Volume 3 - Issue 2

Whole Issue

Competition Law Review - Volume 3 Issue 2 (1.5 MB)

Editorial

Editorial

Michael Waterson (112 KB)

Articles

The Controversies of the Consumer Welfare Standard
KJ Cseres (445 KB)

This article deals with the consumer welfare standard in competition law enforcement. It explores the inherent economic and legal ‘geography’ of this notion by looking beyond the borderlines of competition rules. While the consumer welfare standard has been widely discussed as a legal and economic notion of competition law, this article approaches this concept from a new angle by making use of its interpretation in consumer law. In competition law the primary role of the consumer welfare standard is to verify the goals of competition policy and to delineate the general legal framework of competition law enforcement by establishing the basis for the standard of proof. In consumer law consumer welfare stands for correcting market failures in order to improve the consumer’s position in market transactions. Consumer welfare is concerned with efficient transactions and cost-savings but it is also directed at social aspects of the market such as the safety and health of consumers. Consumer welfare is an economic concept with relevant socio-political and legal implications. However, the economic rationale seems to be often overridden by a political rationale, which is to legitimize the enforcement work of competition authorities’ and to reflect society’s preferences on income distribution. This article addresses the implications of the consumer welfare standard in welfare economics, political economy and law. The analysis points out to what extent the enforcement of competition law can prevent (final) consumer harm and make (final) consumers better off and what the inherent limits of the promotion of consumer interests are in competition law. Such comparisons clarify and identify the function of this standard and delineate the borderlines between the two disciplines, the possible gaps and unnecessary overlaps they create in regulating markets.

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Competition Law, Consumer Policy and the Retail Sector: systems’ relation and the effects of a strengthened consumer protection policy on competition law
Irina Haracoglou (366 KB)

In March 2006, the French Competition Council fined 13 leading brands in the cosmetics industry and 3 major distributors of luxury perfumes a total of €46.2m for violating competition law. While cartels and competition enforcement are not new to competition law, the case triggers significant questions as it affects a retail sector, with an obvious, explicitly-recognised and direct impact on consumers. As distinct from competition infringements that are found to have taken place on a wholesale market and presumed to have an effect on consumers further down the chain, infringements in retail markets trigger more direct consumer concerns inasmuch as they may more directly and obviously harm consumer price, choice or other interests, thereby also triggering a potentially harsher application of competition law itself. Who is the consumer? What is the role of the consumer in competition law? How does consumer policy and law interact with competition policy and law? How do the developments in one body of law impact on the developments on the other body of law? And what implications does a strengthening in the perceived role of the consumer have on competition law and enforcement? This paper begins by defining and giving the basics of competition and consumer policy and law. It then inquires into the ‘theoretical’ relation between the two bodies of law, and finally, it explores the ‘practical’ implications of the consumer interest, and its strengthening, within competition law (procedural and substantive). The paper concludes by triggering some questions on ‘harm to consumers’ vs ‘harm to competition’, and whether the former could become an alternative threshold to competition enforcement.

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Representation of Consumer Interest by Consumer Associations – Salvation for the Masses?
Orit Dayagi-Epstein (411 KB)

Recent reforms have been made in the UK and Europe with a view to creating new avenues for representation of consumer interest by consumer associations. These avenues include the UK super-complaint mechanism, the appointment of the Consumer Liaison Officer at the European Commission, and the introduction of new mechanisms for the participation of consumer associations in judicial proceedings. This article argues that, although the recent reforms should be considered as an important milestone in competition policy, they have not fully addressed the difficulties inherent in the representation of consumer interest by consumer associations. These difficulties include lack of legitimacy, shortage of resources and agency problems. Indeed, a reform that grants consumer associations such a central role in the representation of consumer interest should also consider these difficulties and ensure that consumer associations will have not only the opportunities but also the ability to represent consumer interest adequately. The article goes on to consider how such vital capabilities, which include proper funding and training and improving cooperation between consumer associations, can be enhanced. It is incumbent upon competition authorities to play a distinctive role in implementing these measures.

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The Supermarket Sector in China and Hong Kong: A Tale of Two Systems
Mark Williams (220 KB)

The supermarket sectors in China and Hong Kong have different histories, structures and competition-related problems. In China, after 1949, all large-scale retail operations were nationalised. Local government control of supply chains and retailing meant there were no nationally organised chain stores. The retail sector was highly fragmented and faced little, if any, competitive pressure. Only in the 1980’s did the system change with an abandonment of the formal state plan, the liberalisation of agriculture, and acceptance of small private retailers. By the mid 1990s, various local governments across China encouraged international grocery firms to establish retail chains and grocery hypermarkets. The massive investment by foreign retailers has had a dramatic effect on the sector in major cities and has caused alarm and despondency amongst local retailers who have agitated for protection against the alleged ‘monopolistic’ practices of the foreign giants. The national government has commissioned reports and new regulations are slated to address these issues. In Hong Kong, the traditional laissez-faire economic policy of the former colonial government has been continued by the post-1997 administration. This has allowed the creation, by market forces, of a supermarket duopoly that has in excess of 80 per cent of the local supermarket trade. The incumbents are both subsidiaries of local property conglomerates and given local conditions the ability of newcomers to enter the market is restricted by high barriers to entry. As Hong Kong has no general competition law complaints have not resulted in any government intervention in the sector.  This complacent attitude is likely to change given the recent publication of a government-sponsored Competition Policy Review Committee report that recommended the enactment of a general competition statute which would include powers to investigate and sanction abuses of dominance.