Competition and Liberalization
Liberalization has been introduced in the several sectors of the economy across the European Union in the name of the consumers. Similarly, competition law has become a key policy of the national and European administrations to monitor the development of the economy. That policy is also carried out in the name of the consumer.
Can we however consider that these policies justified by a reference to consumer’s interest work to the benefit of consumers ? A major research project has been finished on this subject matter by Paul Nihoul. It has given to a book (La concurrence et le droit – Autorités, Consommateurs, Entreprises, Editions management et société, Paris, 2000). The book has been translated into the Chinese language for the Chinese market. An expanded version will be published in English and will encompass a comparison between competition laws in Europe and the United States.
Benefits
A first answer is to consider that competition and liberalization indeed provide a form of liberation of economic forces which were beforehand kept captive by public authorities. For instance, energies have been liberated on the electronic communications markets as a result of the liberalization which has been carried out by the European institutions in that part of the economy. In that regard, competition and liberalization bring considerable advantages to society. Consumers are probably the first category to benefit from these advantages as prices decrease and output increase as a result of the introduction of competition.
Africa, Asia, South-America
This movement has been observed in Europe and in the United States. It is still to be discovered in many other countries. Discussions and research conducted in the Centre for instance show that there is desire in African and South-American countries to free up economic forces from the grip authorities are holding on them. Last year, we have been holding a series of conferences on competition law around the world. In these conferences, the situation of countries such as Turkey, Rwanda, Congo and Ukraine has been discussed. In these countries, competition law is progressively developed. There is a hope that this will change attitudes towards economic activities in these territories and that people will take on themselves to start activities for the service of others.
Limits
Competition and Liberalization however has limits. It is important to put these limits in the limelight in order to show that these processes may provide solutions in given stages of economic development, but may have to be controlled or even replaced by other forms of organization at a later stage. Competition for instance exerts an incredible pressure on workers. What people gain on one side as consumers is lost (at least in part and for some of them) on the other side as workers. Competition also increases the necessity to realize benefits and that has consequences on the rule of law. People stop respecting the laws when they decide to make a profit whatever the consequences. A third drawback is that competition may lead to a diminution of quality.
These limits - and others to be added – make it necessary to introduce rules to ensure a proper development of economic activities in the interest of all. The sector of electronic communications provide an excellent example of the kind of rules that may be designed in that regard. Extensive research is being carried out at the centre on this subject matter and we hope to be able to make some results of it public on this internet site in the very near future.
Services of general interest
Competition and Liberalization ensure a satisfactory allocation of resources. However, resource allocation is not the only public policy objective pursued by public authorities. This is particularly true for sectors where goods and/or services are essential. These sectors were formerly organized in a specific manner, with activities being reserved to public bodies under a monopoly regime.
This form of market organization has been set aside with the development of competition and the question is now: how can these services deemed essential for society still be ensured ? A think tank has been created on that subject matter, in an attempt to counsel the Commission about policies that could be carried out in that respect.
A research project is currently being prepared in that context by Luis Ferney Moreno Castillo about services of general interest in South America. Another project is started by Julien Baeys about the financing mechanisms used by the States in order to finance their services of general interest. The introduction of competition, and the budgetary norms to be respected in the Euroland, have made it more difficult for States to finance these services.
We provide hereinafter a selection of papers devoted to the liberalization of services of general interest - and the impact of the liberalization on the consumers.
Food and Health
The biggest concerns of consumers nowadays are: food and health. Is our food safe and healthy ? Is our health properly taken care of ? These two issues have been at the core of the concerns that have developed in the last years in the Centre.
We are examining how food safety and quality can be ensured. Among other initiatives, we attempt to determine how consumers can develop self regulatory schemes allowing them to monitor their own consumption. Food cannot be thought only in connection with safety. It is important for consumers to develop initiatives on the quality front – ensure that food consumed indeed corresponds to the needs of the organism.
Health is more important even than food, although both are interrelated. Several issues are examined within the Centre in connection with health. Part of the research is directed towards the protection of patients in the medial world. The rights of patients are often infringed and this may have far reaching consequences for their health. An issue is to determine how they can be protected. Another aspect is related to financing. Should the health sector be organised in a competitive manner ?
The questions arises in the light of recent case law adopted by the European Court of justice in the areas of the internal market (free movement) and competition (insurances).
Intellectual property
Intellectual property has an influence on consumers - and conversely. This is due to the reason why intellectual property rights are conceded. Here again, as in the general field of competition, intellectual property rights are justified by references to consumers. There are supposed to be granted in order to allow firms to amortize investments necessary to ensure the production of goods and services agreeable to consumers.
Yet, an issue is to determine whether this normally consumer-oriented rights are not used for other purposes – whether they are not in particular used by firms to maintain prices at a high level irrespective of the need to make products and services available to the public at reasonable conditions.
A research project (PhD) is carried out by Elodie Masson around the idea that intellectual property rights might have to be questioned in the light of the doubts that have been formulated about monopolies in the last years. Monopolies have been set aside in the telecommunications sectors.
The European institutions have justified the dismantling of this form of market organization on the basis of the advantages that would derive from a more competitive system if telecommunications were to be granted by several firms in competition. If that justification is valid, should we not question rights granted in the name of intellectual property on the basis of the same arguments ? This is particularly important for the availability of medicines around the world and also for the dissemination of culture.
Information society
Information dominates society as a whole. Its importance is so pervasive that economic theories have been built around the idea that the main function of public authorities should be to make information available. With due information, markets should then be able to ensure that the best economic outcome is reached.
This sort of market organization lies at the centre of the reform that has taken place around the globe in electronic communications. In Europe and the United States, telecommunications organizations were organized beforehand in the form of monopolies. These monopolies have been dismantled and competition has been established. As a corollary, new norms have been adopted to ensure the protection of consumers in their contacts with firms for which profits stand high on the agenda. Norms were also established to ensure the continued provision of services of general interest, in this liberalized environment.
Several research projects are now being carried out by Paul Nihoul in the field of electronic communications. A project has just been finished with McKinsey, consisting of a review drafted for the European Commission of the regulatory conditions for the launching of the third generation of mobile technology. Another project is started with the same partners about the development of Internet in the European Union. A book is in preparation about Electronic Communications in Europe, to be published at Oxford University Press.
One often concentrates on the content of the goods and/or services that are provided to the consumers. Issues such as safety are then essential, because they concern what is being provided to the consumer. Yet, attention must also be devoted to the selling methods i.e. the behaviour adopted by undertakings when they propose their goods and services to the consumers.
This is a traditional area of the law, but the European Commission has recently tried to revive it by suggesting that a framework directive could be adopted which would regulate all sector specific directives that are now in force.
Trade practices are also important in the liberalization context, because rules adopted by regional or national entities are often criticized as measures causing hindrances to commerce. This issue must be examined at a European and at an international level. At world level, particularly, new negotiation rounds are starting and an issue will be to determine what place consumers have in the liberalization measures that are expected to result from these negotiation.
A research project has started about the general principles of WTO law and their influence on the various stakeholders; it is carried out by Henri Culot under the leadership of Philippe Coppens.
Stake holder
Natural resources
Consumption – and as a result consumer law – has an impact on other dimensions of society. For instance, consumption may lead to the destruction of natural resources. An issue is to promote a form of consumption which will respect the environment and ensure that the earth remains an adequate place to live for future generations.
Relation with workers
Another example is the relation between competition and work conditions. Competition and liberalization normally have an impact on markets, in that they bring about a decrease in prices and an increase in output. These changes are however obtained at the detriment of other stakeholders. Among these stakeholders are workers. With competition and liberalization, people have access as consumers to more goods at better conditions. But as workers they have to work harder and their life is rendered more difficult.
The question is whether people real gain in the trade off. Some obviously loose - those who are excluded from the business cycle because they are not considered productive enough. These people are also excluded from consumption as their revenues are minimal. Some others gain – those which have access to more revenues as a result of their work and have thus the opportunity to consume more. It is more difficult to provide an answer for the category in between – the category of people whose life may be rendered, at the same time, more pleasant as a result of the consumption to which they have access, and more difficult as a result of the pressure resulting from competition.
Developing countries
Another issue is the development of consumers and competition laws in developing countries. The Centre de droit de la consommation has a tradition of involvement in these countries. Its Director and members have been active in teaching programs across the African continent, particularly in Burkina Faso. This tradition is being continued through doctoral programs carried out for African students and students from other developing countries. We are currently hosting Mr. Alphonse Ngagi, who is finishing a research project (PhD) on the development of consumer law in Rwanda. A PhD Student, Justin Mushaga, is starting another project writing about The Introduction of Competition Law in Africa. Yet another project is being started by Luis Ferney Moreno Castillo about Public Service in South America.
Values
Finally there can be no research about consumer law without asking the question of the place of consumption in society. Does consuming make people more happy ? What is the incidence of consumption in their lives as human beings ? This entails a reflexion on values present in modern society. There is also the issue of sustainable development. What consequence does our way of consuming have on society and the environment ?
New forms of regulation
For a long period, the adoption of rules has been structured alongside the industrial model which dominated across the social and economic organization of western countries? In that model, laws are produced by authorities as would be any other output by undertakings.
Authorities were supposed to shape the world conform to their wishes. This model, it is our feeling, does not correspond any longer to modern society. In our society, a substantial portion of the normative power is held by the people themselves, including the social and economic actors. New forms of regulation are thus be invented.
A conference was held on October 3, 2002 on that subject matter. This conference was organised by the Belgian Ministry of Economic Affairs under the scientific presidency of the Centre and het Studie Centrum voor Consumenten Recht (KULeuven). The results of this conference will be published shortly from this internet page.
