Handout 2

Seminar 2: Competition Law and Consumer Law (11 October 2012)

 The overlap between these two legal domains has increased in recent years, especially as the more economics-based approach to competition law in the EU has made consumer welfare a more central part of its law enforcement activities (whether at the stage of deciding on what cases to prioritise, or at the stage of developing a theory of harm). Concomitantly, the law and economics approach to consumer law might have moved its legal standards closer to those of competition law.  That said, there remain probably differences between the two approaches. I would like to consider both the overlaps and the differences.

 Reading

Case C-238/05 Asnef-Equifax, Servicios de Información sobre Solvencia y Crédito, SL v Administración del Estado [2006] ECR I-11125

 J.D. Wright ‘The Antitrust/Consumer Protection Paradox: two Policies at War with Each Other’ (2012) 121 Yale Law Journal 2216

 G. Monti ‘The Revision of the Consumer Acquis from a Competition Law Perspective’ (2007) 3(3) European Review of Contract Law 295

 E. Hondius ‘The Innovative Nature of Consumer Law’ (2012) 35 Journal of Consumer Policy 165

 Questions for reflection

1. What is the possible role that the consumer plays in EU competition law? Consider for example the application of Article 101 TFEU.

 2. Is it possible to think that we could do away with consumer law and rely solely on competition law? If not, what specific examples can you use to illustrate the sorts of harm that consumer law addresses that competition law cannot?

 3. Does competition law create an analytical framework that is duplicated in consumer law (or vice versa)? Or are the two approaches irreconcilable?

 4. Consider remedies and enforcement in the two fields: are there, or should there, be any similarities or differences?

 5. What should we do if we find consumer law has anticompetitive effects?

 Further Reading

K. Armstrong Interactions between Competition and Consumer Policy (2008) 4(1) Competition Policy International 97

 M. Huffmann Bridging the Divide: Theories for Integrating Competition law and Consumer Protection 2010 6(1) European Competition Journal 7

 J.R. Macey & J.P. Holdcroft, Jr., Failure Is an Option: An Ersatz-Antitrust

Approach to Financial Regulation, 120 Yale LJ 1368 (2011)

 Neil W. Averitt & Robert H. Lande, Consumer Sovereignty: A Unified Theory of Antitrust and Consumer Protection Law, 65 Antitrust LJ 713 (1997)

 I. Haracoglou ‘Competition Law, Consumer Policy and the Retail Sector: Systems’ Relation and the Effects of a Strengthened Consumer Protection Policy on Competition Law’(2007) 3(2) Competition Law Review 175

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5 comments on “Handout 2

  1. Jotte Mulder says:

    Both EU competition law and consumer law define the welfare of consumers as a fundamental objective. However, as the reading materials for the seminar illustrate, the specific consumer welfare concerns that consumer and competition law pursue differ in a fundamental sense. Competition law defines consumer welfare mainly from a market perspective. That means that the consumer as such remains a bit abstract and its welfare is mainly defined in monetary terms. An increase in consumer surplus will lead to an increase in consumer welfare. That is the assumption in competition law. It is a single-minded approach and one that will not always align with reality. But this simplicity and relative single mindedness provide the basis for a general policy of competition law that can be effective, coherent and most of the time beneficial for consumers. In most cases consumers will benefit from more choice in products and lower prices. It is in those incidental cases where consumer welfare can be benefited though a more specifically targeted public policy driven concerns that consumer law could play a role in addition to competition law.

    Consumer law considers the welfare of consumers from a public policy paradigm that is less easily measurable and generally based on principles of fairness and specific policy objectives. In other words, objectives in competition law are objectively defined by the market perspective whereas objectives in consumer law are more instrumentally defined on a specific situational basis and grounded in a process of political decision making that is concerned with isolated situations of consumer welfare (such as healthier food and product safety). This may also explain the different underlying approaches to consumer welfare in competition and consumer law in the U.S., as highlighted by Wright (2012). The rational choice model of consumer behaviour in antitrust law assumes that more availability of choice in products necessarily leads to an increase in consumer welfare. It appears as if this model is directly challenged by models adopted on the basis of behavioural economics that map consumer choices on the basis of more indicia relevant to the actual decision making process of consumers. However, there is only a contradiction if it is assumed that the underlying objectives of consumer welfare are the same. As said, I think this is not the case. Competition law pursues consumer welfare in monetary terms, specifically related to market objectives. Rational choice models are best suited to apply to scenario’s situations where maximum consumer surplus is reached. Consumer law pursues consumer welfare from a public policy perspective. As such it allows for the integration of specific public policy concerns whereas the competition law objectives are mostly attractive, in particular, because of their simplicity and general applicability.

    This may also provide a basis for a rational for competition and consumer law to coincide within the EU legal infrastructure. From this perspective, as a general rule, competition law and its approach to consumer welfare in monetary terms could be the general rule and consumer law could provide exceptions or adaptations to the simplistic approach when considered necessary on the basis of specific consumer welfare concerns.

  2. Emma says:

    I think consumer welfare in the competition law sense is different to the objectives of consumer law. Economic internal market aims are still primary in EU competition law, so the angle at which the competition provisions approach consumer welfare is concerned with the functioning of the market (effects-based), and not a consumer fairness based approach. The ECJ has not been swayed into making consumers the central beneficiaries of EU competition law, saying that it ‘aims to protect not only the interests of competitors or of consumers, but also the structure of the market and, in so doing, competition as such’(ECJ in GSK, 2009). Nonetheless, the consumer obviously has a role to play, especially since a efficiencies under Art. 101(3) must produce a ‘fair share’ of benefits to consumers in order for an agreement that falls within Art.101(1) to be granted an exemption. However, under Art. 101(3), as far as the meaning of ‘fair share of the benefit to consumers is concerned, there is still some room for manoeuvre: One type of consumer benefit (e.g. low prices) might be off-set by another (non-economic gains).

    I do not think that doing away with consumer law is the way to go. Private litigation in consumer law allows for reparation to be granted to the weaker party (the consumer). The competition rules only apply to undertakings, and the role of private litigation is very small. Competition law generally functions ex post, while consumer law has an additional preventative role, to avoid consumer harm in the first place. Additionally, I think consumer law has a political role which competition law cannot take on – health and safety, increased information etc. are not direct aims of Arts. 101 and 102, although they may be taken into account for an exception. Also, it can be noted while consumer law goals are necessarily protective and paternalistic, competition law aims more towards encouraging competition and innovation rather than protecting from the unknown.

    I think that as Giorgio points out, the analytical frameworks have the potential for more coherence and that this should be done by using competition law as a basis. The Wright article describes the current situation as ‘wildly inefficient’, and from what I’ve read this seems accurate. Competition law has been evolving over many years and has reached a level where it is seen as stable and solid. A more competition-like approach to consumer law may well produce more efficient rules and I think Giorgio’s article highlighted that we can indeed approach the two areas from the same angle. I have to admit that I found parts of the Wright article rather striking, insofar as he indicated that the behavioural economics approach of the CFPB to consumer law was really just a ploy to further political ends. I am left doubting whether this behavioural economics approach is in any way sustainable in the long run, as increased political input could lead to further fragmentation rather than coherence.

    Lastly, there is scope in the competition provisions to allow for justified restrictions of competition. Art.101(3) allows for a balance to be struck, which can offset restrictions against efficiencies. As the Asnef-Equifax case shows, if there is any doubt then the market analysis undertaken in competition law – providing that it leads to an infringement of Art 101- results in a balancing of efficiencies under Art. 101(3). As such, I think that while competition law protects wider goals than consumer law, it is developed enough to satisfactorily deal with consumer issues that fall within its scope. Of course, this is limited where private litigation is concerned and the additional policy-making role of consumer institutions also make it free-standing from the competition realm.

    In short, I think here is scope for consumer law and competition law to work more closely in order to ensure efficient outcomes. The competition provisions do allow for non-competition goals to be taken into account, which ensures a balance is struck. Additionally, a behavioural economics approach to consumer law rings some alarm bells due to the lack of accountability and the malleability of objectives.

  3. Argyri Panezi says:

    In Asnef-Equifax the Court gives consumer a role in the analysis, with mainly paragraphs 55, 56 and 67 considering the consumer benefits of the discussed register. Indeed, article 101(3) allows this kind of consideration by including the criterion of a fair share of consumer benefit. As the Court interprets this, the criterion is that the overall effect on consumers in the relevant markets must be favorable. The decision, however, does not rely solely on consumer benefits to justify the register. For example, along with stating the consumer benefits in paragraphs 55 and 56, the Court immediately adds: “in addition, those registers are apt to make it easier for new competitors to enter the market”.
    I think that the Court tries to incorporate consumer benefits in a more general stream of competition-related criteria and is still focusing clearly on competition rather than looking at consumer benefits as an independent criterion (see para. 54, competition rules cannot be assessed in the abstract).

    I tend to agree with Wright that there is possibly a paradox here. If antitrust is ultimately intended to maximize consumer welfare by ensuring competition (thus, competition is only a means not a goal), then one would expect that the consideration of consumer benefit should not be just one of the criteria in the mix when assessing whether competition rules have been violated. It should rather be the decisive criterion.
    If both antitrust and consumer protection law aim at consumer welfare, in principle there should be no potential conflict, or any conflict should be resolved by prioritizing the consumer benefits. However, while the first field is designed to achieve consumer welfare under one specific method or process – that is the process of competition – the second should in principle be more flexible with regard to methods for achieving the same goal.

    I understand that a paradox, as Wright discusses it, is created by a rather recent shift or trend in consumer law, influenced by behavioral law and economics, which might be seen as going directly against the assumptions of competition law and ultimately doubting competition as the correct method of reaching maximum consumer welfare. Indeed, if one questions the rationality of consumer’s choice, then it becomes more difficult to defend competition law as the correct normative approach.

    Building upon the previous responses, I agree with Jotte that the reason behind the above tension is that, on the one hand, antitrust defines consumer welfare from a market perspective, and on the other hand consumer law centralizes consumer welfare as its public policy purpose. I would go further arguing that competition law clearly prioritizes the market and only secondarily considers consumers (see Monti, p. 311: protecting consumers without generating any efficiency is beyond the scope of the power to exempt [under 101(3)]).
    I also agree with Emma that this is not a reason to do away with either consumer or competition law, mainly because 1. Consumer law offers the consumers direct remedies that competition law does not and 2. Competition law ensures the functioning of a market and the safeguarding of consumer choice in a clear, consistent and systematic way that consumer law does not.

    However, while acknowledging that “the encroachment of the consumer law domain by competition lawyers is risky” (Monti, p. 312), and indeed the risk of protectionism is high (with Dodd Frank added to EU consumer policies the main criticism has been that global financial reform agenda is becoming increasingly protectionist), I am not entirely convinced that it is possible to fully achieve consumer protection via competition law which I still find, despite the rhetoric about its ultimate goal being consumer welfare, clearly prioritizing markets over protection even when consumer behavior was to be proved irrational and thus failures are inevitable.

  4. Chloé says:

    According to me, competition law and consumer law are strongly interrelated. Consumer law participates to competition law and policy. It is in the interests of the consumers to guarantee and promote competition law. Indeed, the development and reinforcement of competition law contribute to less concentrated markets, possible new entry of competitors and thus contribute to reducing prices and to offering more choices. In this context, consumer law can be seen as a consequence of competitive markets. It can also be seen as a cause, a justification to foster and reinforce competition.

    However, even though competition and consumer laws are strongly interrelated and complement each other, I do not consider consumer law as a synonym of competition law. Three examples could be given here.
    First, consumer law cannot be defined and interpreted from a sole competition law perspective. In this respect, the classification of consumer rights as enumerated by President John F. Kennedy and used by Hondius in his article is interesting. Indeed, while the right to choose and to a lesser extent the right to be informed, could form part of competition law, the right to health and safety and the right to be heard cannot be achieved and safeguarded by competition law.
    Secondly, the notion of consumer may be construed narrowly from a competition law perspective. In that regard, the interpretation given by the Court of Justice in Asnef-Equifax is relevant. In this decision, the Court referred to the consumers as a group without taking into consideration the specific situation of individual consumers or the specific situation of weaker consumers. Article 101(3) TFEU will be held applicable if it has, inter alia, a beneficial effect on all consumers in the relevant markets. It is not necessary for the Court that the restrictive competition practice has a beneficial effect on individual consumers. In other words, the overall beneficial effect on consumers outweighs the disadvantages certain consumers could face, such as increased interest rates or refusal of credit. This interpretation of consumer benefits is quite far from the broad definitions that could be given to consumer welfare, consumer harms and to unfair practices to consumers. In my view, it is for example difficult to see how and for which reasons the definition of ‘unfairness’ given by the Federal Trade Commission in 1964 – e.g. “a practice proved ‘immoral, unethical, oppressive or unscrupulous’” (Wright, 2012) – could be implemented by competition law.
    Thirdly, I think that remedies in the two fields are quite different. In competition law, remedies will often take the form of a fine, of requirements to put an end to a given anticompetitive practice or of the informal use of commitments. Certainly, in the long run, such remedies will benefit to consumers as they will foster entry of new competitors, development of new forms of competition, reduction of prices etc. Nevertheless, harm caused to consumers is generally not addressed by competition law and compensation for damage is generally addressed by private litigation.

    Lastly, the issue concerning how consumer protection impacts on and affects competitive markets constituted an interesting element of the readings. Consumer law may lead to anticompetitive effects which may in the end affect consumer protection itself. Certainly, in such a case, it is necessary to make a choice and to balance the two objectives: e.g. the protection of competition and the protection of consumers. However, it would be interesting to examine whether some guidance could be made or a standard test could be developed in order to conduct such trade-offs.

    In brief, competition and consumer laws are strongly interrelated but remain two different fields of law. It is therefore difficult to see how consumer law could merge with competition law or could disappear behind competition law objectives. Some consumer law aims cannot be dealt with by competition law or only with great difficulties, which render necessary a clearer standard test to balance both objectives.

  5. Argyri Panezi says:

    Test 2

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