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Competition Law Toolkit : Practices Controlled by Competition Law
Competition Law and Other Important Areas of Law and PolicyThe first four parts of this section have been concerned with what competition law is. This part will briefly discuss what competition law is not. It is important not to confuse competition law with the law of unfair competition; and to understand that competition law, as understood in this toolkit, is not concerned with matters such as industrial policy (for example promoting national champions), employment, trade liberalization and foreign direct investment. It may also be helpful to discuss briefly the relationship between competition law and intellectual property law.
The competition law this toolkit is concerned with addresses the problem of market power that can be harmful to consumer welfare. As explained in the previous part of this section, anti-competitive agreements, the unilateral behavior of some dominant firms, and some mergers may need to be controlled in order to protect consumer welfare. Also, governments should be discouraged from public restrictions of competition. Competition law contains rules which must be complied with, and in one sense, "fair" competition can be regarded as competition which does not involve infringements of competition law. Here, the word, "fair" is synonymous to "lawful." However, there are many other rules that address the issue of "fairness" or fair dealing in the market-place. It is obviously not fair if one firm pretends that its goods were actually produced by someone else with a better reputation or brand image. One way of protecting firms from the appropriation of their trade name or having another person's products passed off as their own is through the law of trademarks. It would also be "unfair" for firms to indulge in dishonest practices intended to denigrate competitors' products. Other examples of unfairness would be to mislead the public through dishonest advertising, or for a producer to misrepresent the quality or characteristics of its goods or services. Withholding information or providing misleading information may be very harmful to consumers. Contractual terms and conditions, over which consumers usually have little or no control, may also be unfair. The practices mentioned in the previous paragraph—as well as many others—are all relevant to the question of whether the relationships between stakeholders in the marketplace are fair or not. Some of them may be unlawful as a matter of private law: competitors may be able to sue one another where unfair practices occur, e.g., as a result of trademark rights and various rules concerned with torts/delicts, and the deliberate infliction of economic harm. Customers may enjoy various rights where they are the victims of unfair practices, e.g., through the law of contract, supplemented sometimes by statutory protections. However, it is not unusual for public institutions to be created and given powers to control unfair acts and omissions that harm consumers. Examples of institutions that have powers of this kind are the Federal Trade Commission in the US, the Office of Fair Trading in the UK, and the Australian Competition and Consumer Commission in Australia. Each of these institutions has powers under competition law, in the sense in which this term is used in this toolkit, as well as other powers under various statutes that are concerned with specific pieces of consumer protection. For instance, in the UK, the Office of Fair Trading not only has powers under the Competition Act 1998 to deal with anti-competitive agreements and the abuse of market dominance, and under the Enterprise Act 2002 to investigate mergers that might lead to a substantial lessening of competition. It also has powers under the Consumer Protection (Distance Selling) Regulations, the Unfair Terms in Consumer Contracts Regulations, the Control of Misleading Advertising Regulations, the Estate Agents Act, and the Consumer Credit Act. All of these laws are concerned with one thing: the protection of consumers (this is why the Office of Fair Trading has repeatedly stated, in recent years, that its job "is to make competition and consumer law—old and new—operate effectively so that markets work well for consumers.") Nation states have an obvious interest in promoting successful economic entrepreneurs and in providing employment for their citizens. They may also wish to exercise control over the extent to which it is possible for overseas operators to invest in the local economy. These are important matters, and the policies adopted on these issues are affected by, and have an effect on, competition and competitiveness. However, these are not matters that fall within the scope of competition law as such: competition law is predominantly concerned with agreements, abusive behavior, and mergers. The limits of competition law should be clearly understood, and these other policies should be implemented as a result of other instruments available to governments. Considerable harm can be done to the reputation of competition law if it is used as a mechanism for pursuing other objectives quite different from the promotion of consumer welfare through the elimination of anti-competitive behavior and mergers. Competition law is committed to free, competitive markets, and is sometimes invoked to prevent a dominant firm from taking action that might exclude competitors from the market. Competition law is naturally suspicious of market power—and of monopoly, in particular—if this might be used to the detriment of the competitive process and, ultimately, consumer welfare. On the other hand, the law of intellectual property awards legal monopolies to creative and innovative people through the system of patent and copyright law. It might appear that there is inevitably a conflict between the law of competition and the law of intellectual property, the former opposed to monopoly and the latter apparently in favor of it. This, however, would be an incorrect way of evaluating the situation. In fact, competition law and intellectual property law are both in favor of the promotion of research and development, innovation, the taking of risks, the development of new and better products and technological progress. Competition law is committed to economic efficiency; so is the law of intellectual property. There may be exceptional circumstances in which the owner of an intellectual property right may be able to exercise that right in a way that could have an anti-competitive outcome, for example through the terms of a license of a right or, in very exceptional circumstances, by refusing to license the right to a third party. A discussion of the relationship between competition law and intellectual property law—which stresses the commonalities between the two systems—will be found in the European Commission's Technology Transfer Guidelines [ PDF ] published in 2004.
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