Competition policy and consumer protection
WHY should consumers care about competition policy? The answer is very simple, it is vital for economic growth and development. Competition is an age-old phenomenon and a key to survival in any market driven economy. It ensures that markets operate more efficiently, competitively and in the interest of consumers.
The origins of modern competition policy can be traced back to the end of 19th century, mainly as a reaction to the formation of trusts in the United States (US). Modern competition law (known as anti-trust law in the US) began with the US legislation of the Sherman Act of 1890 (original antitrust legislation attempt to control monopoly power) and the Clayton Act of 1914 (extension of federal antitrust law through which a Federal Trade Commission was created to control unfair methods of competition).
The protection of consumer rights in modern times dates back to 1962, when the Consumer Bill of Rights was proclaimed by the US President John F Kennedy in a message to the Congress. The message proclaimed the right to choice, the right to information, the right to safety; and the right to be heard. Subsequently, the right to consumer education, the right to a healthy environment and right to basic needs (food, clothing and shelter) were added by Consumer International.
Competition in the market for products and services is essential for the healthy growth of an economy. Protection of consumers is accomplished by setting minimum quality specifications and safety compliances for both goods and services; and by establishing mechanism to redress their grievances. The objective is to ensure the presence of sufficient numbers of producers in the market, where no one can attain a position of dominance. A competitive market fosters investment in an economy and also helps the consumers through maintaining a fair price in the market.
Though perfect competition is a myth, a good competition policy lowers entry barriers in the market and makes the environment conducive to promoting entrepreneurship for the growth of small and medium enterprises, which will ultimately generate employment. Through competition policy, other forms of market failure can also be tackled, such as formation of cartels leading to collusive pricing, division of markets, and joint decisions to reduce supply. The ultimate object of a competition policy is to protect consumers as well as producers, and ensure safeguarding of public interest.
Free and open competition lowers prices and ensures new and better products in the market, which in turn ensures consumer welfare. Ultimately, it removes the unequal relationship between both consumers and producers. Competition policy includes laws and policies dealing with anti-competitive practices, as well as competition advocacy for educating the public about the need for the policy. Any such policy generally includes economic policy undertaken by the government and competition law.
Promotion of welfare of the consumer should be the common goal of consumer protection and competition policy. There is a convergence between the objectives of consumer protection and competition policy. The first and foremost fundamental right of a human is the right to life. Consumer protection law protects the consumers. These concern minimum health and safety standards, information and labeling requirements, provision of advice to consumers, and regulation of consumer credit.
On the other hand, the main objective of competition policy is to preserve and promote competition as a means of ensuring efficient allocation of resources in an economy. It ensures fair prices and adequate supply, which makes markets work, and protect the consumers from deception as they are the first to lose when markets fail. This brings both consumer protection and competition policy under one integrated framework.
With the process of economic liberalisation since the 1980s, several countries adopted policies of deregulation, privatisation and trade liberalisation. Following these changes, the General Agreement on Tariffs and Trade (GATT) and subsequently the World Trade Organisation (WTO) came into being. The WTO, with several agreements and rules, ensures healthy competition in the global market. So, there is a need for specific competition rules to be integrated into the international trading system.
Though a strong relationship exists between trade and competition, there is a great deal of controversy on whether or not measures should be taken to create a multilateral set of rules governing competition regulations. Some developing countries fear that large multinational corporations will expand into their domestic markets and threaten new and domestic firms. The major players, such as the US and the EU, vigorously support the creation of international competition policy that should be regulated by the WTO rather than left up to individual country governments.
However, competition policy is yet to be an agreement under the WTO. Out of 149 member states of the WTO, 80 have adopted competition policy. Though it was proposed in 1996, it could not be passed due to strong opposition from the developing countries. Through the process of globalisation, adoption of a consumer protection and competition policy has now become a necessity.
Consumer movement in Bangladesh is still in a nascent stage. The desire of businessmen for unlimited profiteering brings unbearable sufferings for the consumers, particularly for the people of limited income, as they cannot adjust to the large and sudden changes in price levels. However, consumer protection legislation was brought into law in Bangladesh on April 1, 2009 by the Parliament when the 2008 Consumer Protection Ordinance became Law. But no legal provision exists at present in Bangladesh to provide protection against injuries caused by monopolies and unfair trade practices.
Bangladesh should adopt a national competition policy and accordingly enact a competition law, which should establish a national competition authority to administer and implement the competition policy. Policy should be made sector-wise. It should be adopted by the government at its own discretion, depending on the local context. While doing so, cultural differences should be taken into account. For this, utmost care is required to select from the foreign experience under different cultural settings. Lack of awareness among stakeholders about the need to formulate a competition law needs to be removed. Steps need to be taken to make the bureaucracy pro-people to get maximum output from competition policy.
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