CONSUMERS were given statutory protection against deceptive marketing practices in late 2007 with the promulgation of the Competition Ordinance and the creation of the Competition Commission of Pakistan.

Since then, the CCP has conducted inquiries into several marketing practices that prima facie had the potential of deceiving consumers in a given market and/or harm the commercial interests of other business entities. This article is an attempt to highlight some of the most important policy principles underlying the CCP case law with regards to ‘deceptive marketing practices’.

The Office of Fair Trading within the CCP is responsible for investigating instances of deceptive marketing practices. The concept is not defined in the Competition Act 2010, but Section 10(2) provides a list of four practices that are considered outlawed in all circumstances:

There is a pressing need to analyse whether the standards adopted by the CCP and its decisions have, on balance, increased consumer welfare and/or competition in the market and cut the costs of doing business

• The distribution of false or misleading information that is capable of harming the business interests of another undertaking;

• The distribution of false or misleading information to consumers, including the distribution of information lacking a reasonable basis, related to the price, character, method or place of production, properties, suitability for use, or quality of goods;

• False or misleading comparison of goods in the process of advertising;

• Fraudulent use of another’s trademark, firm name, or product labelling or packaging

These practices are considered problematic because they provide or distribute false or misleading information that may be harmful for both consumers and competitors.

The competition authorities have to implement a difficult mandate, which primarily is to break powerful monopolies and economic cartels. The CCP initially faced a lot of political and financial difficulties and ultimately some of its important statutory powers were trimmed.

However, it has been successful in generating a handsome volume of case law and is quite active as a market regulator. Yet, some may consider it is not as omnipresent as a watchdog as it should be.

Despite the acute teething problems and the emblematic financial and political opposition competition authorities initially face, the CCP got to work from early on. Since then, it has passed 14 orders, finding in each instance the undertaking being engaged in deceptive marketing practice, violating Section 10 of the Act.

Generally, the CCP conducts inquiry into an alleged deceptive marketing practice either on its own initiation or in response to complaints filed with it. On a finding of a prima facie case, show cause notices are issued and formal hearings conducted afterwards, following which the final orders are issued.

The basic difference between the CCP case law and that of the US and the EU is that the undertakings in the former are exclusively responsible for a marketing practice that the CCP may perceive as deceptive.

In the Zong/Ufone order, the watchdog deemed it imperative for the implementation of the Competition Ordinance ‘in its true letter and spirit’ and to encourage compliance with Section 10 to “place a higher onus on the undertakings in relation to marketing practices”. This was further confirmed in an order involving various banks, where it held that “it is the undertaking which must have a ‘reasonable basis’ for making any claims in an advertisement”.

Moreover, in the draft Marketing Practices Guidelines for the telecom sector, the telecoms were considered to be under duty to disclose essential and material information to their consumers. Hence, marketing practices that may not be seen as deceptive elsewhere may be considered so in Pakistan.

A marketing practice is deemed deceptive by the watchdog when it provides false or misleading information. According to the CCP, false information is contrary to truth or fact; implies either conscious wrong or culpable negligence; has a stricter and stronger connotation than can be justified; and is not readily open to interpretation.

On the other hand, misleading information has the capability to give a wrong impression; is likely to lead to error of judgment or conduct; and tends to misguide consumers because of it being vague. The omission of material information is also considered misleading, and hence, deceptive.

Misleading information may or may not be deliberate, has a less onerous connotation and is open to interpretation in contrast to false information.

Accordingly, the undertakings must consider that the liability with regards to distributing false information would be higher than that of misleading information, though this is not clear yet as the CCP has so far avoided imposing financial penalties in deceptive marketing practices cases, except in a few instances.

In a majority of the cases, it directed the undertakings to discontinue the alleged practice or to amend the alleged deceptive advertisement without imposing any financial penalty in the first instance.

The higher onus on the undertakings is a direct consequence of the CCP’s conceptualisation of ‘consumer’. The Pakistani ‘consumer’ is defined as ‘the usual, common or foreseeable user or buyer of the product’. This ‘ordinary’ consumer is not burdened with the requirements of ‘ordinary diligence, caution/duty of care and ability to mitigate (possible inquiries)’.

Moreover, as per this definition, the consumer — for the purpose of Section 10 — neither carries the burden of an ordinary prudent man under the Pakistani contract law nor that of the ‘average’ consumer under the Pakistani trademark law.

The CCP justified departure from both local and foreign precedents in this instance so it could implement the intent of the law and ensure that the undertakings do not have an easy way out. This concept creates friction with the standards maintained for a long time under complementary Pakistani laws.

However, unless the CCP revisits its case law or a higher court overturns this standard, the undertakings will have to come up with advertising campaigns while keeping in mind the ordinary ‘consumer’ of the CCP.

The CCP has so far done a respectable job in making its presence felt as a market regulator. A couple of its recent decisions show that even individuals who approached it with their complaints got reprieves. This is a welcome development.

Nonetheless, there is a pressing need to analyse whether the standards adopted by the CCP and its decisions have, on balance, increased consumer welfare and/or competition in the market and cut the costs of doing business.

The writer is a doctoral scholar at the Max Planck Institute for Innovation and Competition, Munich, Germany. owaishs@yahoo.com

Published in Dawn, Economic & Business, April 6th, 2015

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