We are honoured to welcome Professor Wouter Wils, who will give a lunchtime lecture on 13 May 2008 at the Competition Law Research Centre, with the support of the Centre for Competition Culture, Office of Economic Competition. The event is co-organised by the Hungarian Competition Law Association.
Today the OFT published a paper on the interactions between competition and consumer policy (written by Mark Armstrong (?)). See here. The GVH, the national competition authority in Hungary, is also responsible for enforcing consumer deception prohibitions.
The paper might be of interest for those who litigate consumer deception cases before the courts. Some parts about over enforcement:
“… the FTC often took a very expansive view of which adverts were misleading, and this was used to protect incumbent firms from new entrants. The problem was that an advert could be ruled as misleading even when it deceived only the ‘ignorant, unthinking, and credulous’, which in practice could include many adverts.”
“In Chapter 3, I argued that consumer policies should facilitate advertising, since advertising might be a valuable channel through which consumers obtain information about prices and product attributes in the market. Therefore, it is ironic that in the past (as illustrated in the previous quote), consumer policies often acted to restrict advertising.”
“Other highly contentious consumer policies are those that act to restrict the choices available in the market. The reason for this is that such policies harm those consumers who vigorously defend their interests, even if they sometimes help the more vulnerable consumers.”
“A frequent way in which consumer policies can restrict choice is by imposing stringent minimum quality standards on a market. Of course, if quality is not observed by consumers, if reputational concerns are not effective, and if information remedies are not feasible, then it may be sensible to impose minimum standards. But the situation is rarely that bad.”
And some parts for those who are involved in the highly disputed credit card cases.
“But other cases are much less clear-cut, such as the credit card penalty charges discussed shortly. In such cases, the information needed to be confident that the benefits of banning a particular product outweigh the losses is hard for a consumer body to find. In these situations, the consumer body should investigate carefully whether there is an information remedy that might do almost as well at protecting the inattentive consumers without restricting choice.”
“Consider in more detail the case of late payment charges on credit cards. As an alternative (or in addition) to an informational remedy, such as making these charges more prominent when the consumer signs the contract, one could directly control the level of such a charge. Set against the beneficial impact on those consumers who end up paying the charge and did not realize it applied to them, there are at least five drawbacks to such a policy. First, as discussed in Chapter 3 Section D, the impact will likely be to harm the careful consumers who do always pay on time, and so the benefit in terms of aggregate consumer welfare is unlikely to be great. Second, there may be consumers who actively want to have this particular charging structure. For instance, a consumer who is aware that he suffers from self-control problems might like the extra discipline that high penalty charges bring, so that the high charge acts as a commitment device. …
The third problem is that a credit card supplier might legitimately wish to deter adoption of its product by less credit-worthy consumers, and may use a high charge for late payment as a means of doing so.
Fourth, as a practical matter it may be very resource intensive for a consumer body to have to determine permitted price levels in the small print of contracts. Generally, one does not want a consumer or competition body to need to have a detailed knowledge of the many industries it oversees. Unless it is completely arbitrary, in order to calculate the basis for a ‘fair’ small-print charge, the authority will have to investigate detailed costs incurred by many firms on an ongoing basis, which will be resourceintensive for both the authority and the industry. Finally, the fifth reason for caution is that such a policy may be the thin end of the wedge. If policy to control the level of small-print or add-on charges is deemed appropriate in this instance, why not in other markets such as: hotel phone charges; printer ink cartridges; extended warranties on electrical goods; charges for going beyond one’s monthly allowance for mobile phone calls; the hypothetical expensive butter in the supermarket in Chapter 2; and so forth?” And so on and so forth.
Worth to read!
Also a new site that concentrates on competition laws less frequently analysed in European academic literature. It is worth to follow: IMEDIPA.
IMEDIPA (Institute of Studies in Competition Law and Policy), an independent, non-profit organization, was founded in February 2007. Its objective is to promote legal, policy and economic analysis of competition policy reforms in the Eastern Mediterranean, the Balkan region and the countries members of the Organization of the Black Sea Economic Cooperation Agreement, and to provide a research and discussion forum for academics, practitioners, and enforcement officers in the competition field in these jurisdictions.
IMEDIPA aims through external events, research projects and publications to stimulate research in competition law and policy and its application in specific industries (e.g. Energy, Maritime Transport, Telecoms, Information Technology, Financial Services). It also aims to promote a strong competition law community in this geographic area by organizing events and advancing the debate among competition law and economics scholars, policymakers and Competition authorities, the judiciary, practitioners, consumer associations as well as the business community.
I had a great time in Glasgow at the CLaSF conference. The presentations were excellent quality and looking at some of the “hot topics”. The next workshop will be held in London in September.
One of my surprises came when it turned out that there are people out there who read (or at least take a look on) my blog. So I have to be careful what I write here… I really thought I only do it for my own fun…
I think the fellow academics and practitioners were really interested in the developments at the East side of the EU. For those who would like to take a look at recent case law I recommend a recently published book. The book is really very useful to anyone who has to deal with competition cases on national level and is not active in the respective country. See here:
Ioannis Kokkoris also drew my attention to an interesting site I did not know of. Look out for developments on the site in the near future, I was told it will be recast and redesigned.
Tomorrow I should deliver a presentation at the 11th CLaSF Workshop in Glasgow. See here. Currently I am stuck on the Hungarian airport. After waiting for about an hour on the plane we had to get off and now I am in the waiting hall. It was promised that we will get back on the plane in about an hour and a half, but this was two hours ago. I hope I will get to Glasgow at least today evening. Anyway, in case not probably the best place to disseminate information is the Internet, so please feel free to download and read the background paper for the presenatition. It was not intended to cover all apsects of Hungarian competition policy, nor to provide a complete picture, since I have only 20 min. to talk.
In the next Glaxo case the AG delivered his opinion. (No Enlgish version available at the time, but see here for a German version.) But there is an English press release by the ECJ. Just a few interesting points:
No per se abuses: “Advocate General Dámaso Ruiz-Jarabo points out that the Treaty provision which prohibits abuse of dominant position does not admit of any exception. Moreover, he maintains that the Treaty does not provide a basis for attributing to undertakings in a dominant position conduct which is in itself abusive, even when the circumstances of the case leave no room or doubt as to its anti-competitive purpose or effect. On the contrary, such conduct may be objectively justified.”
Special market: „First, in the view of the Advocate General, the European pharmaceuticals market is an imperfect market, with a low level of harmonisation, characterised by State intervention in respect of pricing and public reimbursement systems and by the duty to supply and where, because of the industrial patents of pharmaceutical products, the holders of those industrial property rights can easily assume positions of dominance.”
Special negotiating power in the sector: „Nevertheless, the Advocate General believes that the price regulation system is not completely free from the influence of the manufacturers, who negotiate prices with the health authorities of the Member States. By the same token, the duty to supply does not justify cutting off supplies to rival wholesalers, because the needs of patients in a Member State are not subject to sudden changes, and the statistics for the various illnesses are reliable, offering companies a degree of predictability which enables them to adapt to the market.”
Efficiency defence:” Lastly, the Advocate General suggests that undertakings in a dominant position may be entitled to demonstrate the efficiency in economic terms of their potentially abusive conduct. As regards the circumstances of the present case, however, the Advocate General takes the view that – apart from the description of the negative consequences of parallel trade – GSK has not indicated any positive aspect resulting from its cutting down on medicinal supplies to wholesalers.”
The MOL/CEZ JV (M.5090) was notified on 3 April 2008 to the European Commission. Provisional deadline for the end of the first phase is 14 May 2008.