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Competition Law and Consumer Protection:
Whether the Twain Shall Meet?

This article discusses how consumer welfare can be just as much affected by anti-competitive trade practices as it would be undermined by unfair trade practices. Thus, unfair trade falls within the domain which both consumer protection and competition law look to govern and regulate.

Whenever the phrase unfair trade practices comes up, intuitively, a lawyer's mind is directed to think along the lines of consumer protection laws that regulate business conduct vis-à-vis the end user (the final consumer). However, there is another dimension to the phrase 'unfair trade practices' which does not spring to mind at first thought. 'Unfair Trade' is also the subject matter of competition law, something which competition law aims at preventing or regulating. Thus, it is one of the common factors that falls within the domain which both consumer protection and competition law look to govern and regulate, albeit with somewhat differing ends. Whilst consumer protection is directly concerned with consumer welfare, competition law looks to foster healthy competition, by regulating what is deemed as 'unfair trade practices' or anti-competitive behaviour. This objective of competition law is thought to be an end in itself. Some policymakers and academics argue that competition law and regulation will encompass in its fold consumer welfare too. Thus, essentially the argument is that consumer protection against 'unfair trade practices', as understood in the competition law sense, will be taken care of by competition law. But reality, as would be the case, is far from perfect. Imperfections are and will remain an integral part of the most open market economy and as long as there are imperfections there is always a potential for anti-competitive behaviour which in the end hurts the end user as a losing enterprise will strive hard to pass on the losses to the end user or else it will risk going bust.
A case in point illustrating how anti-competitive behaviour can affect consumer welfare, by limiting consumer choice, is the case of provision of internet services to end users in Singapore. When opting to subscribe to a broadband internet connection, a person may approach one of three internet service providers ('ISP'). Upon having selected an internet plan, the consumer is required to obtain the relevant hardware which at the very least includes a broadband modem. All the ISPs bundle up a modem with most of their plans, however, this not only increases the monthly rental payable but also serves as a pretext to lock in the consumer for a period of 12 months at the very least. Any premature cancellation will result in a hefty penalty. A possible way of circumventing getting into a contract would be to purchase one's own hardware, at a more competitive price over the counter from one of the several hundred hardware retailers in the city. However, efforts in inquiring island wide were wasted as it was virtually impossible for the authors to locate a single computer hardware retailer offering broadband modems for sale. Upon inquiring where one could purchase such modems, the standard reply was that modems were only available for sale, or strictly speaking what is really hire purchase, through one of the ISPs. Clearly, this practice of bundling hardware allows the ISPs to control the market for modems and reap the advantages of such an oligopoly that the three ISPs share amongst themselves. For sure, there is no certain way to compare the price at which such modems are being supplied by the ISPs to prices for the same when sold over the counter. One can imagine the immense margin of profit in just selling modems, as they would be procured in bulk from modem manufacturers and thus economies of scale would come into play. However, whether the end user benefits from such economies of scale is a concern that goes to the root of consumer welfare.

Competition law analysis is complex and time consuming and, thus, a better picture only comes out when a more comprehensive market analysis is conducted. However, what comes out clearly, from the above example, is that consumer welfare can be just as much affected by anti-competitive trade practices as it would be undermined by unfair trade practices (as understood in the 'consumer protection law' sense). One key difference in the operation of these two bodies of laws lies in respect of the redressal mechanisms. While consumer protection laws, such as the Consumer Protection (Fair Trading) Act, aim at redressing the aggrieved individual, competition law on the other hand is not concerned with an individual's gains or losses. Rather the focus is on the ironing out of distortions created by an enterprise or a group of enterprises on the market. The implementation of competition regulation affects all players in the market - the enterprises, as well as the individual consumer, who is the ultimate end user.

Consumer protection and fair trading laws in Singapore, as well as most other common law jurisdictions, are specifically targeted to regulate and sanction unfair trade practices in relation to product performance and quality of services rendered. Anti-competitive practices are in the domain of competition law. An alternative approach adopted in the US anti-trust system, however, is consumer centric, focusing on consumer protection as opposed to trade or industrial protectionism. The purported goal of the US anti-trust law has been to sustain 'real competition', for consumer benefits will be subsumed and attained in only such a scenario. Needless to say the realities of implementation of the US anti-trust law may reveal a state that is far from the stated aims. That is a moot point befitting a thesis. However, the holistic approach of clubbing the goals of consumer welfare with those of fair competition is something that is unique and can work as a buffer against the unwarranted effects of competition law which work against the interests of the consumer. One example where anti-trust enforcement came out on top, as a champion of consumer interests, is the Microsoft case involving the sale of bundled software applications, specifically internet explorer along with the Windows 95 platform.
By choking out competition, through a combination of technical means which were essentially closing out compatibility of windows platform with that of other supporting applications (developed by competitors), Microsoft left no option to consumers but to accept its own applications in a bundled form. Thus, the lesson for consumers and anti-trust policy makers to be drawn from the successful prosecution of the Microsoft case is clear - anti-trust properly focused on competition ought to be a powerful form of consumer protection in the new economy, as it was in the old. This holds true for Singapore as well as. The competition law should not operate in vacuum to the welfare of the end user, the final consumer. Having some form of consumer redressal to address anti-competitive practices that hurt not just fair competition but impact directly upon the end user, as for instance restricting the freedom to choose, is worth consideration.

Ankur Gupta
Alban Tay Mahtani & de Silva
E-mail: ankurgupta@atmdlaw.com.sg