CHAPTER ONE

GENERAL INTRODUCTION
In this chapter the reader will be introduced to the subject of the dissertation and the
problems to be analysed. The problems will be presented as well as arguments regarding the
delimitation. At the end, a hallucination of intended structure will give the reader the chance
to see how the author visualizes the flow and structure of the dissertation.

1.1 Introduction to the Research Problem

There is feasible convergence linking the objectives of competition policy and consumer
protection policy.1 The foremost purpose of competition policy and laws is to protect and
uphold competition,2 so as to ensure efficient allocation of resources in the economy follow-
on the best feasible choice of quality, the lowest feasible prices and satisfactory supplies to
consumers.3 Competition law guarantee that consumers get a reasonable share of the market
in the economy,4 however, it is well known that the purpose of competition law is economic
efficiency and overall welfare to the society.5 The aim of this paper is to look at the
interaction between competition law and consumer interest, it is well know that competition
law aims at consumer welfare, however one need to understand how competition law enhance
consumer welfare.

This paper has researched on the relationship between competition law and consumer
protection, to what extent is the competition law in Tanzania effectively protecting
consumer’s interest. Moreover, the paper also address whether the Fair Competition Act 2003
is an effective tool for protecting consumer’s interest and whether there are certain consumer
problems that the Act cannot address. It is an interesting area because the researcher has no
knowledge of any existing paper that has research on the new competition law (Fair
Competition Act 2003) and the protection of consumer interest. Apart from that there is lack
of extensive legal literature on Tanzania competition law; therefore this work will raise

1
Cseres Katalin Judit, Competition Law and Consumer protection (Kluwer Law International, 2005) pg 403
2
Neelies Kroes,Eurpean Commissioner for competition policy,exclusionary abuses of dominance-the European
commission enforcement priorities, Fortham University symposium, New York,25 September 2008 available at
http://europa.eu/rapid/pressReleasesAction.do?
reference=SPEECH/08/457&format=HTML&aged=0&language=EN&guiLanguage=en 11/06/2009
3
OECD, Global forum on competition “the interface between competition and consumer policies” 5, June, 2008
DAF/COM/P/GF (2008) 10 unclassified.
4
Cseres Katalin Judit, Competition Law and Consumer protection (Kluwer Law International, 2005) pg 407
5
Ibid.,
awareness to legal researchers to research on this subject area, in future time Tanzania will
have extensive legal literature under competition law. The Fair Competition Act, 1994 was
enacted to encourage competition, regulate monopolies and prevent restrictive trade
practices.6 Tanzania has been identified to be among the first African countries to have
competition policy and legislation. However there is lack of case laws at the appeal level all
competition cases end up at the court of first instance (the Commission). This paper explores
the main reasons behind lack of case laws in Tanzania despite the fact that the law was
enacted since 1994. Is the area of competition law stagnating in Tanzania? What are the
means that the country can apply to make sure competition policies are effectively enforced.

The economy in Tanzania is mainly agriculture 80% of the population are engaged in the
sector. The manufacturing sector is very small and weak.7 Tanzania is at the early stage of
institutional building of competition policy and law enforcement.8 The current new law is
Fair Competition Act, no 8 of 2003;9 the act is well drafted and takes into account changes in
the global competition regime. Although the competition policy and laws are comprehensive
and takes into account changes in the international arena, there is still a problem of
enforcement in Tanzania10

Tanzania has little practice in the enforcement and implementation of competition matters,
the country needs to take note of precedents and procedures in developed jurisdiction. South
Africa competition law existed from 1955 (the regulation of monopolist condition Act 1955)
its experience is suitable for point of reference for Tanzania as an African country. The
dominance objective of the South Africa competition law is to provide consumers with

6
Godius Kahyarara, “Competition policy, manufacturing exports, investment and productivity: Firm-level
evidence from Tanzania manufacturing enterprises,” Competition, Competitiveness and Development: Lessons
from Developing Countries (UNCTAD 2004) pg 39
7
Economy watch at http://www.economywatch.com/world_economy/tanzania/ 18/05/2009
8
Mkocha Godfrey.Director General Fair Competition Commission Tanzania, “The role of economic analysis in
competition law enforcement” presented at panel III fifth UN Conference to renew all aspects of the set of
multilaterally agreed equitable principles and rules for the control of restructure business practices, Anatalya,
Turkey 14th to 18th November 2005 pg 8, at
http://www.unctadxi.org/Sections/AntalyaConference/docs/ConferencePresentations/tdrbpayt05065_en.pdf
9/05/2009
9
The Fair Competition Act can be sourced under the United republic of Tanzania Act no 8. 2003 printed by the
Government printer, Dar es Salaam at http://www.parliament.go.tz/bunge/act.php?search=2003 9/05/2009
10
OECD Global forum on competition, Challenges faced by competition authorities in achieving greater
economic development through the promotion of competition, contribution from tTanzania 9/01/2004 pg 1-7 at
http://www.oecd.org/dataoecd/18/63/23733551.pdf 11/05/2009
product choices and competitive prices.11 The research has also surveyed other jurisdiction
such as EC and US, so as to evaluate what Tanzania can learn from them, in order to develop
her competition policy, law and implementation.

The paper is divided into five chapters, chapter one introduce the reader to the research
problem, the purpose for the research and what other authors have written on the subject. It
also gives the reader an understanding and formulation of competition law in Tanzania.
Chapter two describes various instruments on competition law from the global level to the
case studies, it introduce competition law and policy to the reader. Chapter three which forms
the main aim part of the paper access the relationship between competition law and consumer
protection, the chapter answers whether the aim of competition law is consumer interest.
Chapter four gives the study findings and analysis, it answers whether competition law is an
effective tool to protect consumers interest. Finally, chapter five gives the research
conclusion and recommendations for further research.

1.2 Literature Review

Cseres Katalin Judit12 has identified the relationship between competition law and consumer
protection. Competition law make certain that market remains competitive by cheering new
market entrants at the same time it creates incentive for innovation, therefore competitive
prices will be promoted at the same time it increase product choices. Cseres has attempted to
fill the gap, of how competition law benefits consumers and how consumer protection
benefits the whole process of competition in the market. The author has shown to what extent
consumer protection law will exist on a market where effective competition rule operate. In
some other circumstance there is no need of enacting ineffective law which it aim is already
covered by another legislation, this results into wastage of tax payers money and government
time. This research paper has gone further to research whether competition law is effective
tool to protect consumers. The study has taken into account the developed jurisprudence of
competition law that is US and EC, with the developing jurisprudence of competition law that
is Tanzania.

11
Mankga, Boaz, “When is price discrimination prohibited as anti-competitive?” Juta’s Business law, Vol 15,
Issue 2, pages 23-28, 2007.pg 26
12
Cseres Katalin Judit, Op.Cit pg 1-407
Kahyarara13 has examined different competition policy, regulations and upcoming institution
that regulate the activities of dominant firms to avoid monopoly through mergers and
anticompetitive behaviours in Tanzania. His research was part of the initiative taken by the
United National Conference on trade and development. He has extensively surveyed the
results of monopoly through mergers and anticompetitive behaviours in Tanzania. That
consumer will be limited in terms of choices and prices, this robes consumer’s utility, as they
will buy products unwillingly. This research paper will go further to study how the Fair
Competition Act of Tanzania protects consumers.

Hans Vedder,14 in order to identify the relationship between competition law and consumer
protection, he has first and foremost defined what is the objective of competition law as an
economic phenomena. He comes to the conclusion that, the link between competition law and
consumer protection is limited to the restriction of competition regulations that have some
consumer protection objective. However, one can criticise Hans Vedder on the point of view
that the main objective of competition rules and regulation is economic effectiveness, when
defining the word economic effectiveness it includes consumers’ welfare, if consumers lack
competitive prices and arena for choices that means the economy is not effective.

Hans W Micklitz15 the author has discussed on the relationship between antitrust law and
consumer law in the EC, the EC has formed several directives that relates to the consumer
protection in EC such as Directive 2003/5416 and 2003/5517, the coming into force of these
directives have reaffirmed the relationship between antitrust and consumer law. Hans W
Micklitz has raised an emphasis that, private enforcements are of vital importance for the
development of competition law and consumer protection relations. This dissertation paper
will go further to study the relationship of competition law and consumer protection in US,
EC, South Africa and evaluate what lessons Tanzania can learn from these countries.

13
Godius kahyrara, Op. Cit pg 30-39
14
Hans Vedder, “Competition law and consumer protection: How competition Law can be used to protect
consumers even better- or not” European Business Law Review, Volume 17, Issue 1, 2006, pg 83
15
Hans- W Micklitz, “Consumers and competition – Access and compensation under the EC law” European
Business Law Review, Volume 17, Issue 1, 2006 pg 69
16
OJ 2003 L 176/37
17
OJ 2003 L 176.57
OECD,18 the paper discussed on how competition policy and consumer protection share
common goals and how they complement each other. The two policies share a common goal
that is both aim at the welfare of consumer, they both speak the same language with the same
goal. In this case this research paper will research if there is a need of having two legislations
with the same aim, the paper will evaluate if competition law is effective tool to protect
consumers or there are some consumers’ problems that cannot be protected under
competition legislations.

The WTO centre for international trade, Economics and Environment, under CUTS
19
International conferences on competition policy published an article for the purpose of
helping consumers to generate minimum awareness on anti-competitive behaviours in the
market. So that consumers can alert the government as well as competition authority in the
implementation of competition legislations. Furthermore the article raise emphasis that,
consumers gain a lot from healthy competition in the market, due to the fact that competition
enables undertakings to function efficiently. Also competition presents to consumers a greater
choice of products at lower prices. The article purports that developing countries should
design their competition structure based on their economic, social and historical factor not
based on the developed nations.

CUTS International Conference on competition policy,20 this article has a report on

competition regime in Tanzania, it makes a critical analysis and review of the competition
structure and regime in Tanzania. The research was conducted during the period when the
Fair Trade Practices was in the process been amend to Fair Competition Act. Therefore it is
based on the first competition act of Tanzania, as opposed to this research will go further into
assessing the competition regime of Tanzania basing on the new Competition Act, that is the
Fair Competition Act of 2003.

The report narrates that competition policy and law should attach to the process of
liberalisation, privatization and de-regulation in Tanzania. The enactment of the Tanzania
Trade Practices Act is the milestone of Tanzania competition regime, as it protects

18
OECD,global forum on competition, interference between competition law and consumer welfare,
DAG/COMP/GF/2008 at http://www.oecd.org/competition 01/07/2009
19
CUTS, Competition policy & law made easy, monographs on investment and competition policy, no.8 (CUTS
centre for international trade, economics and environment 2001) pg 1-20
20
CUTS, Competition Law and Policy a tool for Development in Tanzania (Japur printer P. LTD 2002) pg12
consumer’s interest in the market foundation economy. The report has structured down
sections from the act which shows references to the consumers’ interest. Finally, in the
conclusion the report recommend that more studies of competition policies and law are
indispensable in Tanzania, as well as the significant area of consumer protection and
advocacy.

1.3 Objectives of the Study

This study seeks to find a better means for enforcement of the competition law in Tanzania. It
raises serious concern over the state of Tanzania competition Act in relation to consumer
protection. The study narrates and analyse the research findings and gives recommendations
thereto. Eventually this work will relatively contribute to the development of interaction
between competition law and consumer protection in Tanzania.

1.4 Significance of Study

The study is significant in several different ways; first it gives answers to how competition
law protect consumer’s interest, whether competition law is an effective tool to protect
consumers. The study will analyse if there is a need of consumer protection legislation when
efficient competition rules operate, the result will help the government to stop legislating
inefficient rules which cost money and time. This scenario has been discussed from the
international arena to national arena, from developed countries, developing countries to the
least developed countries. Secondly, it will contribute much in the academic field, as it adds
reference materials on this subject since there is insufficiency literature in Tanzania
concerning this subject. Moreover, as a secondary issue the study will provoke and inspire
other researchers to direct attention to this subject in Tanzania.

1.5 Hypothesis
This research is governed by the following the test that competition law is an effective tool to
protect consumers. Therefore the government does not need to enact other legislation for the
protection of consumers.
1.6 Research Methodology
This research was carried out by employing both methods of data correction, the primary and
secondary method. On the primary method data was collected by way of feedback
questionnaires and telephone interviews. The questionnaires were sent to various
stakeholders such as staff from Fair Competition Commission Tanzania, Tanzania
National consumer advocacy bureau, Chief Executive officer Confederation of
Tanzania Industries and individual consumers in Tanzania. A sample feedback
questionnaire has been attached as annexure the results from the feedbacks have been
shown in Chapter four of this dissertation. On the part of secondary method different
libraries have been visited such as the Institute of advanced legal study, British Library,
Cambridge university library and Queen Mary University library to obtain different
monograms and edited collection. Apart from that electronic data from different
website such as the Westlaw and lexis Nexis where different journals were consulted
such as competition law insight, competition law international, competition law review,
journal of competition law and Economics, journal of world competition law and
OECD journal of competition law and policy. Other website are different governmental
website from United States, European Community (EUROPA), South Africa and
Tanzania

1.6 Definition of important terms

Competition Law or Antitrust Law

Competition law is a branch of law that safeguards competition in a free market economy.21
The main objective of competition law is economic efficiency.22 Economic efficiency is
achieved through prohibiting unfair business practices which distort fair competition in the
market. However, the law is not clear on what explicit objectives are considered necessary to
be achieved through the utilization of competition law. It is constantly straightforward to
perceive the disadvantages that consumers will come across, where there are no competition
and competition regulation in the market.

21
Alison Jones and Brenda Sufrin, EC competition law 3rd edn, (Oxford University press, 2008) pg 1
22
Ibid.,
Consumer protection

Consumer protection is the upholding of consumer’s interest, this is a scenario where by

attention is paid to the consumer.23 In every decision made the centre of consideration
reaching to a conclusion should be the consumers. These are measures designed at general
safeguarding and promotion of consumer interest. Includes, first of all maintenance of the
pricing behaviour so that it will not change to the detriment of consumers. Secondly,
information should be accurately disclosed. However, a widespread perception exist that
information plays a fundamental function in consumers’ lives.

Consumer welfare

The general definition of consumer welfare is defined by Brodley as maximization of

consumer surplus, this is part of the total surplus that is given to consumers, the express and
precise economic benefit received by consumers of a particular product has calculated by its
price and quality.24 This means that, consumers must gain individual settlement from a
consumption of a particular product. Consumer welfare standard does not seek to maximize
total surplus, it is only concerned with consumer surplus.25 Total surplus is the combination
of producers, government and consumers surplus.

23
Katalin, Op.Cit pg 155
24
Brodley, J.F. The economic goals of antitrust: efficiency, consumer welfare and technological progress, 62
New York University Law Review. 1020, 1987 pg 1033
25
Katalin, Op.Cit pg 48
1.7 Foundation of Competition Law in Tanzania
“Increasing competition within an economy is no easy task. People often fear for their
futures when free-market policies are introduced. Tanzania, however, has shown that
promoting fair play through competition policy improves the performance of manufacturing
firms. This translates into gains for the overall economy.”26

Quoting Mark Joelson, “no one claimed credit for having organised the world’s first cartel.
Conversely, no one is certain as to the earliest antecedents of the concept that governmental
vigilance is needed to protect the free market from private anticompetitive restraints”
27
Competition law emerged more than a hundred years ago in the developed jurisdiction such
as United States. In Canada the principles were codified in 1879 and in USA it was in the
1889,28 In Tanzania competition law emerged after 1980.29

Before 1980 Manufacturing undertakings were state owned in Tanzania therefore the
government found that there was no need for competition policy. Such assumptions were
doubtlessly reinforced by the perception that it is the government that controlled all the major
means of production.30 With time the state sector left much of their productive capacity idle,
therefore the results were inefficient allocation of resources and the firms relied on state
subsidies which led to privatization of the manufacturing firms.31 In commentary, one can see
that competition policy is significant to any development process to ensure effective
utilization of resources regardless of who is in control of the market.

According to the United States Agency for International Development (USAID), Tanzania is
considered to be among the world’s poorest nation with per capita gross domestic product
(GDP) of US$ 382.32 The country mainly depend on the agricultural sector has the backbone
of the economy, surprisingly enough the agricultural sector contributes only 45% to the GDP

26
IDRC, Competition and development the power of competitive market , legislation on competition brings
productivity and business investment to Tanzania at http://www.idrc.ca/uploads/user-
S/12093977971Comp_Case4_e_Tanzania.pdf 22/06/2009
27
Mark Joelson, An International Antitrust Primer, A guide to the operation of US, European Union and other
key competition law in the Global Economy, (Kluwer International Law, 2006)
28
Known as anti trust law in the US , Korah, Valentine, An introductory guide to EC competition law and
practise4th edition, (Oxford, Oxford University press, 2000) pg 108
29
Godius kahyrara, Op.Cit pg 36
30
In 1967 the major means of production were nationalised , the government controlled the prices under the
regulation of prices Act 1973 as illustrated by Jones, J, Resources and industry in Tanzania: use, misuse and
abuse (Dar es Salaam, Tanzania publication house, 1983) pg 46-48
31
Ibid.,
32
USAID, Tanzania annual report at http://pdf.dec.org/pdf_docs/Pdacd882.pdf 22/06/2009
of the country.33 Hence forth, Tanzania encourages higher levels of investment and
productivity in order to restructure the economy and fight against poverty.

Chart No. 1 Tanzania GDP Per Capita

Source: United Republic of Tanzania, National Bureau of Statistics

(a) Source derived from the IMF

(b) Data estimation and projection based on instigator calculations

33
National Bureau of statistics Tanzania at http://www.nbs.go.tz/agric_presentations/Highlights%20for
%20launch.pdf 22/06/2009
Chart No. 2 Tanzania Real GDP Growth (%)

1.7.1 Why competition law in Tanzania?

In 1980s, Tanzania opened the doors to free market and investment, manufacturing sectors
were institutional and privately owned. This was the period when the country was in
transition from socialist mode of production to capitalist mode.34 Therefore there was a need
for laws to regulate trade liberalization, privatization and deregulation process.35 As time
surpass the market became subject to concentration, this gave rise to monopoly in the market.
One can see that the need for regulation to control anti-competitive behaviour will
automatically rise; otherwise undertakings will adopt unfair means to extracts maximum from
consumers’ income. In order to safeguard consumer’s interest the government had to regulate
competition policy for market and goods to avoid private monopoly in the market. Therefore
the government embarked on the progress of repealing the laws that had been in control of
the planned economy. In 1993 the Price Control Act of 1973 was tabled in the Parliament for
34
Lutfried x Mbunda, “anti-monopoly law and free market economy: policy and basic issue” African journal of
finance and management, vol 9, issue 2, 2001 pg 6
35
CUTS, competition law and policy: a tool for development in Tanzania at http://www.cuts-
international.org/Tanzania-report.pdf 24/06/2009
the possible amendment, afterwards the government set up task force to research on the legal
structure and institutions operating in the developed market economy.36 This is when the Fair
Trade Practices Act, 1994 came into existence.

The milestones for competition policy in Tanzania was the passing of the Fair Trade practice
Act in 1994, the act main objective inter alia, was to protect consumers, and it set out
regulations for consumer protection.37 It should be clear from the foregoing discussion that,
the first Competition Act in Tanzania main objective was consumer protection, from the Fair
Trade Practice Act words in the title state that and I quote:

“An act to encourage competition in the economy by prohibiting restrictive trade

practices, regulating monopolies, concentrations of economic power and prices, to
protect the consumer and to provide for other related matters.”38

If we look at the market operation and the first legislation on competition law in Tanzania,
one can conclude that the main objective of competition law in Tanzania is the protection of
consumers’ interest. Reading thoroughly, from the first competition Act there are provisions
which are found from other consumer protection legislation. Part six section fifty one to
ninety three of the Fair Trade Practise Act 1994, comprehensively set down the principles for
the protection of consumers’ interest. The Act prohibits inter alia, unfair trade practices to the
detriment of the consumers, misleading advertising and conducts and it impose an obligation
to the firms their products in the market should be labelled so as to enhance transparency.

Finally however, Tanzania need to set rules that will prevent the foreign firms taking
advantage of trade liberalisation process, privatization and foreign direct investment by
dumping second-rate products which are vulnerable to consumers.

1.7.2 The Fair Trade Practices Act

The Act was enacted in 1994; it introduced a significant development in Tanzania on

competition law and policy. The Act outlawed three main types of business activities which
are: restrictive business practice from horizontal agreements to vertical agreements39, control
36
G, Mkocha commissioner Fair Competition Commission Tanzania, challenges/obstacles faced by competition
authorities in achieving a greater economic development through the promotion of competition, contribution
from Tanzania, a paper submitted at the OECD global forum on competition, on 12th February 2004,
CCNM/GF/COMP/WD(2004)12, unclassified pg 3.
37
Godfrey Mkocha, Op. Cit pg 6
38
The United Republic of Tanzania, The Fair Trade practices Act, Act no. 4 of 1994
39
Ibid, See section 16,17,18,19 and 20
of monopolies in the market through mergers and acquisition40 and abuse of market power.
However, it had a number of weaknesses which are: first it accorded unbalanced discretions
to the minister of industry and trade in regulation of certain cases. Going through section
thirty-one to forty the minister has the power to identify unwarranted concentration of
economic power, his approval is required for mergers and takeover also he has the power to
fix prices. Some scholars argue that the competition Commission was operating under the
minister mandate.41 It should be clear from the foregoing discussion, that for proper
implementation of competition policy and laws the Commission should be an independent
and impartial body, operating free from favour and fear.

In the parliament presentation of the Surface and Maritime Transport Regulatory Authority
Act (SUMATRA) Act of 2001 and the Energy and Water Regulatory Authority (EWURA)
Act of 2001, these two acts had a conflicting power with the Fair Trade Practices Act. It was
suggested that concurrent amendments had to be put into the FTPA which are now part of the
EWURA Act.42 These changes are first, the top decision maker is no longer the Trade practise
Commissioner but the amendment creates the commission with five members headed by the
executive chairperson and a secretary. Second, the Commission becomes an independent
body standing on its own not part of the Ministry of Industry and Trade.43

1.7.3 Fair Competition Act

In 2003 the Parliament of Tanzania, voted for a new fair Competition Act that attempts to
accurate countless shortfalls in the 1994 Act. The 2003 Act has strengthen competition law in
Tanzania, in particular by establishing the Fair competition commission,44 giving it power to
hold inquiry and impose direct sanctions for severe infringement45 on an undertaking that has
conducted unfair competition.

40
Ibid, section 31
41
N. Nditi, Consumer protection law and practice: its relevance and reality in a developing economy with
special reference to Tanzania, PhD theses, Toronto University, 1987 pg 23
42
Schedule No.4, EWURA Act 2004
43
CUTS, competition law and policy a tool for development in Tanzania, Loc. Cit pg x
44
See section 62, The Fair Competition Act can be found from The United Republic of Tanzania,Acts
Supplement No. 5 of 23rd May, 2003, Printed by the Government Printer, Dar es Salaam. The Act was passed
by the parliament on the 2nd April, 2003 and assented by the president on 23rd of May, 2003.
45
Ibid, Section 68
Unlikely, the repealed Act the Fair Competition Act 2003 sets out its objective at the
beginning of the sections. Section 3 of the Fair Competition Act of 2003 stipulates that:
“The object of this Act is to enhance the welfare of the people of Tanzania as a whole by
promoting and protecting effective competition in markets and preventing unfair and
misleading market conduct throughout Tanzania in order to:
(a) increase the efficiency in the production, distribution, and supply of goods and
services;
(b) promote innovations;
(c) maximize the efficient allocation of resources; and
(d) “protect consumers.”

The above quotation demonstrate that, whoever has to enforce the Act would have to come to
grips with protecting consumers as indicated in the objects of the Act

1.7.3 The way forward

It is unfortunate that, market forces by themselves are not protected from the actions
restricting competition. The state’s role is to shield the market against any
manifestation of monopolist and unfair competition which leads to the detriment of
consumers.46 The Tanzanian government has partly established its role by the
creation of The Fair Competition Act, 2003 this is the current competition legislation
operating in Tanzania, which in the researcher’s opinion is, clear and has most of the
standard principles of whichever competition law would have. But an excellent Act
alone is not enough, for the reason that adopting legislation merely is not sufficient
enough. In order to have a workable competition regime enforcement should be done
appropriately. The government should be able to control market concentration and
dominance occurrence.

Finally it should be noted that, due to globalisation, Tanzania also has to keep pace with the
changes in the developed economy. Having a well drafted Act is one step, the next step
should be institutional and capacity building for proper implementation of the law. In terms
of capacity building one step has been done that been the creation of the Fair Competition
Commission as an independent body. Furthermore much needs to be done, since the
Commission consist of fewer than twenty experts in the competition area, eight
administration staff and fourteen supporting staff.47 The less than twenty experts come from
46
UNCTAD, Commission on trade in goods and services and commodities, issue relating to competition law of
particular relevance to development: preparation for a handbook on competition legislation,
TD/B/COM.2/CLP/17, 8th Feb, 2001.
47
Figures derived from the FCC website at http://www.competition.or.tz/page.php?9 29/07/2009
all over the country including academician. Tanzania needs to introduce competition law as
part of legal training so as to increase number of experts in the country.

Table No. 1 Number of Staff employed in the Fair Competition

Commission

FIELD NUMBER EXPERTS IN COMPETITION

MATTERS
CONSUMER AFFAIRS AND 5 YES
ADMINISTRATION
COMPLIANCE 4 YES
ADVOCACY 4 YES
ANTI- COUNTERFEIT 3 YES
INVESTIGATION 4 NOT ALL
ENFORCEMENT 5 NOT ALL
OTHERS 22 NO

Source: FCC research department. (2009)

 CHAPTER TWO
THE LEGAL PRINCIPLES
“Today all around the world, policy makers recognise that a system of competition law is
essential to successful operation of a market economy and the protection of consumers”
by Philip Collins Chairman OFT, Opening keynote speech to the British Institute of
International and Comparative Law’s Conference.48

Competition law emerge to be one of those fields of law that the objective forward is not self
explanatory, while with consumer protection legislation every person knows what is
protected. Competition law emerge to be something different in the sense that it
protects, competition and that is something more abstract to relate. Competition law
49
protects consumers by a guarantee that market remains competitive; it encourage
new market competitor and create incentive for innovation. Strong consumer safeguard
depends as much on guideline of competition. An elevated level of protection
throughout strict principles helps to make the domestic financial system extra
competitive by causing undertakings to improve the quality and pricing of goods and
services to the community.50

2.1 The role of International competition law in protecting consumers

The United Nations Conference on Trade and Development UNCTAD has published a model
law on competition so as to support different states in drafting and enlightening their
legislations. Further support for this analysis can be derived from chapter VIII;51 the chapter
culminate on how the prohibition of restrictive business practices can also protect consumers.
It goes further into apprehend that competition law should contain chapters devoted to
consumer protection.

On 22nd of April, 1980 the United Nations Conference on Restrictive Practices approved
different doctrine and set of laws on competition guidelines and laws. Thereafter the
UNCTAD was created as a body responsible of implementing them.52 According to

48
Reform of Article 82’, 24 February 2006. Available at: www.oft.gov.uk (accessed 4 August 2006), p1.
49
Hans Vedder, Op. Cit. pg 83, emphasis added by the author
50
Michael, Porter, “On Competition” (Harvard Business School Press, 1998) pg 187
51
United Nations, UNCTAD Model law on competition, TD/RBP/CONF.5/7/Rev.3 2007 pg 64
52
Ibid., pg 3
UNCTAD the universal objectives of competition policy and law are: to implement and
protect consumer welfare, to implement the production of quality products and services at
reasonable prices to consumers, to restrain restrictive business practices in the economy and
lastly, to control monopoly or exploitation of power and unjustifiable concentration of market
power.53 Section 15 of the General Assembly Resolution54 reinforce on the measures
describing the control of restricted and other offensive business practice which may be
detrimental to consumers, as well as means for enforcement of such measures. It should be
clear from the foregoing discussion that the main focus of UNCTAD principles is protection
of consumers’ welfare through the goal of economic development.

In 2005 UNCTAD organised the International conference on competition policy in Turkey to

reaffirm the legitimacy of the existing codes on restrictive business practices and urge states
to enhance teamwork linking their competition authorities. The extensive effort of UNCTAD
has been carried out by the OECD competition Commission jointly with the World Bank.55
The most topical review of the general recommendation by OECD is the 1995
recommendation of the Council concerning Cooperation between member states on
anticompetitive practices affecting International Trade.56 Part A deals with the guiding
principles for notification of anticompetitive behaviour which harms consumers between
member states.

In 1998 OECD Competition Commission, adopted a recommendation concerning effective

action against hard core cartels.57 The commission went further in concluding that such
cartels are “the most egregious violation of competition law” predominantly as they damage
consumers worldwide through increasing prices and restricting supply.58 The
recommendation identified hard core cartels as understanding among competitors to fix
prices. These includes inter alia: bid riging, market division and restrict output. 59 Member
states were strongly advised to make sure that their competition laws present effective
sanction and deterrents in order to fight cartels. In one critical respect, the OECD Council
work by adapting recommendation. Turning to the pattern of International law,
53
Ibid.,
54
39/248 of 9 April, 1995
55
Ratnakar Adhikari and Malathy Knight-John, “what type of competition law and policy should a developing
country have?” South Asia Economic Journal at http://sae.sagepub.com/cgi/content/abstract/5/1/1 28/07/2009
56
Trade 27 July 1995, C(95)130 / FINAL
57
Adopted in 25 March, 1998 C(98)35/FINAL
58
Mark Joelson, Op.Cit pg 560
59
Ibid.,
recommendations do not legally bind member states. Into some extent, this will cause the
initiative of OECD be ineffectively, due to national interest a country might not adopt the
recommendation.

The World Trade Organisation, created new rules on the interaction between trade and
competition policy, this was established at WTO Singapore Ministerial Conference in
December 1996. In 2001 the ministerial Declaration at Doha conference of WTO
documented multilateral structure to improve competition policy interferences with
international trade hence enhances consumers’ welfare.60 If we look at the trend of
development and global economy, it is of fundamental to have international cooperation in
competition matters. Regional cooperation will only fight anti competitive behaviour within
the region. International cartels and other anti competitive behaviours will have an adverse
effect to consumers.

As part of its work in 2006 to 2007 the International Competition Network, published major
recommendations on the competition law and consumer affairs. The report identified
consumers as the beneficiary of antitrust law and policy.61 Finally, however the ICN best
practices are just mere recommendation. When the ICN reach consensus on the “best
principles” it is the role of the competition authority for each state to make a decision whether
to execute the recommendations known as “best practice”.

Under international competition law, there are three types of enforcement instruments
namely: the bilateral, tripartite and multilaterally agreed principles and rules under
international competition law, which protects consumers’ interest.62 Asian Pacific Economic
Cooperation (APEC). Its member states include Asian nations, the United States and Russian
federation.63 The cooperation implements competition policy and market openness to enhance
consumer welfare in the region.

60
John Jackson, The emerging principles of International Competition Law, (Oxford University Press, 2008) pg
478
61
International Competition Network, competition policy implementation working group, subgroup 2 consumer
relations “report on activities undertaken and lessons learned” at
(http://www.internationalcompetitionnetwork.org/media/library/conference_4th_bonn_2005/Consumer_Relatio
ns.pdf 08/05/2009
62
UNCTAD, revised report by UNCTAD secretariat “experienced gained so far on international cooperation on
competition policy issues and the mechanism used” TD/B/COM.2/CLP/21 8 May 2001
63
Mark Joelson, Op.Cit pg 563
On the other hand, there is a considerable debate on the extent of the role of international
competition law; some scholars argue that, while competition law are converging, it would be
impracticable and undesirable to consent on a common set of rules appropriate worldwide. 64
Therefore one can see that, International competition law is unsuccessfully when it comes to
global networking compared to regional and bilateral agreements. Withstanding the
inadequacy of International competition law, the fact is currently, International competition
law is not an effective tool to protect consumers. Taking into consideration universally
economic difference, it is inappropriate to have the same approach of competition law. On
this matter, therefore there is a need of international consumer protection law, outside the
ambit of competition law such as the International Network of Control and Protection of
Consumers (ICPEN)

2.2 How competition law protects consumers in the US

The objective of the US competition law is advancement of consumer interest and shields the
free flow of goods in a competitive financial system.65 US antitrust law is commonly
perceived as been supplementary focused on economic efficiency or consumer welfare. 66 The
American Chicago school of thought advocates that the single goal of antitrust law is
consumer welfare.67 This interpretation can clearly be sustained from the wording of section 2
of the Sherman Act, which prohibits monopolization, endeavour to monopolise and
conspiracy to monopolise. The rationale of this section is maintaining total welfare, in US
total welfare is defined to include consumer welfare.68

When a firm is in a monopoly position, it can reduce output and raise prices to the detriment
of consumers. Unlike Section 7 of the Clayton Act and Section 1 of the Sherman Act, section
2 of the Sherman Act explicitly marks single firms who are in monopolisation or attempting
to. Moreover, the Clayton Act and Sherman Act, stipulates that any consumer who may be
injured by anti competitive conducts that are prohibited in the US antitrust law is entitled to

64
John Jackson, Op. Cit pg 562
65
Eleneor M, Fox, US and EU competition law a comparison, Global competition policy, at
http://www.piie.com/publications/chapters_preview/56/10ie1664.pdf 06/06/2009
66
H.Hovenkamp, Federal antitrust policy: the law of competition and its practice 3rd edn, (St Paul, Minn:West,
2005) Chap 1.
67
Albert. Foer, “The goals of antitrust thoughts on consumer welfare in US” found in Philip Marsden (ed)
“Handbook in Trans-Atlantic Antitrust (Edward Elgar Publishing LTD, United Kingdom, 2007) pg 566
68
Bork, “The Antitrust Paradox” 1978 pg 90.
compensation.69 In the important decision of Copperweld Corp v Independence Tube Corp70
the Supreme Court went further into interpreting the objectives of Section 2 of the Sherman
Act. That it is quite similar as the core US antitrust law meaning it focus on the effective
allocation of resources by boost economic growth and exploit the wealth and prosperity of the
nation. The end result will be lowest possible prices, highest quality and material
advancement.

Turning to the pattern of case law, in the important decision of FTC v Raladam Corp,71 it was
held that and I quote “the trader whose methods are assailed as unfair must have present or
potential rivals in trade whose business will be, or is likely to be lessened.” According to
Thomas Leary72, this judgement created a foundation in section 5 of the Sherman Act, that
proof of injury to competitors is not an element of an offence under the aforementioned Act.
This suggests that, for an act to constitute an offence it must cause harm to consumers and not
a particular consumer. Ironically, the US antitrust law protects competitors and forgets about
consumers, when it stipulates that prove of actual harm is essential in predatory pricing
behaviours. This was decided in the case of Booke Group Ltd. v Brown & Williamson
Tobacco Corp.,73 for a predatory pricing case to be established evidence of recoupment stage
must be provided.

2.3 How competition law protects consumers in EC

Neelie Kroes,74 made a statement that competition law is not concerning cases only. It is on
the subject of regulating conditions for undertakings to deliver improved goods and services
to consumers. Competition law aims at competitive markets; the European approach towards
this aim is embodied in Treaty of Lisbon,75 which is based on the concept of social market
69
Deborah A. Garza Chair, Jonathan R. Yarowsky Vice-Chai. Antitrust Modernization Commission, Report and
Recommendations. New York: April 2007 at
http://govinfo.library.unt.edu/amc/public_studies_fr28902/enforcement_pdf/070320_us_chamber_inst_for_legal
_reform.pdf 10/06/2008
70
467, US 752,767 (1984)
71
283 U.S. 643, 649 (1931).
72
Thomas Leary, Competition Law and Consumer Protection Law: Two Wings of the Same House, 72
ANTITRUST L.J. 1147 (2005).pg 5
73
Booke Group Ltd. v Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993)
74
European Commissioner for competition policy on: EU and EC antitrust policies our shared believe in
competitive markets; initial contribution at 56th Annual Spring Meeting of The American Bar Association
Section of Antitrust Law; Washington DC, 28 Mar.2008
75
Article 2( 3), Treaty of Lisbon amending the Treaty on European Union and Treaty establishing the European
Community signed at Lisbon, 13 Dec. 2007
economy. This is considered as the most successful method to congregate the demand from
consumers for goods and services.76

After the adoption of Regulation 1/2003,77 the European Commission initiated an extensive
reorientation of its policy that is reinforcement of private enforcement.78 This means that
consumers can, potentially, be well thought-out as holders of compensation entitlement under
competition law. In 1993, Advocate – General van Gerven raised and affirmed that, there is a
need for compensation to professional traders from the abuse of Article 81.79 After seven
years in the case of Courage v Crehan Ltd80 Advocate-general Mischo supported the idea of
compensation but made an establishment that also consumers should be considered as holders
of compensation entitlements under competition law. However there considerable uncertainty
on the organisation of private enforcement81 in order for an individual or collective consumer
groups to claim compensation privilege, one has to be entitled to subjective rights from
Article 81 and 82.82

83
Article 81 (3) point 13 of the guidelines provides that the goal of European competition
law is the protection of competition on the market as means of enhancing consumer welfare
and ensuring an efficient allocation of resources. 84Article 82 paragraph (b) provides for the
protection of consumers.85 The Article prohibits “limiting production, markets or technical
development to the prejudice of consumers”. 86

76
Doris Hilderbrabd, The Role of Economic Analysis in the EC Competition Rules, 3rd edn., (Kluwer Law
Series,2009) pg 4.
77
OJ 2003 L 1/1
78
Hans- W Micklitz, Op. Cit. pg 3
79
Case 128/92, Banks, [1994] ECR 1-1209 Opinion, paras 36-45
80
Case C-453/99, [2001] ECR 1-6324 Opinion, para 38
81
Kj Ceres, Competition law and consumer protection: a love-hate relationship, PhD thesis, 2004, university of
Utrecht pg 34
82
EC regulation 1400/2002
83
EC Commission papers on the Application of Article 81(3) of the Treaty [2004] OJ C101/97,
[84]; Discussion Paper number 3 (55)
84
R Whish, 6th edn “ Competition law” (Lexis Nexis, United Kingdom, 2008) p129, also noted from
Commission Guideline on the application of Article 81 (3) EC [2004] OJ C 101/97, para 84
85
Case C-203/96, Dusseldorp, [1998] ECR 1-4075 in this case the European Court of Justice interpreted the
notion of consumer to include inter alia companies active in waste treatment business
86
P. Akman, “consumer welfare and Article 82 EC Practice and Rhetoric” (ESRC Centre for competition
policy) at http://www.uea.ac.uk/polopoly_fs/1.104683!ccp08-25.pdf 10/06/2009
Article 2(1) (b)87 stipulates that in assessing merger, the Commission should take into account
the consumer welfare if it will be an advantage to consumers and the merger will not be an
obstacle to the community competition.88 This means that the efficiency should be substantial
and beneficial to consumers. Article 153(2) EC treaty, has the basic words in defining
consumer protection.89

Turning to the Community case law, one can evidently see in practice that EC competition
law main aim is the protection of consumers rather than competitors. In the case of British
Airways v. Commission, the court interpreted Article 82 as there is no need of prove of direct
harm to consumers, the rationale of competition law is to avoid artificial market distortion.
When a dominant firm enter into anti competitive agreements with its agencies the interest of
consumer in medium or long term basis are harmed.90 Therefore prove of actual harm is
immaterial under EC law. Looking at the terms in consumer contracts the European Court of
Justice held that “under community law concerning consumer protection the provision of
information to consumer is considered one of the principal requirements”91 In EC law unfair
competition is interpreted under the section of consumer welfare. 92 An act will be will fall
under the category of unfair competition if directly or indirectly harm consumers.

Lastly, the competition Commission has appointed “a consumer Liaison Officer” he is

responsible for primary contact person for consumer organisation. Also an individual person
(consumer) is competent to contact the officer straight on competition connected issues. 93
Finally, however the EC competition legislation provides for effective competition.
Consequently, while the word “effective competition” has not been undoubtedly defined, at
the outset this leads to academic debates on the proper application of the law.

87
The control of concentrations between undertakings, Regulation 139/2004 [2004] OJ L 24/1 (Merger
Regulation)
88
M.Dubbah, “EC and UK Competition Law:commentary cases and materials” (Cambridge University Press,
2004) pg 486.
89
NML Dhondt, Intergration of Environmental protection into other EC policies (Groningen: Europa Law
Publishing 2003) pg 73
90
[2004] CMLR 1008 para 264
91
Case C-362/88 GB-INNO-BM v Confederation du commerce luxemburgeois [1990] ECR 667, 689.
92
Christopher Wadlow, Is it time to reclaim unfair competition law from the consumer lawyers? ( presentation
at oxford Intellectual Property research centre, 7th Feb, 2006) pg 6
93
JuanAtonio, “competition enforcement and consumers” in Philip Marsden (ed) “Handbook in Trans-Atlantic
Antitrust (Edward Elgar Publishing LTD, United Kingdom, 2007) pg 596
2.4 How competition law protects consumers in South Africa
The South Africa competition policy is based on the principle of economic efficiency.
Reading the policy intensely it goes further into the primary fundamental purpose that
is promotion and maintenance of competition.94 The policy has a fundamental feature
that it aims at competitive prices and choices for consumers. It is argued that the
content of South Africa competition law has incorporated both US antitrust principles
and into some extent it has EC competition principles.95

Section 496 strictly prohibits horizontal agreements which distort completion in the market.
Further support of the prohibition can be derived from Section 4 (1) (b), the Act goes further
into including per se enforcement in anti- competitive acts such as price fixing, market
division and collusive tendering. Collusive tendering occurs when firms coordinate their bids
on contracts so as to fix prices.97 On the other hand, the section provides a shield for
consumers’ interest when it comes to pricing, but in another hand it is difficult to enforce.
This is because one, the Section prohibit the above mentioned anti- competitive agreements
in specific undertakings and “any other trading conditions” while the any other trading
condition have not been broadly defined in the Act, this is a loophole in enforcement. Second,
yet in terms of practical experience there has been less enforcement actions on horizontal
agreements.

The South Africa Competition regime has a pecuniary feature in terms of consumer
protection. This is found in Section 5(2) and (3)98 the prohibition of resale price maintenance
if resale price is offered it must be branded as recommended price. One may misunderstood
this point by thinking that in other jurisdiction there is no such law. The peculiarity features
comes to the point that in other jurisdiction resale price is regulated under consumer
protection law and not competition law.

Section 8 (a) deals with abuse of dominance. Where by a list of prohibited practice are
prohibited this comprise charging an excessive price that is detrimental to consumers. Section

94
Thomas Wilhelmsson, “Cooperation and Competition Regarding Standard Contracts Terms in Consumer
Contracts” Business Law Review, Volume 17, Issue 1, 2006 pg 23
95
OECD, “Competition law and policy in South Africa at http://www.oecd.org/dataoecd/52/13/2958714.pdf
12/6/2009 pg 21
96
The republic of South Africa, The Competition Act, Act no. 35 of 2001, published by the government printers
97
OECD, Glossary of statistical terms at http://stats.oecd.org/glossary/detail.asp?ID=3334 12/6/2009
98
The Republic of South Africa Loc. Cit
8 (d) prohibits tying or forcing unrelated contracts, selling below marginal cost and price
predation. This section makes Competition Act a foundation of price control; in 2001 the
Competition Commission received a complaint on the excessive prices for retroviral drugs for
AIDS. As a result the Commission imposed stiff penalties on the international pharmaceutical
firms which distorted competition by entering into agreements that prevented distribution of
cheaper drugs.99

Section 12(a) (i) and (ii) has a list of ground based in the process of approving a mergers.
Inter alia this includes public interest according to the Act commentary. Public interest has
been defined to include the notion of consumer welfare. In the case of Nedcor- stanbic100,
also the judicial appeal in this case made a significant change to the South Africa
Competition Act which is the application of concurrent jurisdiction linking regulatory bodies
and the SA competition authority.

Also in the important decision of Pioneer food v SAD holding Ltd101, a merger was approved
by the SA Competition Tribunal, since it was seen that it would increase different consumer
products in the market. It is immediately apparent the end results will be more choice for
consumers. However, when it comes to export market, consumer welfare becomes the second
priority after market efficiencies.

2.5 Tanzania Market

The market in Tanzania has passed through different phase from the colonial era to the
current market orientation system. Since the question that we are trying to answer is which
approach is relevant for Tanzania market at a glance, therefore it is essential to understand the
current market operation in Tanzania. historically, during the colonial period export increased
at a rapid rate, upon attaining independence Tanzania from the period of 1961 to 1965 after
independence, the involvement of manufacturing sector to the country’s GDP was relatively
from 3,701-4,324102 Tanzania million shillings.

99
Mpheane, A. Lepaku, “competition law in the South African law curriculum: a sorry state affairs, Codicillus,
Vol 45, Issue 2, pages 20-25 2004 pg 34
100
High Court on 31st March, 2000
101
Competition Tribunal Republic of South Africa, case no. 23/LM/APR/02
102
United Republic of Tanzania, National bureau of statistics at
http://www.tanzania.go.tz/budgetspeech/2009/Hali%20ya%20Uchumi.pdf 08/08/2009, in 2009 the conversion
rate is 1500 Tanzania Shilling is equivalent to 1 US dollar
The market trend of manufacturing industries in Tanzania is monopoly, large firm benefit
from market power than smaller firm these are mainly the food process, beverage and
tobacco. No comprehensive analysis has been approved concerning the pricing behaviour. 103
Yet, in terms of practical terms the beer and cigarette industry monopoly power is extremely
noteworthy owing to limited competition.

Studies taken in 2008 on the market system in Tanzania, shows that currently there have been
a higher degree of openness. However the altitudes of imports have been higher compared to
the altitude of exports.104 This has led the country to register a depressing trade balance. Also
the export GDP percentage has proved to be diminishing due to the decrease in export
capacity. In the year 1995-1999 Tanzania experienced a massive downfall of manufacturing
industry production due to the closure of the firms caused by increasing cost of production
and stiff competition from imported goods.105

The manufacturing sector in Tanzania principally comprises of food processing, tobacco and
beverage this covers over 70% of manufacturing. The rest is textile, basic metal, rubber,
petroleum account for the remaining percentage.106

103
OECD, NEPAD and UN Global Impact, “integrity environment and investment promotion, the case of
Tanzania” a paper presented to the conference alliance for intergrity government and business roles in
enhancing African standard living, in Addis Ababa on 7-8 March 2005 available at
http://www.oecd.org/dataoecd/11/37/34571058.pdf 27/07/2009
104
L. Rutoshobya and I. Allan, “SME and network governance structure in Tanzania” Faculty of commerce and
management, University of Dar es Salaam at
http://www.usbe.umu.se/forskning/pub/Business.Studies/IMP2001.pdf 30/07/2009
105
CUTS, Op.Cit pg 4
106
Louise G et all, “Determinants of Exports and Investment of manufacturing firm in Tanzania” Credit
Research paper at http://www.nottingham.ac.uk/economics/credit/research/papers/cp.98.5.pdf
Chart no. 3 Tanzania manufacturing industries breakdown

2.6 Which approach is relevant for Tanzania

According to Adam smith, consumption is the sole end reason of production.107 Therefore the
concern of the producer ought to be upholding consumer’s interest, no consumption no
production. It also seems reasonable to suppose that competition law should focus on
protecting consumers rather than competitors. It is immediately apparent from the survey
above that the current changes made in the EC, that is shifting the focus point of competition
law to protect consumers’ interests first, would be the relevant approach for a developing
country like Tanzania, because the market is characterised by few undertakings. Therefore
there is a room for monopolisation. In this situation competition legislation ought to protect
consumers’ interest.

However, from the nature of market system, particularly the manufacturing sector which is
still at its infant stage, Tanzania needs to incorporate some elements of the US approach with
minor transformation so as to protect small developing firm. In the establishment predatory
pricing cases actual harm should not be a fundamental requirement. This will prevent the
107
Adam smith, The wealth of nations, book 4, chapter 8, 1776.
dominant firm from creating barriers of entry for the small firms. Finally, consumers will be
able to have wide range of choices at reasonable prices.
 CHAPTER THREE
Relationship between competition law and consumer protection
The purpose of this Chapter is to quantify and examine the objective of competition law in
the arena of consumers’ welfare. How are competition law and consumer law related? In
order to answer the posed question; survey has been carried out on different jurisdictions. At
the end the author evaluate on the legal framework for protecting consumers in Tanzania.

3.1 The notion of consumer protection and competition law

Once there is market failure, this means that there is lack of efficiency. This chapter will
focus on competition law and consumer law. Relationship between competition policy and
consumer policy exist in two different ways. Firstly, is what is known as regulatory level
these are the competition rules in a particular jurisdiction. 108 The second way is through the
application of these rules, this consists of decisions from the judicative authority of
competition matters.

Before 1938 competition law and consumer law were two different paths having the same
goal. The situation changed in the case of FTC v Raladam Corp, when the Supreme court
ruled that “ the traders whose method are assailed as unfair must have present or potential
rivals in trade whose business will be, or is likely to be lessened”109 from this case is when
the 1938 Wheeler- Lea Amendments evolved. This is the amendments to the Federal
Commission Act, which authorised the Federal Trade Commission to prohibit unfair means
of competition particular deceptive acts. The Act added the words “deceptive acts or
practices” into Section 5 of the Sherman Act, thereafter injury to competitors was not a
fundamental ingredient of anti competitive offence.110 It is important to understand the
Sherman Act, in considering the emergence of consumer protection principles into
competition law. Since the Sherman Act is the mother of the world competition law.

Competition law and consumer protection both originates from a common root, and that is
the analysis of economic terms.111 Competition law creates competitive market by ensuring
that competitors approach the market fairly. Apart from that competition law also creates

108
Hans Vedder, Op.Cit pg 86
109
283 U.S. 649 (1931)
110
Thomas Leary, Op. Cit pg 1147
111
D. Brown and G. Wood, “competition consumer welfare and monopoly power” (consumer welfare and
monopoly power (Cowles foundation for research in Economics Yale University, Discussion paper No. 1466R
pg 7.
incentive for innovation therefore encouraging economical prices and increasing range of
choices for consumers.

Competition policy and consumer protection policy have historical nature. 112 A good
example is the development in the United States; the federal antitrust law emerged in 1890.
At that time the jurisprudence of consumer protection was not into existence, thereafter FTC
was created within antitrust jurisdiction in 1914.113 In some countries such as France, Poland
and Hungary competition law enclose a subdivision dedicated to consumer protection.114

3.1.1 Competition policy and consumer policy

Competition policy embarks on the prevention of unfair competition conduct in the market
such as vertical and horizontal agreements and misuse of monopoly power. Therefore one can
conclude that competition policy approaches market from the supply side, with the objective
that consumer benefits from the regulation by having widest range of choices at a reasonable
price. While consumer policy embarks on the market from the point of demand, consumer
becomes the main objective consumer law protects the buyer’s interest.115 This suggest that,
the supplementary competitive the market the greater the consumer superfluous, it should be
clear from the foregoing discussion that these two policies are dependant. For economic
development, it is important for competition policy and consumer policy to be administered
by one authority.

Looking at the goals of competition policy and consumer policy, both aim at competitive
working markets.116 Robert Bork advocates that, there can only be one goal for the
competition policy, and that is the notion of consumer welfare.117 Aim at adjusting market
failure in different aspects, competition law correspond to consumer needs by regulating free
market, it encourages new market entrance and generate incentives for innovation. Therefore
the end result will be to increase product choices, motivate sellers to provide correct

112
Ibid.,
113
M. Joelson, “an International Antitrust Primier, a guide to the operation of US, European Union and other
key competition laws in the global economy” 3rd edn (Kluwer Law International, 2006) pg 34 and American Bar
Association, How history inform practice- understanding the development of modern U.S competition policy,
Antitrust Section Fall Forum, Washington, DC, November 19, 2003 available at
http://www.ftc.gov/speeches/muris/murisfallaba.pdf. 20/07/2009
114
OECD, Journal of competition Law and policy, Paris, 1999, vol. 1 no. 3 p 169-246
115
Ibid.,
116
Katalin cseres Op. Cit pg 56
117
R. Bork Op.Cit pg 198
information concerning quality, price and other stipulations of sale.118 Consumer protection
policy objective is geared towards the enhancement of consumer interest. Therefore the
policy endeavour for correct information concerning quality, increase product choice and
lower prices for consumers.119 It should be clear from the foregoing discussion that, in some
aspects competition policy does not identify issues such as health and safety standards.

Thomas Learly, commented that competition policy and consumer policy advocate for one
goal and that is, consumer welfare.120 However, initially, there are a number of competition
policy goals therefore it is ironic to say that the main goal of competition policy is consumer
welfare. The concept is logically, acceptable and understood by academicians. But if we look
at the practical terms competition policy main goal is overall economic efficiency in the
society, which leads to consumer welfare. Further support for the analysis can be derived
from the fact that there are some consumer problems that are not addressed by competition
policy such as health, safety and some other social objectives of a consumer.

However one might conclude that competition policy and consumer policies are two different
roofs that cover the same house, whereas on the other hand they might be two separate roofs
that cover different houses. In order to determine if consumer policy and competition policy
have the same goal it depends on what is defined as consumer welfare.

3.1.2 The Complimentary role

Competition and consumer protection are both intended to improve consumer sovereignty
and effective consumer choice. Looking at the rationale behind these two set of law is the
address of market failure, market failure occurs when market operation and outcomes fall
short to serve the consumer needs.121 The two concepts are deemed as two sides of the same
coin under the coin of consumer sovereignty 122. When competition law and consumer
protection law are misinterpreted the end result will be undesirable harm to consumers. Since
competition law creates market choices and lower prices for consumers, while consumer

118
Katalin Cseres, Loc. Cit.
119
Donald Brown, and G. Wood, “Competition, consumer welfare and monopoly power” Cowles foundation for
research in Economics, Yale University Discussion paper No. 1466R pg 14.
120
Thomas, Learly Op. Cit pg 1112
121
D. Ireland, “Competition Policy and Consumer Protection” at
http://www.irpp.org/po/archive/oct97/ireland.pdf 29/07/2009 pg 28
122
S. Waller, Professor and director institute for consumer antitrust studies, Loyola University “Competition and
Consumer Protection: Breaking down the walls” speech available at http://www.luc.edu/antitrust 20/07/2009
protection law is designed to protect consumers against damaged, faulty, dangerous goods as
well as unfair business practices that are detrimental to consumers.123

The interaction between Competition policy and consumer policy works when competition
law provides consumers with a range of choices from the market, and consumer protection
law gives the consumers the opportunity to exercise the choices. 124 The linkage between
consumer protection and competition is created when consumers need market which
encourage perfect competition.

In the important decision of California Dental Ass’n V FTC, it was noted that, false or
misleading advertising is an offence under the competition law.125 A practice is regarded as
deceitful if it misdirects the consumer’s buying decision.126 In US, under antitrust law
misleading advertisements fall under per se rule offences. This means that once a firm has
practice misleading advertisement there is no need to justify the circumstances for the
misleading, therefore it will be regarded as an offence under the Act. This implies that the US
law is protecting consumers directly.

3.1.3 The opposing role

There are some consumer issues related to consumer protection that are not found under
competition law, such as health, safety and sales contract to children or other people
who, in one reason or another fall under the category of vulnerable buyers. Consumer
protection law set standards for the protection of children such as the educating on the
effect of junk food to children. There is a tension; however it is difficult to prohibit
advertisement of junk food for the sake of protecting children. An agreement by
competitors not to sale junk food in school might fall under anti competitive conducts
in the competition law.

Turning now to the opposing role, under competition law the focus point is not on the
consumer, the consumer is not a special actor. Competition law does not directly focus on the
standard of living of people and how these standards should be improved.127 But one can still
123
Webster new world Law Dictionary at http://www.yourdictionary.com/law/consumer-protection-law
20/07/2009
124
N. Averitt and R. Lande “Consumer sovereignty: A Unified Theory of Antitrust and consumer Protection
Law,” 65 Antitrust L.J 713 (1993) pg 234
125
526 U.S 756 (1999)
126
Thomas, Learly Op. Cit pg 1149
127
Katalin, Cseres Op.Cit, Chapter 2
argue into the dissenting, that competition law, protect consumers through maintaining
economic efficiency.

In the important decision of United States v Brown University128, the Supreme Court made a
rule that pro competitive practice and pro consumer features might be different, it depends on
the organisation and whether it is of a commercial nature129. Looking at the enforcement
level, consumer protection requires direct enforcement; this means that site visiting is
essential. Comparing to competition law is an arm extent from the state. The development of
consumer protection is more when there is a perceived market breakdown or political
disaster.130

In the case of California Dental, FTC brought a complain that a private dental society was
misleading the public under antitrust law by using the words “pain free dentistry” the FTC
applied the per se rule under antitrust. But when the case was taken for appeal, the court ruled
that the matter is not under antitrust theories, the matter fall under consumer protection.131

Competition law is premised on the thought that economic welfare will be enhanced by
endorsing the competitive pricing of goods and services.132 While consumer protection is
mainly centred with ensuring that consumers are provided with a wide range of choice,
flexibility and information.

3.2 Consumer protection in EC, US and South Africa

Before World War 1, the jurisprudence on consumer protection in the world was minimal,
hence lack of legislation to protect consumers.133 Thereafter movements for the supplement of
consumer remedy under common law became recognizable in the 1910s. Different states
started to codify consumer protection in their legislation.

128
5 F 3d 658,677 (3d Cir. 1993)
129
Goldfarb v Virginia, 421 U.S 773 S. Ct 2004
130
D. Ireland Op.Cit pg 28
131
Cal. Dental Ass’n v FTC, 526 U.S. 756 (1999)
132
John Jackson, Op.Cit pg 64
133
M. Jasper, “Consumer Rights Law”, oceana’s Law for the layperson, New York (Oxford University Press,
2008) pg 1
In US, we base our vision on the Federal Trade Commission Act which was established in
1914.134 Section 5 (a) (1) of the Federal Trade Commission Act 1914 as amended prohibits
“unfair or deceptive acts or practice in the market place”. In order to succeed in such an
action a consumer has to demonstrate that an act or practice is unfair or deceptive, sometimes
the consumer should prove that he or she has suffered damage from the unfair deceptive
practise or act. Thereafter the aggrieved consumer can bring a law suit against the seller,
under section 5 (a) (1).135 This section if enforced by the United State department of justice
Antitrust Division and the United States Federal Trade Commission.136 Ironically, in some
jurisdiction there is a requirement that the consumer should send a notice to the seller before
instituting a suit, the rationale behind this is to limit the flooding of court with consumers’
actions and that some buyer and seller disputes can be reached into mutual consensus
amicably. However, in one critical respect the rule is for the detriment of consumer interest.
Since that consumers might see that before going to the justice of the court there is a
bureaucracy procedure to pass to. One might see that his justice will be delayed, as for a
lawyer perspective justice delayed is justice denied.

Apart from the legal instruments, in US there are other bodies that deal with consumer
protection these are: the Federal citizen information centre, this is a department found under
the US general service information. This is assigned with the task of providing supportive
resources information to consumers. The other organisation is the US consumer product
137
safety commission (CPSC) an independent regulatory organ, it has been established in
1972 under the Consumer product safety Act, the body is charged with the responsibility of
protecting the public from irrational risk of serious injury or death from a number of
consumer products. US also has a national consumer organisation and consumer advocacy
group, these are consumer organisation that act on behalf of consumers so as to promote
consumer interest.138 They aid consumers in filling complaint and dealing with all consumer
concerns. Somewhere along the line, these bodies work independently they have no
enforcement authority.

134
1914, (15 U.S.C 41-58 as amended)
135
M. Jasper, Op.Cit pg 6
136
15 U.S.C & 45, Stephanie Kanwit, Federal Trade Commission (2003)
http://www.ftc.gov/ogc/healthcarehearings/docs/030425kanwit.pdf 01/08/2009
137
Ibid., pg 19
138
National Consumer Law Centre,” fair credit report” at http://www.consumerlaw.org/publications/index.shtml
18/07/2009
Turning to the perception of consumer protection in European community, in this part it is
important to have an understanding of the member countries consumer law. Currently EC is
benefiting the internal market of four hundred and ninety million Europeans;139 therefore one
can see the backbone of European economy depends on consumers. The EC consumer
considers free flow of information as the main pillar for protecting consumers’ interest. 140 In
the case of 6-Korn,141 this was a company producing jam, in the advertising it referred as a
“naturrein” maans naturally pure, while in actual sense the jam was not natural pure. The ECJ
declared the advert as misleading to consumers. However, the European judge made law is
decided on a case to case basis,142 the content of what is misleading advertisement changes
with every new decision, although in practice ECJ normally follows its own previous
decision. In the case of Clinique Laboratories SNC and Estee Lauder143 ECJ principally
applied the directives on misleading advertising, cliniques Laboratories used the term
Clinique to market its cosmetic products, the national court in Germany considered this has a
misleading element to the consumers, the case went to appeal in the ECJ and the Court
interpreted the meaning of misleading advertisement in line with EC treaty on the free
movement of goods. Finally, the court decided that the term was not sufficient enough to fall
under misleading advertisement.

The Directive on misleading advertisement,144it has laid down the minimum standard in
evaluating misleading advertisement and it is applies throughout EC member states.145
Article 1 of the directive stipulates the purpose of the directive that is consumer protection.
Article 2 defines advertising in a pioneering way; the definition includes promotion of the
supply of goods or services in any form. Article 4, call upon member countries to take legal
actions against misleading advertisements. There is a considerable debate about the directives
definition of the word “misleading”.

139
Speech by Meglena Kuneva “consumer and competition policies- both for welfare and growth” European
Commissioner for consumer protection, at the OECD Global forum on competition, 2008 pg 1 at
http://www.eaea.org/news.php?k=14968&aid=14968 01/08/2009
140
Case C-362/80 GB Inno para 18 cited in Katalin Cseres Op. Cit. Pg 210, original citation from “Study on the
feasibility of general legislative framework for fair trading (2000) pg 70
141
Case No. C-210/96, 1998 ECR 1-4657 decision of the ECJ made on July 16, 1998
142
R. Hilty and F. Frauke (eds) “ Law against Unfair competition toward a new paragim in Europe” ( Springer-
Verlag Berlin Heidelberg, 2007) pg 105
143
Decision of the ECJ on February 2,1994, Case C-315, 1994 ECR 1-317
144
Directive 84/450/EEC council directive of September 10, 1984 oJ L 250/17 at http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31984L0450:EN:HTML 01/08/2009
145
R.Hilty Op.Cit pg 113
In South Africa, consumer protection provision are scattered into different statutes. First and
foremost is the ground norm of the country it provides for the bill of rights inter alia, such as
right to safety under Section 12146, Section 29 providing for the right to be informed.
Therefore consumers in South Africa have the right to safe goods and get the required
information about a product before making the decision of purchasing. Section 24 and 34
provide for the right to healthy environment and the right to redress147 Competition Act of
South Africa aims at the regulation of free market economy to enhance consumer interest.148

Other Acts which adhere to consumer protection are the Business Act149 which makes
150
mandatory requirements for business to have a licence, the Standard Act promote the
standards of goods and services offered to consumers. South Africa has more than twenty
pieces of legislation which have provisions for the protection of a consumer. In the year
2008, a new bill on consumer protection has been approved by the cabinet and taken to the
parliament for approval. The new bill aims at creating one piece of legislation that will unify
all the provision on consumer protection from other legislation. Since the aim of this paper is
to evaluate what Tanzania can learn from the developed world on the issue of consumer
protection. In these circumstances it is vital to consider why SA has come up with such
changes and not the past practice.

In the year 2007 South Africa made a remarkable change on the consumer protection, this is
the approval of 3rd draft consumer protection bill by the cabinet which will be tabled to the
parliament and possibly might be passed into law in 2010.151 The bill has put all consumer
protection provision from different statutes into under one piece of legislation. This bill has a
peculiarly feature imposing liability to the manufacture, retailer or distributer on
consequential damage suffered by a consumer as a result of their product. The defence of
negligence is inapplicable here. As consequences of somewhat simplicity reading of section
50 of the new bill, it is a fundamental requirement that “all agreements for consumers must
be in plain language”. Upon passing of this bill, consumers in South Africa will have the best
statutory protection worldwide.

146
Constitution of the United Republic of South Africa, Act no 108 of 1996
147
Ibid.,
148
The Republic of South Africa, Act no 89 of 1998
149
Act No. 71 of 1991
150
Act No. 29 of 19993
151
MARSH, International Bulletin “New consumer protection bill in South Africa” July 2008 at
http://global.marsh.dppl.com/documents/Internationalbriefings/Consumer_Protection_Bill_in_South_Africa.pdf
23/0/2009
3.2.1 Consumer protection in Tanzania

When interpreting the concept of consumer protection in Tanzania, one has to start with the
Constitution of the United Republic of Tanzania. This interpretation can clearly be sustained
from the words of Part III Article 30 (2) section (b) of the Tanzania constitution which
provide for “defence, public safety, public morality, public order, and public health”152 in
commentary, in any activity of development the country’s interest shall be enhancing public
benefit. Part 11I Article 20 (1) of the CURT provides for consumers freedom subject to the
laws of the country to liberally and peacefully cooperate, unite or assemble on the matters
affecting consumers, they have the right to form or join association. Notwithstanding the fact
that consumer rights are recognised from the mother law, the fact remains that consumer
abuse have continue to increase in Tanzania. A good example is the magnitude increase of
counterfeit products estimated at 50% to 90% of the good found in Tanzania market. 153
Statistics from Tanzania Food and Drug Authority (TFDA) estimates market value of
counterfeits at about TZS 925 billion which is estimated to be equivalent to US $715 million.

Part III, Para 15 to 21 of the Fair Competition Act, 2003 stipulates that misleading or
deceptive conducts against consumers shall be prohibited and part VIII para 48 stipulates on
the necessity of product safety and product information to consumers. This provision is
complimented with the constitution Article 18 (2) “provides for the freedom of expression”154
that citizens have the right to be informed on all state matters that have an impact into their
lives. Part II para 8 to 14 of the Fair Competition Act provides for the right to choose, that
consumers have the right to choose from a range of products that they came across. Further
support for this analysis can be derived from section 12 to 14 of the Fair Competition Act,
2003 where details of anti competitive agreements conducts are laid down for the consumers
to take note. Part IV para 22 of the Fair Competition Act provides for the right to redress,
consumers have the right to compensation for unsatisfactory goods or services, subject to
hearing. Apparently, consumers in Tanzania are not aware of their rights, this is due to
several factors namely, and government publications are not easily accessible for the public.
One might argue on the contrary that the statutes are easily accessible from the parliament

152
United Republic of Tanzania, Constitution of the United Republic of Tanzania 1977 (as amended from time
to time)
153
Elizabeth Karua, “Trademark law and counterfeits: A case of cosmetic industry in Tanzania” A dissertation
submitted in a partial fulfilment of the requirements for the award of degree of bachelor of laws (LL.B) of the
faculty of law University of Dar es salaam, May 2008 pg 7
154
Ibid.,
website, this is actual truth. Such truth will be in doubt reinforce by the fact that the level of
155
adult illiterate was 20% apart from that majority of the population have no access to
internet facilities. Therefore it is absolute correct to conclude that majority of consumers in
Tanzania do not know their rights.

The government has enacted other sectoral regulation for the promotion of consumer rights;
inter alia these include EWURA Act, 2001 which provide for the energy, water and utilities.
The SUMATRA Act, 2001 which provide for the transport sectoral, The Tanzania
Communication Regulatory Authority Act, 2003, Tanzania food and drug Authority Act 2003
and Tanzania bureau of standard Act, 1975. All the aforementioned acts aims at consumers
satisfaction need, they regulate on all basic needs such as food, water and shelter.

Reading comprehensively the Fair Competition Act, 2003 part VI para 26-36 has a very
important aspect on consumer protection and this is the condition in consumer contracts.
Worldwide, even in the developed jurisdiction of consumer protection, consumer rights are
mainly abused under consumer contracts. The part provide that consumers should be well
informed before entering into the agreement with the seller also the agreement should be of
satisfactory quality, fit for their purpose as described.156 Finally, however there is a well
drafted law on the protection of consumer in Tanzania, the problem is the implementation, it
is estimated that more than eighty percent of consumers suffer from lack of understanding of
consumer’s rights most of them do not even know the existence of the Tanzania Consumer
Advocacy Society. Having a good law is one thing and implementation is another thing, for
proper implementation Tanzania government should work towards raising consumer
awareness on their statutory rights.

Turning to the few cases on consumer protection, in the case of Ministry of industry and
trade v Bonite Bottlers Ltd, the matter was heard at the Trade practice commission. That
Bonited Bottlers the manufacturers of Kilimanjaro drinking water had a false advertisement
deceiving the public that the water is from a “natural spring” while in actual terms their water
was from a dripped well, the commissioner ordered Bonite Bottles to change their advert the
advert was changed to “pure drinking water” the matter did not go on appeal. 157 Another
similar case is Permanent Secretary Ministry of industry and Trade v Associated Breweries
155
In 2007 data from Tanzania National bureau of statics at http://www.nbs.go.tz/education.htm 2/08/2009
156
Fair Competition Act, 2003
157
The matter was decided on 1st June, 1999 by the Trade Practice Commissioner
(Tanzania) Ltd,158 the matter was brought at the Trade practice Commissioner that Associated
Breweries had been deceiving the public that their beer is a guarantee that there is no
hangover and “no sugar added” which was not true. The Trade practice Commissioner which
now is the Fair Competition Commission barred such deceives and the order was complied.
Making a critical analysis from these cases it is worth noting that the complainant is the
Ministry of Industry and Trade, this shows that individual consumers are not aware of their
statutory rights. Therefore it is the role of the government to create public awareness that
consumers can institute direct suits against misleading advertisement.

3.2.2 Evaluating lessons for Tanzania

From the survey above, the practice in US, European Community, South Africa and the
actual practice in Tanzania. There is one major problem that Tanzania needs to address,
namely implementation of the drafted law especially on the consumer awareness of their
statutory rights. The Tanzania government has wasted a lot of public funds on the funding of
codification of all the above mentioned consumer protection law, while on the other side the
people who ought to know these rights are not aware of their existence. Consumers are
robbed so many things by the sellers such as comfort, reliability and personal safety
irrespective of the fact that the statute prohibits conducts which leads to consumers detriment.

Looking at the changes that South Africa is expected to make in the year 2010 after passing
of the new consumer protection bill. It is also essential for the government of Tanzania to
take further look into that. In Tanzania several legislation have consumer protection
provision, however there is no specific legislation that cater for consumer issues only. Hence
it is difficult for a layperson to understand the proper application of law.

Finally, from the US, EC and South Africa consumer protection legislation, we can evaluate
that Tanzania legislation on consumer protection has a gap. An aspect of consumer
compensations is missing; EC had to go major reforms in the angle of consumer protection so
that consumer should be individually compensated. Apart from that, Tanzania should also
increase the level of consumer awareness by providing public education and increasing the
accessibility of legislation that protect consumers. Therefore, as a developing country,

158
The matter was decided on August, 1998 by the Trade Practice Commissioner
Tanzania should have attention to the financial status of consumers, being able to distinguish
the group of vulnerable consumers in the legislation of consumer related laws.

For the maximum consumer protection it is also essential for Tanzania to have a competition
regime, which will have the power to restrain anti competitive behaviours within the
privatized large undertakings, limit mega-corporation abuse of market power and lastly
promote development.159 Promote development in the sense that the policy should aim at
raising the standard of living by encouraging investments into the country. Tanzania is
characterised by low rate of manufacturing firms, when investment is high this will also
benefit consumers, because number of manufacturing firms will increase. The end result will
be increase of product choices and lower prices.

159
UNCTAD, discussion paper series, competition and competition policy in emerging market: international and
development dimension at http://www.unctad.org/en/docs/gdsmdpbg2418_en.pdf pg 15 12/08/2009
 CHAPTER FOUR

STUDY FINDINGS AND ANALYSIS

“Anti- competitive conducts are the most egregious violation of competition law and ... they
injure consumers in many countries by raising prices and restricting supply, thus making
goods and services completely unavailable to some purchasers and unnecessarily expensive
for others”160

1.1 How and why anti competitive conducts abuse consumer’s interests
Anti competitive conducts may be referred as an extensive range of business activities that an
undertaking or a group of undertakings is engaged in, certainly the types of conduct that are
regarded as anti-competitive vary from one jurisdiction to another.161 Conspiracy among
sellers is regarded as a natural character, this was advocated by Adam Smith.

“People of the same seldom meet together even for merriment and diversion, but the
conversion ends in a conspiracy against the public or in some contrivance to raise
prices.”162
The force underpinning these disruptive behaviours of sellers is profit motive; each
undertaking is willing to apply different techniques so as to increase its profit. In the end
almost all of these techniques are detrimental to consumers inter alia these are cartels,
price discrimination, predatory pricing and abuse of a dominant position. According to the
study by Hungarian national report on anti competitive conducts, these conducts also have
a direct or indirect effect on all market participants.163 This chapter will deal with the
detriments to consumer as a result of the anti-competitive conducts. Since the consumer is
the sole end of production,164 without a consumer the production process is fruitless.
Below different anti-competitive conducts will be discussed in terms of their effects on
consumers.
160
The preamble of OECD council effective action against hard core cartels, 1998 reccomendation
161
UNCTAD, consumers International in the Asia Pacific, “Competition policy and law in the consumer and
development interest” http://www.cid.harvard.edu/cidtrade/Papers/sothi.pdf 2/08/2009
162
Adam Smith, Loc. Cit. Pg 67
163
LIDC-Amsterdam Congress, “Should the objectives of the rules on unfair competition be protection of
competitors, or consumer, or of other interest? How should any conflict between these objectives be resolved?”
athttp://209.85.229.132/search?
q=cache:AG4hgxNfnGEJ:www.ligue.org/files/amsterdam_rapportbsudois.doc+unfair+competition+affect+cons
umers&cd=2&hl=en&ct=clnk&gl=uk 20/08/2009
164
Adam Smith, Op. Cit
1.1.1 Anti-competitive agreements

Anti- competitive agreements which involve agreements by competitors to fix prices, restrict
output and rig bids (collusive tenders), are the most serious and detrimental violations of
competition law, that have a direct impact on consumers.165 Eventually, consumers will be
injured by the supply restriction that will cause prices to rise. When anti-competitive
agreement is successful consumers have no choice but to pay the price above competitive
level.

Some scholars argue that it is difficult to quantify the actual harm caused by anti-competitive
agreements, thus it is reasonable to apply the per se (proxy rule) in dealing with anti-
competitive agreements cases.166 In the case of Vicenzo Manfredi v Lloyd Adriatico
Assicurazion SpA167 consumers in EC brought a claim that the undertaking operated a
horizontal agreement. The ECJ made an important decision that the interpretation of Article
81 EC can include any individual as a consumer. So if an undertaking has engaged in
prohibited conducts, including agreements, and there is harm suffered, a claim for
compensation will suffice. Research done by the OECD’s Competition committee in an
attempt to learn more the harm caused to consumers, reflected that out of 119 cases 70% of
the cases it was difficult to estimate the harm.168Having researched different jurisdiction and
cases, it is possible to suggest that there is no one rigid principle, each case is judged on its
own merit. In the case of United States v Socony Vacuum oil ltd, it was laid that in US price
fixing is illegal per se, regardless of the market power, intention or business justification of
the participating undertaking.169

Firms adopt different means so as to compete with each others, sometimes undertakings of
the same level enter into an agreement so as to fix prices with the intention of eliminating
other competitors or create entry barriers for emerging competitors. This form of agreement
is restrictive and unfair, for the market and consumers. The consumers will be limited in
terms of choices, and the dominant firms will manage to dominate pricing so they can

165
Hylton, K. Antitrust law (Cambridge University Press, 2003) pg 30
166
Jacobson, J.M Antitrust law development (SIXTH) vol. 1 (America Bar Association 2007) pg 49
167
Case 295/04, judgement of the Court third chamber July, 2006
168
OECD, Report on the nature and impact of hard core cartels and sanctions against cartels under national
competition laws, DaffE/Comp (2002)7/Unclassified pg 4 at http://www.oecd.org/dataoecd/16/20/2081831.pdf
17/08/2009
169
310 U.S 150, 1950.
maximise profit from consumers. Since there are no other competitors consumers will be
forced to buy their product or services.

Some firms may enter into agreement to select market, so as to avoid competition among
them. They can fix this according to their targeted customers or geographically.170 The danger
of these agreements is the occurrence of price fixing. When prices are been fixed consumers
lose their autonomy of choice with regard to price, prices can escalate and they will have no
choice.

1.1.2 Abuse of Dominant position

In the OECD glossary the term abuse of dominant position is defined as, an anti-competitive
business practice, whereby a dominant undertaking engages in unfair business practices so as
to maintain or increase its position in the competition.171 The dominant undertaking usually
abuses its position by price discrimination, charging excessive prices, refusing to supply or
sell, predatory pricing and exclusive dealing or third line forcing. When a firm charges
excessive prices according to the total cost of production it is a prima facie that the firm is
abusing its dominant position. However, these conducts are classified abusive depending on
the jurisdiction and case by case basis.

In the case of Wanadoo Espana v. Telefo’nica172 Telefonia was charged with imposing unfair
prices in terms of marginal squeeze which harmed consumers using broadband in Spain. The
court held that the commission described this as abusive conduct because marginal squeeze
pricing had created a foreclosure in the market, resulting into entry barriers for other
competitors. Therefore consumers became victims of higher prices, lack of choice and
innovation. In the case of British Airways v. Commission the ECJ established that
exclusionary abuse by British Airways is prejudicial to consumer within the meaning of
subparagraph (b) of the second paragraph of Article 82 EC treaty.173 In commentary, the
agreement that a travel agent will get tributes by selling more British Airways ticket is a
prejudice to consumers in the sense that, consumers will be limited in terms of choices.

170
Jacobson, J.M, Loc. Cit pg 46
171
OECD, Glossary of statistical terms created on 2002, at http://stats.oecd.org/glossary/detail.asp?ID=3136
25/08/2009
172
Case COMP 38/.784 Wanadoo Espana v. Telefo’nica, 2008 /C83/05
173
Case 95/04 P, British Airways v. Commission, 23 Feb 2006, para 28
In the case of U.S. v. Microsoft Corporation, Microsoft paid hundreds millions of dollars to
develop Internet Explorer and then it offered IE at a zero price. The IE was built into
Microsoft windows and no other company could provide it. This created “application barriers
to entry”174 and consumers suffered the effects of monopolization. When there is competition
law, consumers are protected against misuse of market power by dominant undertakings.

1.1.3 Price predation

In the OECD glossary, price predation is defined as a form of strategic behaviour, which aims
at eradicating rivals from the market, usually conducted by a dominant firm, selling its
products below production cost, so that rivals will fail to compete.175 In interpreting the
framework of predatory pricing, it is immediately apparent that, at the very beginning of
predation, the end result will be lower prices which benefits consumers. The predator has to
lower its prices to be an outstanding low.176 Once the predator is in control of the market
(monopoly), the predator will have to increase prices above reasonable so at to gain the loses
suffered during the initial stage.177 At this stage is when consumers will suffer high prices and
lack of choices.

Economists argue that it is very unrealistic for recoupment to take place. 178 Such assumption
is doubtless reinforced by the perception that, during recoupment stage, other rivals will enter
into the market. Writer Richard Zerbe argues to the contrary. He advocates that from the
point of price distortion consumers will gain loses in the long run.179 He supports his
argument by stipulating that, when prices are below actual cost there is wastage of resources,
which in return affects other markets. To put the subsequent discussion in its proper
perspective, his argument is meaningful, since prices below marginal cost create
wastefulness. In long run the society will have inefficient allocation of resources, hence
consumers will suffer the consequences of lack of resources.

174
U.S. v. Microsoft Corporation, 253 F.3d 34 (DC Cir. 2001) from the article by
Robert W. Crandall and Clifford Winston, “Does Antitrust Policy Improve Consumer Welfare? Assessing
the Evidence,” Journal of Economic Perspectives, Vol. 17 (4), Fall 2003, pp. 3-26.
175
Ibid.,
176
L. Gormsen “The conflict between economic freedom and consumer welfare in the modernisation of Article
82 EC” European Competition Journal 2007, 329 pg 51
177
OECD., Op. Cit pg 4
178
Crane, Daniel,”The perverse effects of predatory pricing law” Regulation, vol 28 No 4 pp 26-31, Winter
2005
179
Richard Zerbe “does predatory pricing exist” Antitrust Bullet 949-985, winter 2006 pg 1
In the European case of Irish sugar v Commission it was stated that any undertaking which
holds a dominant position, if it engages in conduct aiming at the elimination of competitors
and creating barriers into entry, commits an offence under Article of the 82 EC treaty. 180
Finally it should be noted that in EC, recoupment is not an essential element for price
predation case to succeed. In the case of France Telecom v the Commission181 it was held
that, “prices below average variable cost are ground for presumption that they have the aim
of eliminating competitors and prices below average total cost but above average variable
cost, are presumed abusive when they consist part of a plan to eliminate competitor.”
Predatory pricing has an anti competitive impact on consumer, eventually consumers will be
faced with high prices and lack of choice.182

In the US predatory pricing is regulated differently from the EC. The actual harm must be
tangible for a price predation case to succeed. In the case of Brooke Group Ltd v Brown &
Williamson Tobacco corp,183 the Supreme Court laid that for the plaintiff to succeed in price a
predation case he must first prove that, prices complained are below cost.184 Secondly, the
plaintiff should demonstrate that the competitor had intended to eliminate other competitor,
in other words the evidence of recoupment must be feasible. On this matter, therefore one
might conclude that the U.S approach is protecting a particular competitor, compared to the
EC approach.

The approach in South Africa is an application of the EC system, although the SA

competition Act incorporates both US and EC approaches but when it comes to predatory
pricing, EC approach is applied. Much cannot be said in the system on Tanzania since there
are no decided cases about predatory pricing. The Tanzania government should be prudently
advised to follow implementation approach that will enhance economic development. It will
be wise to conclude that the EC approach is relevant for Tanzania, since there is a growing
need to protect consumers rather than a particular competitor.

180
Case T-228/97, [1999] ECR 11- 2969 para 191, the same findings were held in the case T-203/01 Michelin v
Commission [2003] ECR 11-4071 para 241 and 242
181
At the Court of first Instance, Case T-340/03, the commission used the management staff documents and
formal presentation to establish whether there was predation plan. Therefore the commission understood what
the management had in mind.
182
J. Temple and R. O’Donoghue (2002) 144
183
U.S Supreme court, 509 U.S 209 (1993)
184
The Court also reffered to the case of Cargill Inc v. Monfort of Colorado, Inc 479 U.S 104, 117
1.2 Efficacy of Fair Competition Act, 2003 and consumer protection

Table 2: Comments from the stakeholders

SN Respondent Knowl Assessment of Observations on Specific
edge effectiveness whether further Recommendations
of the reforms are
Regul needed
ations
Effect
ed
1. Government Yes Effective as the New reforms can More education to
organs regulations set forth only be set in consumers so as to increase
attack the gravity respect of adding awareness on their
-FCC problems attacking more strength on statutory rights as
-TCAS consumers such as the subject matter consumer.
-NCAC deceptive and
misleading Apart from the sectoral
advertisements and regulatory laws, the
product counterfeit. government should enact
one law that will deal with
They have also consumer central issues.
proven to be the best The Fair Competition Act
regulations so far in cannot address some of the
implementing and consumer issues such as
facilitating proper health and safety.
channels of
combating consumer
problems.

2. Producers and Yes Regulations have The Fair The Government in

manufacturers enabled at a certain Competition Act, collaboration with
higher degree should also focus manufactures and other
restoration of faith on protection of undertakings should
from the customer. the market by conduct public awareness
protecting the that consumers are the sole
This is because competitors end of any production.
consumers are aware through Hence forth they should
that the government encouraging fair build their trust with
regulating laws that competition manufacturers.
enhance at consumer
protection The provision on
mergers should be
amended to
accommodate
international
mergers that are
for the welfare of
the national.

3. Academician Yes Implementation of There should be Training and capacity

Faculty of law the regulation took private building is needed for the
and Faculty of time to be put into enforcement of country to develop its
commerce and place by the competition; competition awareness.
management, government consumers should
University of Dar have a locus
es Salaam standi for
compensation.

Currently, Need to introduce

adjudication of competition courses in
Source: feedback from the sample questionnaires

1.3 Consumer problems that cannot be addressed by competition law and

authority in Tanzania

Consumer protection is usually associated with economic growth of the market system, in
Tanzania. In assessing the role of Tanzania national consumer advocacy, Dr. R Tenga 185 put
forward that the consumer group is the largest group, yet in practice it is the weakest group.
Consumers rely heavily on the sellers for market information and in most cases they end up
uninformed. This is done through advertisement and marketing strategies on the quality and
product information. From its establishment the Tanzania competition Commission has dealt
with only two cases of this nature namely Ministry of industry and trade v Bonite Bottlers Ltd
and Permanent Secretary Ministry of industry and Trade v Associated Breweries (Tanzania)
Ltd as cited above. Undertakings use sophisticated methods of advertising to make
misleading or untruthful statements in their product information. In order to minimize these
problem consumers need to be educated so as to understand their rights and be able to
identify misleading product information. For Tanzania to reach this goal, it is vital for the
consumer education and advocacy to be under different authorities not competition law
authorities only.

The Constitution of the United Republic of Tanzania provides for public safety, public
defense, public health and public morality.186 These rights applies to consumers when they
enter into contract with the seller, reading thoroughly at the Fair Competition Act the aspect
of consumer health is not addressed. One can see that the rights in the Constitution need to be
complimented by a particular statute.

Also consumers have the right to satisfaction of their basic needs, in Tanzania this is provided
under EWURA Act 2001 and SUMATRA Act 2001. Competition law does not provide for
this right directly. It only compliments indirectly by prohibiting anti competitive conducts in
part 11 para 8 to 14 of the Fair Competition Act. Consumers need to have their rights directly

185
Tenga, R.W. Consumer Protection in Tanzania - Challenges and Prospects for Ncac - May 2007 at
http://www.scribd.com/doc/18533961/Tenga-rw-Consumer-Protection-in-Tanzania-Challenges-and-
Prospects-for-Ncac-May-2007 24/08/2009

186
Article 30 (2) (b) Constitution of the United Republic of Tanzania
provided, since majority of consumers in Tanzania regard pieces of legislation complicated.
Therefore the government should have legislation that clearly provides for consumer’s rights.

This research has found out that, consumers in Tanzania are affected by the caveat emptor
principles “buyers beware”. In some cases the terms and conditions are placed beyond
consumer’s vision, therefore many firms escape liability. This problem harms consumers’
freedom, still there is no consumer law that protects consumers from such principles. Also the
change of mind freedom does not operate in Tanzania, if a consumer made a mistake upon
buying a product he or she has no right to return it. The competition law and competition
authority does not address any of the above mentioned consumer problem.

The Tanzania Fair Competition Act is an antitrust law designed to prohibit abuse of
monopoly power, cartels and other anti-competitive agreements which have an adverse effect
on economic efficiency and consumers. Although the Act has a specific part that provides for
consumer protection still it is important to have other pieces of legislation on consumer
protection.

1.4 Why Tanzania lacks case law on competition law and consumer
protection.
With globalization, promotion of competition law has become an international issue.
Tanzania is part of this international community, hence it is fundamental for the country to
keep pace with the changes in the community. Looking at the practical level one may
conclude that, Tanzania is lagging behind on competition law and enforcement. This is
because there is a very minimal amount of case law on competition issues and consumer
protection. The few cases end up at the FCC tribunal, the alleged undertakings implements
Commission decision. No appeals have gone up to the High Court Commercial Division, as a
consequence Tanzania lacks jurisprudence and precedents on competition law.

Why no case law in Tanzania? Before analysis of the above question it is very important to
understand the economic and legal history of Tanzania. Before attaining independence in
1961 the degree of industrialisation and liberalization was very low, although currently things
have changed but still the number of industries is very low. Tanzania is heavily dependent on
export goods. Looking at the legal system before and ten years after independence Tanzania
had very few legal practitioners.187 Therefore matters were not brought to Court. They were
solved by leaders in a particular society. Currently, the numbers of legal practitioners has
increased but in most cases legal proceeding are very slow; hence people are discouraged
from taking cases.

Competition in Tanzania is a fairly new trend, and the number of manufacturers, wholesalers
and retailers is not adequate for competition. For a perfect competition to occur there should
be many firms operating in the market, so that no particular firm will be able to affect market
price. Apart from that the public is not well informed on the issue of competition and
consumer protection. Hardly any consumers in Tanzania recognise their statutory rights
hence it is difficult for them to institute civil proceedings when their rights are violated. There
is a need for public education awareness on their rights as consumers.

Another reason is lack of human resources. From the judiciary to academics Tanzania lacks
enough experts on competition matters. Refer to Table number 1, on the number of staff
employed by the FCC, it is difficult for the few experts to tackle all anti-competitive
behaviours in the country and brought them the Courts.

CHAPTER FIVE
CONCLUSION AND RECOMENDATIONS FOR FURTHER
RESEARCH

1.1 Conclusion

Competition law benefits consumers in the following ways, first of all it ensures efficient
allocation of resources, secondly it ensures better quality of products at a reasonable price
and lastly, it regulates fair competition in the market. When a country introduces deregulation
and privatization this creates opportunities for new firms in the market, “hence boosts” the
economy. Therefore firms will enter into competition to win the market power, in doing this
they will be forced to produce quality goods or services at affordable prices. The end results
will be benefits to consumers. However, sound legal drafting on competition matters is vital,
otherwise a country will have competition legislation but still consumers will not benefit
from the system. Finally, one can conclude that well drafted competition policy is part and

187
Dr Fauz, T. “The legal profession in Tanzanian” (Law Africa Pub, 2008) pg 14
parcel of an effectual consumer protection policy. Competition law opens the doors for
market so that firms can compete but the law is not a judge in the competition to choose who
wins. It makes regulation to regulate the game as a referee, who supervises how the game
should be played fairly and no harm to audiences which are the consumers.

For the maximum protection of consumers, competition should be maintained in the market.
This can only be achieved whereby there is proper drafting and implementation of
competition regulations. Herein comes the role of the state and its institutions involved
with competition matters. The state needs to develop and promote market concentration,
at the same time monitoring unfair means of competition. It is clear therefore that,
consumers’ interest will be protected rather than a particular competitor. Design and
structure of competition regulation vary from one country to another depending on
historical, economic and political factors.188 Developing countries like Tanzania must
have competition legislation that is flexible. This means that the law can change from
time to time so as to strike a balance between economic efficiency and consumer
protection, Tanzania competition law should take

188
Godius kahyrara, Op. Cit pg 32
into account development issues such as employment and encouragements of small scale and
medium scale undertakings.

There is a need for Tanzania to harmonise her competition laws into one piece of legislation.
Currently, sector regulators are created by separate pieces of legislation incorporating part of
competition rules in the particular sector. These laws should be deliberately harmonised into
one piece of legislation and that is the Fair Competition Act, 2003. Moreover the competition
authority (FCC) should have concurrent jurisdiction in all competition matters and sector
competition matters. Research findings have shown that staff in different sectors such as
Energy, Water and Utility Regulatory Authority (EWURA) and Tanzania Communication
Regulatory Authority (TCRA) usually seeks advice from the Fair Competition Commission
concerning competition matters. It will be meaningful for the Fair Competition Commission
to regulate these sector bodies through the Fair Competition Act.

The main cause of unsound policies in Tanzania is poor leadership, in order for Tanzania to
develop her competition policy and law emphasis should be on appointment of strong
leadership. An outstanding competition authority requires strong and determined leaders the
problem of corruption should be tackled down appropriately. Apart from that, the FCC
should also recruit experienced lawyers and economists on competition issues. However, it is
impossible to have experienced staff on competition matters if competition is not part of
courses taught in Tanzania universities. The government should take the responsibility to hire
foreign experts’ to teach competition courses in the universities and other higher learning
institutions. In years to come Tanzania will have sufficient experts on competition matters,
therefore the government will not need to employ foreign expatriates in drafting competition
legislation and giving advice to the government.

Since competition law is a new phenomenon in Tanzania, it is important for the judges and
magistrate to be trained on the subject matter. Magistrates and judges are the uppermost in
decision making, therefore knowledge of competition matters is essential for them in order to
make logical and fair decision. It is immediately apparent that, the government will waste tax
payers’ money and time, if no training is provided to the decision makers of competition
litigations.
Due to globalisation, there is growth of cross boarder trading and foreign direct investment
by transnational cooperation. Henceforth, competition has become an international trend.
Therefore international cooperation is essential for proper control of anti competitive
behaviours, particular cartel. National competition authorities have limited jurisdiction power
they cannot investigate cases which are out of its jurisdiction. Therefore international
cooperation is necessary. Different countries have signed bilateral and tripartite agreements
for the proper enforcement of competition regulation within the region. Regional cooperation
will only fight anti competitive behaviour within the region. International cartels and other
anti competitive behaviours at international level will have adverse effects to consumers if
there is no multinational cooperation.

1.2 Recommendations for further research

The researcher is aware that there are some problems associated with the research topic,
which have not been analysed in detail. Hence would like to recommend them for further
research so as to develop the area of competition law and consumer protection particular in
Tanzania. The point where Tanzania lacks case law on competition law, deserve further
investigation. Tanzania has been identified to be among the first African countries to have
competition policy and legislation. However there is lack of case law at the appeal level all
competition cases end up at the court of first instance (the Commission). As a result there is
lack of jurisprudence and precedents on competition law. Chapter three has given out the
reasons for and how to overcome the problem. Still further research is needed to find out
whether competition law is stagnant in Tanzania. It is a contradictory issue, because when
reading literature on competition law in Tanzania authors argue that competition law is
developing in Tanzania,189 however they admit that their research is limited by absence of
case law on competition in Tanzania. Generally, the research community in Tanzania needs
to research more on this issue.

Another area which needs further research is the enforcement of competition policy and law
in Tanzania, the line of demarcation between current legal and institutional enforcement need

189
Mkocha Godfrey, Loc.Cit
to be identified. There is a need of understanding of how enforcement procedure works, and
how the competition authority can interlink with the judiciary. It is also seen reasonable to
have a paper which will analyse the Fair Competition Act, 2003 its main features and the
application of the provisions. This will help to build an understanding of the law to the
public, particular lay persons. From the research findings there is a high degree of ignorance
in Tanzania on the competition law, some consumers do not even know that the Act is
intended to protect their interest they think it is a legislation that protects competitors in the
market.

Since Tanzania is on the early stage development of its competition law jurisprudence, it is
essential to have extensive literature on the subject for proper implementation and drafting of
the law. The researcher has faced the problem of lack of sufficient literature on Tanzania
competition law. As this research paper will contribute to reference material, further research
in Tanzania need to direct attention into competition issues. It is good thing that we have a
well drafted act, which has been drafted by experts. Eventually, law changes with time and
possible transform in the society. Therefore one can see that amendments are inevitable, the
body empowered by Tanzania constitution to make amendments is the legislature. If there is
lack or no literature development in this area of law, members of parliament will have no
knowledge of what needs to be changed for the betterment of the national. Otherwise the well
drafted piece of legislation will be turned into inactive and atrocious law.

All in all, for Tanzania to develop her competition policy, law and consumer protection, there
is a need for the government to implement recommendations from this research paper.
Moreover more research is needed on the area of competition law. The researcher is of the
opinion that everything evolves from knowledge, if you don’t recognise what you have is the
same as having nothing. Tanzania has good and clear competition Act, which clearly
provides for consumer protection but ninety percent of consumers do not know about the Act
and the remaining five percent who know do not understand if they are protected by it.190 The
five percent who knows about the Act are civil servants and other stakeholders of competition
issues in the country.

190
Data compiled from consumers questionnaires (feedback form)