Competition Policy and Consumer Welfare in a Liberalised Economy

Abstract

The discourse on competition policy often uses the term 'consumer welfare' but rarely is clear about its meaning or role. Promotion of consumer welfare is the common goal of consumer protection and competition policy. As India's economies move progressively towards increased liberalisation, certain undesirable business practices can emerge which act as a hindrance to development and economic growth. The absence of a competition and consumer protection policy in India has created opportunities for some sectors of the business community to engage in unfair business practices viz., price fixing, speculative hoarding and collusive tendering. Competition policy and consumer policy reinforce one another. In markets that are effectively competitive, producers have internal incentives to further consumer policy objectives, for example, to develop a relationship for quality or to attract customers away from rivals by providing the necessary information to minimise switching costs. At the same time, when consumers are able to exercise their choices effectively, they can act as a competitive discipline upon producers. Thus, there is a strong case to be made for the co-ordination of these two policy areas. In the light of India's commitment to a liberalised economy, there is a need for a fair and equitable environment where producer and consumer can maximise their profit and satisfaction respectively. There is therefore a need for India's Competition and Consumer Protection policy if market oriented policies are to be given the best possible chance of success. In the backdrop of this, it is therefore imperative for India to develop this Policy ensuring the supporting legislation, infrastructure and regulations. In this context, the present paper analysis the standard of consumer welfare required to be taken into consideration while dealing with competition issues, and to what extent is protection accorded to consumers under other legislations.