohibited” anti-competitive behaviour and there can be “permitted” anti-competitive behaviour. In U.SA, what is called Anti-Trust Law, in other Countries, it is called Competition Law and/or Anti-Monopoly Law 1 and/or Consumer Protection Law. According to Philip Areeda, U.S. Anti-Trust Law, “…contains a basic distinction between concerted and “independent” 2 action” , which in other words refers to distinction between “single – firm” and “multi-firm” conduct in the context of “encouraging competition”, and save the “businesses” and/or “consumers”. Antitrust law seeks fair competition on the belief that “free trade” benefits not only the consumer, but also the economy and business. The restraints imposed by this law can be divided into four categories: (i) agreements between competitors (ii) contractual arrangements between sellers and buyers (iii) creating and maintaining of monopoly power, and (iv) mergers. While U.S.A has “The Sherman Antitrust Act” (1890)” named for Senator Johan Sherman as a first measure passed by the U.S. Congress to “regulate interstate commerce” as well, Clayton Act, 1914) and “Robinson Patman Act (1936)”, Pakistan had “Monopolies And Restrictive Trade Practices (Control And Prevention) Ordinance, (V of 1970)”, Competition Ordinance (LII of 2007)” as amended from time to time and “The Punjab Consumer Protection Act (Pb. Act II of 2005)” while the other Provinces have not yet started applying Consumer Protection Law. India promulgated “The Consumer Protection Act, 1986” and Rules 1987 which includes “goods” as well as “services”. The present exercise is aimed at comparative study of the aforesaid laws with particular reference to U.S.A., European Union, India and Pakistan. The Sherman Antitrust Act (1890)3 It is interesting to note that the Sherman Act does not restrain or condemn monopoly per se, but it condemns the monopoly which has been obtained and kept through prohibited conduct of business. One obvious example of 1 The Term “antitrust” originated from the process of combating “business trusts” which used to create monopoly or unequal bargaining power presently called “Cartels”. Such laws deal with, inter alia, illegal monopoly, unfair business practices such as, but not limited to, cartels, hoarding, undue financial & stock controls, malafide connivance etc. European Union has provisions under the Treaty of Rome while Australia deals with it under “Trade Practices Act, 1974”. 2 P. Areeda, Antitrust Law, 1436 (1986). 3 The other U.S Laws on the subject are, FTC ACT; Hart – Scott-Rodino Act; Merger guidelines; Essential facilities doctrine. Noerr – Pennington doctrine; Parker immunity doctrine. anticompetitive conduct is overt price fixing which falls under per se category of conduct detrimental to competition requiring detailed analysis. The most important principle of prohibited conduct, in this context, is that the method(s) of 4 business are not aimed at making consumers the sufferers. Whether as a “single- 5 firm” or “multi-firm”, the “conduct” can be anti competition per se or can be so proved after analysis. It is very important to note that, Monopoly Power alone without anti competition conduct, is not unlawful. Rather, Mr. Learned Hand stated that, “[t] he successful competitor, having been urged to compete, must not 6 be turned on when he wins.” Therefore, the U.S Law does not prohibit monopoly 7 power through “Superior skill, foresight and industry” Under U.S law, the “prohibition” is limited to those arrangements or agreements which amount to unreasonable restraint of trade. It has been held by U.S. Court that, “Every agreement concerning trade, every regulation of trade, restrains. To bind, to restrain, is one of their very essence. The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy 8 competition.” The following are generally subject to antitrust test:- ● Price fixing ● Bid rigging ● Geographic market allocation ● 9 Fraud of “Patent” Consumer Protection Consumer Protection Laws are aimed at regulating, inter-alia, the following subject/topics: ● Minimum standards of product quality. ● Disclosure of certain details of the product and/or service. ● Cost of the product/service. ● Express or Implied Warranty. ● Prohibition of misleading advertisement. 4 th See e.g. “Olympia Equipment Leasing Co. v. Western Union Telegraph Co., 797 F.2d 370, 379 (7 Cir. 1986) (Posmer,J.). 5 The single-firm prohibition is contained in “15 U.S.C. Section-2”; and multi-firm prohibition is contained in “15 U.S.C. Sect.1). It prohibits “[e] very contract, combination in the form of Trust or otherwise, or conspiracy, in restraint of trade or commerce”. 6 See e.g. “United States v. Aluminum Corp. of America (“Alcoa”), 148 f.2D 416, 430 (1945) (l.Hand, J.) 7 Id. 8 See e.g. Board of Trade of the City of Chicago v. United States, 246 U.S. 231, 244 (1918) (“Chicago Board of Trade”). 9 See e.g. Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965). ● Product liability including any possible present or future side after effects. Thus, Consumer Protection Laws are, in certain respects, distinct from Antitrust or Ant Competition Laws. The approach of U.S Supreme Court has shifted since 1970s and is now focused solely on what is best for the consumer 10 rather than the Company’s practices . The ultimate rationale behind Antitrust, Anti-Competition and/or Anti-monopoly laws is to restrain trade practices amounting to or resulting in or attempting towards direct or indirect monopolization, anti-competitive mergers including but not limited to, price discrimination in the sale of commodities, market allocations, quotas and resale price maintenance by manufacturers. Unreasonable exclusionary 11 practices and “predatory pricing” is also prohibited. Enforcement: In U.S.A., there are both state and federal anti-trust laws and the enforcement of these laws takes three forms:- i. Federal Government via the Department of Justice or Federal Trade Commission can bring civil law suits. The Department of Justice alone may bring criminal antitrust suit. ii. State attorneys, general/law officers may file suits to enforce both state and federal antitrust laws. iii. Private civil suits may be brought in both state and federal courts for damages etc. If it is decided that by monopolizing, the consumer was overcharged $200,000, that amount will automatically tripled, so 12 the injured consumer will receive $600,000. There are two federal enforcement agencies in U.S., the Federal Trade Commission (FTC) and the U.S. Department of Justice’s Antitrust Division. Violations of the Sherman Act are felonies carrying fines upto $10 million for corporations and upto $ 35,000 and upto three years prison for individual persons. The U.S Antitrust law kept on developing in the late 1980s and early 1990s. U.S. Supreme Court supported the efforts of Government’s attacked mergers and restraints.13 After the era of Ronald Reagan, antitrust attitudes became more severe in Washington, DC. President George Bush also adopted an activist approach. Under President Clinton, the most important case of Antitrust law was that involving AT & T and IBM. Competitors complained that Microsoft used illegal arrangements with buyers to ensure that its risk 10 See, David Frum, “How we got here: The 70s, New York(2000): Basic Books. P.327. ISBN 0465041957. 11 In “predatory pricing” big enterprises sell their products and services at a loss for a time pushing smaller enterprises out of business. See, “David Frum”, Id. 12 The U.S Supreme Court summarized why Congress authorized private antitrust law suits in the case,”Hawai vs. Standard oil Co. of Cal., 405 U.S. 251, 262 (1972). 13 See, “ California vs. American Stores Co., 495 U.S.271, 110 S.Ct. 1853, 109 L.Ed.2d 240 (1990). operating system would be installed in nearly 80 percent of the world’s computers. In-depth investigation by the FTC and the Department of Justice followed. In mid- 1994, under threat of a federal lawsuit, Microsoft entered a consent decree designed to increase competitors’ access to the market. All the parties involved i.e. the original complainants, Microsoft , and the government expressed relative satisfaction. But in early 1995, a federal judge rejected the agreement, citing evidence of other monopolistic practices by Microsoft. In a highly unusual move, the Justice Department and Microsoft together appealed the decision. The uncertain future of the case carried the threat of further action against the nation’s fifth-largest industry. Anti competition Law in the U.K. United Kingdom being a member state of the European Union is bound by the consumer protection laws, rules and directives of the European Union. The Anti Competition Law and/or the Consumer Protection Law of the U.K itself developed from the ambit of “contract” and “tort”. Now due to the influence of the European Union, an independent body of law is emerging in this area. The United Kingdom has also a lot to share with the other common wealth countries such as Australia and Newzeland etc. In Australia, there is the Australian Competition And Consumer Commission. In Newzeland, the correspondence agency is the ministry of consumer affairs. The U.K itself has been following the laws given as under:- ● Unfair Contract Terms Act 1977 ● Sale of Goods Act 1979 ● Consumer Protection Act 1987 ● Unfair Terms in Consumer Contracts Regulations 1999 ● Consumer Protection (Distance Selling) Regulations 2000 ● Electronic Commerce Regulations 2002 ● Enterprise Act 2002 ● General Product Safety Regulations 2005 European Union Law In the year 1957, six Western European countries signed the Treaty of Rome, now called the Treaty of the European Community.
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