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Speech by Rahat Kaunain Hassan on Deceptive Marketing Practices

Chairperson Competition Commission of Pakistan (CCP), Ms. Rahat Kaunain Hassan delivered a speech on deceptive marketing practices in a seminar organised by Helpline Trust in Karachi on October 5, 2010.

“The Honourable Chair Justice (Rtd) Saeed-uz-Zaman Siddiqui, eminent speakers, ladies and gentlemen; I would like to begin by thanking the organisers for inviting me to speak at this seminar. I feel truly honoured and privileged to address this distinguished gathering.

At the out set, may I share that the prohibition of deceptive marketing is one of the four important pillars enshrined in the competition law of Pakistan. This is indeed a topic which is of great interest to me both personally as well as at the professional level. It was this interest that had led me to conceptualise and later being instrumental in setting up the Office of Fair Trading within the Competition Commission of Pakistan on July 07, 2008.

As a law enforcement agency, in detecting various kinds of deceptive marketing, I am reminded of the saying, “Reality is easy. It’s deception that’s the hard work.” Hence you can very well imagine that unveiling such practices is not a simple task and requires much harder work.

The theme behind setting up of OFT was to build and enhance the link between CCP and the consumers, to establish a focal point for identifying and providing solutions to issues which pose problems for the consumers arising out of false or misleading advertising. It aims at paving the way to create consumer awareness with the object of making market functions better for consumers and to ensure fair dealing in businesses. The focus, of course, is protecting consumers from anticompetitive behavior to enable informed consumer choices.

We must appreciate that OFT at CCP does not operate at the level similar to developed jurisdictions. Generally, OFT has multiple objectives and operates as an independent competition agency. In the UK, their competition commission initiates all enquiries following concern referred to by another authority, usually the OFT. In Australia, their OFT safeguards consumer rights and advises business men and traders on fair and ethical practices; licensing system is in place regulating rights and obligation under Fair Trading Laws. In  USA and Canada, there is a Bureau of Consumer Protection, Fair Business Practices Branch performing same functions as that of an OFT.

Nonetheless, we are fortunate that our law envisages deceptive marketing within its mandate no matter how narrow or restricted the scope has been kept in Section 10 of the statute. Establishment of OFT facilitates in completing the picture of the competition agency in Pakistan – paving way for creating consumer awareness.

In Pakistan, the setting up of OFT is focused on the mandate to oversee and act as a watch dog for misleading and deceptive marketing practices, aiming to build a vibrant, fair and competitive market place for consumer confidence. It also ensures that no competitor gains or retains market share by deception. The competitive market forces operating under the principles of competition law should determine the “winners and losers in the marketplace”.

It would be useful to share what our mandate is in this regard. Section 10 prohibits certain marketing practices which includes; distribution of false or misleading information that is capable of harming the business interests of another undertaking; distribution of false or misleading information to consumers, including lacking reasonable basis, related to price, character, method or place of production, properties, suitability for use, or quality of goods; false or misleading comparison of goods in process of advertising; and last fraudulent use of another’s trade mark.

In a recently decided case against Ace Group of Industries, OFT fined AGI for the fraudulent use of trademarks of BMW and Harley Davidson, on its website and held that it as capable of harming the business interest of the complainants in violation of Section 10 of the law. (A trademark is a symbol or phrase that distinguishes ownership of a product or service and can also stand as a mark of quality/good will). However, keeping in view, the cooperation AGI extended during investigation and hearings only a token penalty was imposed in the sum of Rs. 2,50,000. Similarly, OFT’s compliance oriented approach has brought to a certain extent, corrective behaviour in two very important sectors: telecom companies and consumer banking.

These undertakings were reprimanded to desist from deceptive marketing and all submitted to the jurisdiction, gave written commitments to rectify their behaviour and assured future compliance. Both cases pertained to claims regarding price/rates charged. The Commission apart from making it clear that the responsibility rests on the undertakings to establish the reasonable basis of the claim, has also laid down the principles that: ‘fine print disclaimers, are inadequate to correct the deceptive impressions’, half truth or concealment may be construed as deceptive, for the purposes of deceptive marketing, actual deception need not be shown to carry the burden of proof and it is sufficient to establish that the advertisement has the tendency/potential to deceive and the capacity to mislead.

In the US around the early 70s, it was taken as gospel that proof of actual deception was not necessary and it was enough if the act or practice had the capacity to deceive or all/or even most of the public and for this purpose public was construed as “the ignorant, the unthinking and the credulous” – innocent consumer. Subsequently, three elements are introduced in this regard: i) there must be representation or practice to mislead the consumer, ii) the consumer must be acting reasonably in the circumstances and iii) the representation/omission/practice must be a material one to affect the consumer. Since our law places the burden on the “undertakings” to have a reasonable basis for making any representation, we do not wish to change the onus to the consumer by adding on the obligation of acting reasonably or taking into account whether it is material to affect the consumer choice vis-à-vis the product.

Contrary to the position in US, in one of my judgments it has been observed that “the ‘ordinary consumer’ is not the same as the ‘ordinary prudent man’ concept evolved under contract law. Unlike the ‘ordinary prudent man’ the thrust on ordinary diligence, caution/duty of care and ability to mitigate (possible inquiries) on the part of the consumer would not be considered relevant factors… the scope of the term ‘consumer’ must be construed most liberally and in its widest amplitude… restricting its interpretation with the use of the words ‘average’, ‘reasonable’ or ‘prudent’ will not only narrow down and put constraints in the effective implementation of the provision it would, rather be contrary to the intent of law. It would result in shifting the onus from the Undertaking to the consumer and is likely to result in providing an easy exit for Undertakings from the application of (law).” Hence, a consumer is defined as the ‘ordinary consumer’ who is the ‘usual, common or foreseeable user or buyer of the product’ and such a consumer need not necessarily be restricted to the end user.

As for the words ‘false’ or ‘misleading’ in terms of false advertising versus misleading advertising, drawing a distinction between the two could itself be deceptive. However, it should suffice to state that the former has stricter and stronger connotation and usually implies either conscious wrong or culpable negligence. The latter is in contrast to the former less onerous and open to wider interpretation.

OFT has provided an online complaint provision, upon receipt of complaint acknowledgment is immediately issued and a preliminary probe is initiated subject to initial verification of facts, complaint can either be closed or proceeded with through formal enquiry under Section 37 statute. The outcome of enquiry determines initiation of proceedings under Section 30, i.e. a show cause notice followed by hearings and concluded through a speaking order.

The remedies include seize and desist orders, injunctive relief, commitments ensuring compliance, confiscation, forfeiture or destruction of any goods having hazardous or harmful effect and requiring the undertaking concerned to take such actions as may be necessary to restore the pervious market conditions.

In Pakistan, recourse to other laws is available to redress deceptive marketing practices, some of the laws which are in place to protect consumers in Pakistan include: Pakistan Standards and Quality Control Authority Act 1996; Drugs Act 1940; Drugs Act 1976; Pakistan Penal Code 1860; West Pakistan Pure Food Ordinance 1960 etc. However, in terms of deterrence and effectiveness of remedies invoking Section 10 of our law seems appropriate.

We are cognisant that in enforcing law, we must act in a fair, uniform and transparent manner. All violations as and when brought to our notice must be proceeded against. However, financial constraints and globalisation of the market poses the challenge to our capacity/ability to enforce law against false advertising and deceptive marketing effectively and efficiently. Against this background, CCP must continue to opt for a compliance oriented approach with a prioritisation policy on issues/aspects having wider economic impact in the market, having maximum deterrent effect and optimal development of case law.

In the end, I would urge you all, in particular those members of civil society and media who are here today to continue extending support to law enforcement agencies contributing as an agent of change in unveiling the prevalent deceptive marketing practices. Thank you!”

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