Competition Law for Consumers

How will consumers benefit from a competition law?
   
A market economy with a thriving market sector is the key to economic growth and long term sustainable increases in consumer welfare.  However, markets can fail because of anti-competitive practices.
     
Because trade liberalisation removes government-imposed barriers to international trade, it allows producers to increase their efficiency through cheaper inputs. This allows them to compete more effectively on the domestic and international markets, benefiting their customers and the economy as a whole.
   
Unfortunately, there is no guarantee that the full benefits of trade liberalisation will be achieved without a competition policy.  Many goods and services, for example, cannot be traded internationally, and agreements between groups of businesses can distort trade.  These private sector barriers can significantly reduce the benefits of trade liberalisation to ordinary consumers.

An effective competition law and policy will encourage the use of the most efficient methods of production, and will guide resources to the uses society values most highly.  There will be continuing incentives for innovation to increase productivity, and consumers will benefit from lower prices, better quality and a greater variety of goods and services.  An effective competition policy and law will prohibit business practices that unreasonably deprive consumers of these benefits, resulting in higher prices for inferior products and services.  Some, including the COMESA Competition Regulations, also prohibit other practices that mislead or deceive consumers and include provisions relating to product safety and product information and unconscionable (or grossly unfair) conduct.
   
Businesses will have less incentive to trade fairly when competitors can obtain short-term advantage by misleading consumers, supplying unsafe goods or acting in a grossly unfair way.  The costs of such short-term advantages will fall on both consumers and legitimate traders.
 

Competition Regulations, however, recognise that not all agreements between businesses harm competition.  For example, both businesses and consumers may benefit if agreements between competitors resulted in acceptable minimum standards of safety while allowing business to continue competing on factors such as price or quality.  The Regulations have been drafted to include sufficient flexibility so that beneficial agreements between companies are not prohibited.
   
How will the COMESA Competition Regulations be enforced?
   
The COMESA Competition Regulations will be enforced by the COMESA Competition Commission.  This authority will have the power and resources to:

  • examine complaints from consumer groups, individual consumers and business and others;
  • investigate possible contraventions of the Regulations in conjunction with the relevant authorities of the member countries concerned;
  • determine a resolution to the investigation, including the imposition of penalties and remedies.

   
Decisions of the Commission may generally be appealed to the COMESA Competition Board and on constitutional matters to the COMESA Court of Justice.
   
What types of business conduct will be covered by the Regulations?
   
Because the COMESA Competition Regulations is a regional law it will only apply to conduct that affects regional trading. 
   
Where a business’s conduct directly affects regional trading, the Regulations will apply to that business regardless of its ownership or control, including government-owned businesses and foreign-owned businesses.
   
Prohibitions
   
In general, the Regulations prohibit all agreements between businesses which have as their objective or effect the prevention, restriction or distortion of competition within the Common Market. 
   
Broadly speaking, the Regulations prohibit the following anti-competitive business conduct:
   
Agreements between competitors, including price fixing and market sharing.
   
Agreements between direct competitors (horizontal agreements) are anti-competitive since they either prevent or retard competition by restricting the ability of businesses to respond individually to new market conditions such as changing costs of production or distribution, or in consumer demand.  Many horizontal agreements are prohibited absolutely (‘per se’) because they go to the heart of competition and deprive consumers of the ability to shop around for the best deal, for example, conduct such as price-fixing and market-sharing.  Generally, these practices provide no beneficial effects to counter their adverse effect on competition.
   
Other types of agreements between competitors may have pro-competitive features.  For example, joint activities of competitors may be competitively beneficial if they foster efficiencies, reduce risk and create new or improved products or methods of distribution.  These arrangements are not absolutely prohibited.  Instead, they are only prohibited if they fail the ‘rule of reason’ assessment that looks at the overall effects of such agreements.
   
Anti-competitive conduct between buyers and sellers, including anti-competitive exclusive dealing and resale price maintenance
   
The Regulations also prohibit certain conduct between buyers and sellers (vertical arrangements) such as resale price maintenance and exclusive dealing that adversely affect competition. Consumers are harmed because businesses subject to such restrictions are unable to respond effectively to consumer demands and to compete effectively against competitors.
   
Resale price maintenance is when manufacturers or wholesalers tell a retailer they cannot discount products below a set price.
   
It is common for a business to decide only to sell to a limited number of other businesses or to impose strict conditions on their business relationships.  In certain situations defined by the Regulations, exclusive dealing will be prohibited because it makes it difficult for other businesses to compete in the market.  These arrangements are not prohibited absolutely.  Instead they are only prohibited if they fail the ‘rule of reason’ assessment that looks at the overall effects of such agreements.
   
 Abuse of dominant position
   
The Regulations prohibit a dominant business from misusing its power in ways that harm competitors or stop new businesses from starting.  The Regulations do not prohibit a business achieving a dominant position where it can largely ignore its competitors.
   
Mergers which would have the effect or likely effect of substantially lessening competition in a substantial market
   
There can be many reasons why consumers support particular businesses over others.  For example, because businesses offer cheaper goods, better quality goods or because their level of service is better than their competitors.  When businesses get bigger through increased sales, this is generally a good thing.  Traders are rewarded for their efforts and consumers are likely to benefit because successful businesses may be able to sell goods more cheaply or invest in new and better goods and services.
   
Competition Regulations does not prohibit businesses getting bigger simply because they have won increased market share through keeping consumers happy. 
   
At other times, businesses increase their market share by buying a competitor.  This will be good for consumers if the resulting bigger business sells goods more cheaply or invests in new and better goods and services.  However, it will not be good for consumers if the resulting bigger business no longer faces effective competition from other businesses.  If there is little remaining competition, the bigger business will have less incentive to keep consumers happy by selling goods cheaply or investing in new and better goods and services.
   
Competition Regulations prohibit businesses getting bigger through taking over competitors when the result will be significantly less competition to win consumers.  The Competition Regulations do not prohibit businesses getting bigger through taking over competitors when the result will not have any significant effect on competition to win consumers.
   
Merger regulation is more effective if competition authorities can examine the merger proposals before they are put into action.  The Regulations provide for this by requiring mergers ‘with a regional dimension’ and a value at or above a prescribed threshold to notify the Competition Commission prior to the merger.
   
Misleading and deceptive conduct, particularly in advertising and selling
   
The Competition Regulations prohibit misleading and deceptive conduct, particularly in advertising and selling.
   
If consumers are to make informed purchasing decisions, information concerning goods and services must be accurate, relevant and useable.
   
Unconscionable conduct in consumer transactions
   
In markets where there is great disparity in knowledge, relevant experience and skills, it is likely that unscrupulous persons will seek to exploit these differences to their advantage.
   
The Competition Regulations’ unconscionable conduct provisions are directed towards prohibiting grossly unfair conduct.
   
The Regulations include guidelines as to what will be considered unconscionable so that the circumstance of the conduct can be taken into account.  Separate guides are provided to reflect the differences between businesses dealing with other businesses and businesses dealing with consumers.
   
Product Safety and Product Information
   
Safety has long been recognised as one of the basic rights of consumers.
   
The COMESA Competition Regulations empowers the Commission to:

  • set safety standards to ensure a minimum safety requirements for particular goods
  • set information standards to ensure a minimum disclosure requirements for particular goods
  • issue warning notices to the public about dangerous goods; and
  • recall dangerous goods.

What can consumer groups do to help ensure that the COMESA Competition Regulations are an effective tool in the advancement of consumer interests in the region?
   
Consumer groups can:

  • educate their members about the Regulations. 
  • pass legitimate complaints through to either the COMESA Competition Commission or to a national competition authority as appropriate;
  • provide advice to the COMESA Competition Commission on the consumer perspective. 

What can individual consumers do to help?

Consumers are the eyes and ears of any successful competition authority.
   
It is consumers who see the misleading advertisements or who buy the unsafe goods.  It is individuals, as employees and consumers, who find out first about secret, price-fixing and bid-rigging conspiracies.  For these reasons, the Commission will rely on complaints and information from individual consumers.
   
If you know or suspect that competitors, suppliers or even an employer are violating the Competition Regulations, you should alert the COMESA Competition Commission so that it can determine whether the conduct is contrary to either the COMESA Competition Regulations or a national competition law.
   
Where can I get more information?
   
This guide is just one of the guides and brochures available to explain various competition law issues. 
   
A list of these other publications is available for download – click here.
   
If your country has a national competition authority, the Commission will be able to respond to your questions on your national law.  A list of the national competition authorities is available from the COMESA web site.
   
Alternatively, contact the COMESA Competition Commission.

Download the full guide on competition law for consumers.
   
   

Other COMESA Sites

COMESA | comesa.int
COMSTAT | comstat.comesa.int