Fair trading and National economy

In any country Fair Trading and the National Economy are inter linked and inter connected. We have written and unwritten legislation and practices in Sri Lanka in this sphere.

The Fair Trading Commission Act No. 1 of 1987 has been replaced by the Act No. 9 of 2003 which has emphasised on Consumer Rights and regulators rather than concentrating on Fair Trading as in the other parts of the world.

The main functions of the Fair Trading Commission (FTC) were mainly to investigate, examine, make references and reports on fair trading and anti-merger competitions based on competition principles.

The commission had powers to inspect premises, call inquiries, summon and attend complaints compel production documents in the course of litigation mechanism.

It has dealt with monopoly and merger situation and anti-competitive practices. The present Act has only dealt within the preamble as follows:

“WHEREAS it is the policy of the Government of Sri Lanka to provide for the better protection of consumers through the regulation of trade and the prices of goods and services and to protect traders and manufacturers against unfair trade practices and restrictive trade practices.

And whereas the Government of Sri Lanka is also desirous of promoting competitive pricing wherever possible and ensures healthy competition among traders and manufacturers of goods and services.”

Within a liberalised economy a need arises to set the boundaries of firms operating in markets. The objects of Fair Trading Commission for the control of monopolies mergers and anti-competitive practices were for the purposes of fair trading in liberalised economy protecting the consumer, industrialists and manufacturers in the trade.

In the other parts of the world the governments and professional institutions have taken steps to protect the small traders and the consumers mainly from multi national business giants.

In USA, UK and most European countries in situations of anti-competitive, the government directly intervenes eg: it is not possible for a leading chain of super markets to buy small timers without prior permission from the Government.

In South Korea consumer is protected mainly by competition and not purely by protecting them in Sri Lanka.

Act No. 9 of 2003 primarily protects the consumer while safeguarding the trader, industrialist, and the manufacturers.

The functions of the Authority include Fair Trading as specified in Section 8 with situations restrictive trade, abuse of dominant position and restrain from competition which needs more teeth.

The functions of the Authority shall include-

a) Control or eliminate-

(i) restrictive trade agreements among enterprises

(ii) arrangements amongst enterprises with regard to prices

(iii) abuse of a dominant position with regard to domestic trade or economic development within the market or in a substantial part of the market; or

(iv) any restraint of competition adversely affecting domestic or international trade or economic development

b) investigate or inquire into anti-competitive practices and abuse of a dominant position

c) maintain and promote effective competition between persons supplying goods and services.

Each country needs its own “tailor made” fair trade policies. “One size fits all” in other words it is not possible to copy existing fair trade policy from one country to another country.

Each country will have to experiment and amend gradually its law and policy. Developing countries as they develop an industrial base need to reduce State intervention and strengthen their competition law and policy to achieve the fair trade practices. Following sequence may be considered as suitable with flexible implementation in fair trade policy.

1. Prohibiting price fixing and bid rigging agreements

2. Concentrate on education and seized or desist order

3. Accept certain flexibility and exceptions or exemptions

4. Introducing control of abuse of dominance

5. Control of monopolies

6. Introducing merger controls

7. Strengthening the sanctions as the market becomes more developed and once all operators, stakeholders are aware of the need for competition law and policy for fair trade.

Less Developed market/ under developing market suffer from anti competitive practices. Market failures are more common due to its small size of market or more or less market segmentation.

The need for competition policy in less developed or under developed countries need the right mix between government intervention and competition policy. Both aiming and correcting the market failures. In Sri Lanka our difficulties are lack of funds to employ right personal need for high level training.

Therefore, there exists a need for technical co-operation between us and developed economies. The political will for competition policy has been identified to create a competition culture in Sri Lanka. In this spirit we are going ahead with amendments to the present legislation.

The competition policy and consumer protection have brought together within a single independent government agency in UK. In United States, Federal Trade Commission has similar functions.

In Australia too these two are combined. A survey of competition laws the world over (the London Economist) found that Australian laws were the fairest. Sri Lanka Law is somewhat similar to that of Australian except the monopolies and mergers part of it.

In my view the most powerful means for improving the well-being of the consumers is to promote competition in business markets. In most circumstances business competition is the best way of encouraging efficiency, innovation and value for money.

The numerous complaints and reports convinced me that consumer protection could be achieved through the fair trade practices. Further, greater transparency of terms and conditions of business agreements is desirable and easy justifiable by way of fair trading in the interests of consumer protection.

Sarath Wijesinghe,

Chairman,

Consumer Affairs Authority

Unfair trade practices specified in Consumer Protection Act of Singapore

The aims and objects of publishing this consumer page weekly is mainly to educate the consumers, traders, manufacturers, industrialists and to also step up public education drives to raise public awareness of their rights and responsibilities.

The Consumer Affairs Authority Act No. 9 of 2003 deals with this subject under Sections 30 and 31. These sections are being quoted on and off in this page wherever there is a relevance:

For a comparative study, the situation in other countries are also useful to extend our vision.

Today, we publish below 20 unfair practices specified in the Consumer Protection (Fair Trading) Act of Singapore. This Act was passed in the Singapore Parliament on 11th November 2003 and it is in force with effect from 1st March 2004.

The specific unfair practices referred to above are enlisted below:-

1. Representing that goods or services have sponsorship, approval or performance characteristics, accessories, ingredients, components, qualities, uses or benefits that they do not have

* Making false claims about a product

2. Representing that goods or services are of a particular standard, quality, grade, style, model, origin or method of manufacture if they are not

* Claiming that goods are from a certain country when they are not

3. Representing that the goods are new or unused if they are not or if they have deteriorated or been altered, reconditioned or reclaimed

* Claiming that used goods are new

4. Representing that goods have been used to an extent different from the fact or that they have a particular history or use if the supplier knows it is not so

* Lying about the history or extent to which second-hand goods have been used

5. Representing that goods or services are available or are available for a particular reason, for a particular price, in particular qualities or at a particular time if the supplier knows or can reasonably be expected to know it is not so, unless the representation clearly states any limitation

* Falsely claiming that goods are available in large quantities to attract buyers when there is actually only a limited number. This is also knows as bait and switch practice

6. Representing that a service, part, repair or replacement is needed or desirable if that is not so, or that a service has been provided, a part has been installed, a repair has been made or a replacement has been provided, if that is not so

* Telling the customer that the product he bought needs repairing when there is no such need

7. Representing that a price benefit or advantage exists respecting goods or services where a price benefit or advantage does not exist

* Claiming that the product prices have been discounted when they have not

8. Charging a price for goods or services that is substantially higher than an estimate provided to the consumer, except where the consumer has expressly agreed to the higher price in advance

* Charging a price higher than what was estimated by the seller, unless both parties had agreed upon the final price

9. Representing that a transaction involving goods and services involves or does not involve rights, remedies or obligations where that representation is deceptive or misleading

* Claiming that a product comes with warranty when it does not

10. Representing that a person has or does not have the authority to negotiate the final terms of a transaction involving goods or services if the representation is different from the fact

* Representing that the seller has the authority to close a deal when he does not

11. Taking advantage of a consumer by including in a consumer agreement terms or conditions that are harsh, oppressive or excessively one-sided so as to be unconscionable

* Bullying a consumer by using oppressive terms in the sales contract

12. Taking advantage of a consumer by exerting undue pressure or undue influence on the consumer to enter into a transaction involving goods or services

* Using undue pressure to get the person to buy items

13. Representing in relation to a voucher that another supplier will provide goods or services at a discounted or reduced price if the supplier making the representation knows or ought to know that the other supplier will not do so

* Giving out false vouchers

14. Making a representation that appears in an objective form such as an editorial, documentary or scientific report when the representation is primarily made to sell goods or services, unless the representation states that it is an advertisement or promotion

* Using a scientific report to sell goods without stating that it is an advertisement

15. Representing that a particular person has offered or agreed to acquire goods and services whether or not at a stated price if he has not

* Falsely claiming that someone else is about to buy the goods, to put pressure on the consumer

16. Representing the availability of facilities for repair of goods or of spare parts for goods if that is not the case

* Saying that there are facilities where a consumer can go to get his items repaired when there are none.

17. Offering gifts, prizes or other free items in connection with the supply of goods or services if the supplier knows or ought to know that the items will not be provided or provided as offered

* Falsely claiming that gifts will be given out with the sale of a product

18. Representing that goods or services are available at a discounted price for a stated period of time if the supplier knows or ought to know that the goods and services will continue to be so available for a substantially longer period

* Stating that a sale is for a fixed period, when it goes on for much longer

19. Representing that goods or services are available at a discounted price for a particular reason that is different from the fact

* Giving false reasons for selling a good cheaply

20. Using small print to conceal a material fact from the consumer or to mislead a consumer as to a material fact, in connection with the supply of goods or services

* Using small print to hide facts from consumers

A. L. Mohideen Bawa
Executive Director, CAA