1. Consumers and Competition: making policies that work together Michael Jenkin Consumer Affairs, Industry Canada Louise Sylvan ACCC

2. Interface - Basics Example 1: Misleading conduct laws Example 1: Misleading conduct laws Protects consumers (in the cp part of our laws) ANDProtects consumers (in the cp part of our laws) AND Protects competition (opportunity to compete on a fair basis)Protects competition (opportunity to compete on a fair basis)

3. Interfaces - Basics Example 2: Cartel (anti-trust) laws Example 2: Cartel (anti-trust) laws Protects the market for competitive conductProtects the market for competitive conduct Protects consumers – results in better value (prices/quality)Protects consumers – results in better value (prices/quality)

4. Interfaces - Advanced Consumers benefit from competition Consumers drive competition

5. Consumers exercising choice Vigorous competition Competitive economy Productivity economic gains Innovation, price competition Active Consumers Active Economy

6. Interfaces - Advanced Studies of how and why markets work well Studies of how and why markets work well Demand Side driving competition: Information asymmetry Supply Side conditions for competition: Structure Market concentration Barriers to entry Collusive behaviour Abuse of market power Bundling Exclusive dealing Natural monopoly Import competition Countervailing power

7. Is the market sound? Are consumers enjoying the benefits of a competitive market? Industry Structure -natural monopoly -barriers to entry -etc Structural competition laws -eg. divestiture, ownership laws, price controls Firm Behaviour -Collusion -Resale Price Maintenance -Misuse of market power -etc Behavioural competition laws & rules -eg. prohibitions on: collusion, price maintenance, etc -eg. prohibition on abuse of dominant position (eg 07/2006 EC decision against Microsoft regarding interoperability with Windows pcs -eg. leniency programs Mandated (or voluntary) industry codes of conduct -eg. franchising code DRAFT CHECKLIST AND TOOLKIT Market Analysis by Competition and Consumer Protection Regulators CHECKS TOOLS COMPETITION (Supply-side)

8. Information Failure -misleading conduct -complexity and bundling -credence goods -lemons -etc Informational Instruments ( laws and other – reducing mis-selling and/or reducing search and switch costs) -misleading conduct laws -disclosures (mandated and voluntary) -provision of comparative information by independent body or required of providers -calculators (online interactive tool for selecting complicated products) -labelling -etc Consumer Behaviour (costly biases – see descriptive text) -choice overload -endowment -defaults -hyperbolic discounting -framing -biases related to risk -over confidence -fairness -Etc Behavioural Instruments (see descriptive text) -resetting defaults -reframing -cooling off periods -general debiasing -self-binding contracts -production transparency (fairness) CONSUMER (Demand side) Other Instruments (including redress) -small claims tribunals/courts -complaints systems -statutory/industry ombudsman schemes -mandated standards (eg pesticide residue limits, electrical safety laws, retail scanner accuracy code ) -banning unfair terms in contracts

9. No Yes No Is the market sound? Are consumers enjoying the benefits of a competitive market? Decision Tree Demand-Side Market Analysis by Consumer Protection Regulators Is there information failure? Informational Instruments Are there behavioural biases affecting consumer decision-making and outcomes? Behavioural Instruments CHECKS TOOLS CONSUMER (Demand side) Other Instruments Are benefits of intervention likely to outweigh the costs of intervening to empower or protect Consumers? Are costs falling on vulnerable or disadvantaged groups? YES POLICY RESPONSE for compensation or protection Yes NFA NFA = no further action No POLICY RESPONSE for improving market for consumers Yes

10. OECD Toolkit Consumer Protection and Consumer Empowerment Strategies II Analysing the Market II Analysing the Market III Tools available III Tools available IV Which tools for which problem? IV Which tools for which problem? V Making decisions V Making decisions

11. Demand-side Policy HOW DO CONSUMERS ACTIVATE MARKETS? WHEN DO CONSUMERS SUFFER DETRIMENT? Standard consumer (demand side) policies: Standard consumer (demand side) policies: Education and information Extending consumer (demand side) policies: Extending consumer (demand side) policies: Findings of behavioural economics

12. Framing Our decisions are influenced by the frame: Contains 8% fat 92% fat free OR

13. Consumer situations Disciplined consumer Undisciplined consumer Sophisticated (informed and knows own biases) Unsophisticated

14. Consumer situations: questions of cross-subsidy and vulnerability Disciplined consumer Undisciplined consumer Sophisticated (informed and knows own biases) Unsophisticated

15. Consumer situations: questions of cross-subsidy and vulnerability Disciplined consumer Undisciplined consumer Sophisticated (informed and knows own biases) Unsophisticated

16. Consumer situations: questions of cross-subsidy and vulnerability Disciplined consumer Undisciplined consumer Sophisticated (informed and knows own biases) Unsophisticated Minimum policy requirement – how to protect interests of three categories without imposing significant costs on disciplined and sophisticated consumer – “asymmetric paternalism”.

17. Basing policy on real (empirical) evidence of people’s behaviour BETTER PUBLIC POLICY