Monday, April 23, 2007

Protection of Consumer Interests, why?

There is a discussion going on up at Hong Kong Competition Law about how HK consumers are not being protected by their government compared with governments elsewhere where consumers protection laws are in place.

Why consumers need protection? Is it not the case that standard economics tells us that a market with sufficient competition will ensure that consumers get what they want at the lowest possible prices?

OK, you respond, sometimes markets might fail because of monopoly and other anti-competitive practices. Hence, leave them alone, markets might be unable to provide consumers with what they want at the lowest possible prices.

Let's assume for a moment that indeed that were the case. So you introduce a competition law, a law supposedly would ensure that markets stay competitive. And let's check how we are doing here. With the markets functioning properly with the help of a competition law, aren't consumers' interests get well taken of already. If so, why we would need another law which supposedly would perform the same function as competition law? That is why need to have another consumer protection law on top of a competition law?

The only argument I can think of for a consumer protection law separate from a competition law is to assume that consumers DO NOT KNOW WHAT WANT. Putting it in another way: While competition can offer them what they want at the best prices and quality, those wants might not be serving their best interests.

I just don't think that is the case. Do you believe that some government lawyers would know better than you do where your real interests lie?

1 comment:

Peter said...

Hi Gary

Could the issue be one of the availability and reliability of information in consumer transactions?

Take a law against misleading or deceptive conduct, for instance. We already have such a law in the form of section 7M of the Telecommunications Ordinance, but it only applies to telecommunications licensees.

What's your view on the need for/effectiveness of this prohibition in what is a very competitive industry (there are a number of decided cases on the OFTA website www.ofta.gov.hk)? Could it be of greater utility in other industries?

Is there an information assymmetry issue in some consumer transactions in Hong Kong that needs to be addressed? Will a competition law deal with these issues?