Unfair Trade Practices A Summary Elisa Holmes Monckton

Unfair Trade Practices: A Summary Elisa Holmes Monckton Chambers London eholmes@monckton. com 1 -2 Raymond Buildings, Gray’s Inn, London, WC 1 R 5 NR, UK +44 (0)20 7405 7211

What are ‘Unfair Trade Practices’? • No universal definition • General idea - cause economic injury to others, including through practices designed to confuse buyers • ‘Lay’ views vary between cultures and individuals, reflecting cultural and community practices and ethics • Legal definitions vary between countries, and reflect local views of appropriate moral conduct in business • Some unfair trade practices are covered by specific legislation • Law generally aimed at protecting relatively weak individuals against powerful corporations

Examples of Unfair Trade Practices • • • False or misleading advertising Misleading or deceptive conduct Imposition of unfair terms for acquiring goods or services Contracts in restraint of trade Infringement of intellectual property rights State aid (important in the EC)

Definitions of Unfair Trade Practices • World Bank / OECD Model Law (1998) – Prohibits unfair competition including false or misleading information harming another firm, or misleading consumers • Commonwealth Model Competition Law (2005) – Prohibits unfair practices in consumer transactions involving false or misleading claims • Australia and New Zealand – Generally prohibit misleading and deceptive conduct or claims • US Trade Commission Act – Talks about “unfair methods of competition” • Indonesia – Unfair business competition

Some examples of consumer protection • Availability of advertised goods & services (eg no bait advertising) • Claims on qualifications and skills • Claims on success • Comparative advertising • Condition: quality, new or used • Fine print conditions • Origin of goods • Pictorial representations • Sponsorships and endorsements • Words with special meanings

False or Deceptive Claims on Price • • • Comparative pricing “Duty free” “Free” goods or services Additional taxes Hidden or additional costs Price displays Price ranges Quote and estimates (legal effect) Sales and promotions Special offers

Unfair sales techniques • • • Debt collection methods Delivery terms Inertia selling “Interest free” claims Harassment and coercion Telecommunications – mobile phones, minors, inadequate information Gifts and prizes Deceptive packaging False billing Pyramid selling, chain letters Guarantees and warranties

Some arguments for limited restrictions on trade practices • Creates uncertainty in application of law • Deters investment • Inhibits job creation and product and service innovation • Should be limited to practices that have predictable effects on competition • Should be measured by impact on consumer welfare • Should not be designed to protect competitors from innovation or efficiency

Conclusions • The underlying assumption is that competition in markets promotes fairness • But competition has to be fair • Legislation and enforcement must reflect national and cultural attitudes • The focus is ultimately on consumer protection, whether directly or indirectly