National competition and consumer policies play an important role in protecting consumer rights. Competition policies benefit consumers by regulating monopolies and collusion to increase productive and allocative efficiency. Consumer policy protects consumers by setting consumer safety standards, requiring product disclosures, and redressing consumer harm, and strengthens their bargaining power with businesses.
Competition policy and consumer policy are the two main types of policies implemented by the state for the benefit of consumers. Competition policy is essentially focused on promoting competition in the marketplace by regulating anti-competitive behavior such as monopolization and collusion. Competition policy is recognized as a valid policy for protecting consumer interests because it benefits consumers as a result. For example, in a competitive market, a wide variety of goods and services are offered, and consumers have a wide range of options to choose from, allowing them to purchase the products that best suit their needs. This contributes to greater market efficiency and a better quality of life for consumers.
The contribution of competition policy to consumer welfare can be viewed from two perspectives: productive efficiency and allocative efficiency. First, productive efficiency is the ability to produce more with a given resource without wasting it: the more a firm produces for the same cost, the higher its productive efficiency, and the less it costs to produce the same amount of output, the higher its productive efficiency. When markets are competitive, individual firms will pursue productive efficiency, such as cost reduction, in order to survive, and the resulting surplus will be utilized to improve quality or reduce prices in order to gain consumer choice. Thus, the productive efficiencies induced by competition policies contribute to consumer welfare. Of course, monopolies may perform better in terms of reducing costs, but this does not necessarily translate into lower prices for consumers. In addition, monopolies may not innovate, whereas competitive markets force companies to constantly innovate, resulting in new technologies and products, which provide consumers with better choices. Therefore, monopolies need to be monitored and regulated.
Next, allocative efficiency refers to the allocation of resources in such a way that people are more satisfied. When a market is monopolized, a monopolist seeking to maximize profits can raise prices without producing enough, causing allocative inefficiency. Increased competition, on the other hand, creates allocative efficiency by increasing output and lowering prices, resulting in greater consumer satisfaction. For example, increased competition in farmers’ markets allows consumers to purchase fresher and more diverse produce at lower prices. Thus, the allocative efficiency that competition policy induces through market competition also contributes to consumer welfare.
Competition policy has played an important role in this regard, but it is not enough to realize consumer rights. No matter how competitive a market is, there are still problems that remain. For one thing, even if competition policy promotes consumer interests on an aggregate basis, some consumers may be disadvantaged. For example, the products of companies that have been driven out of the market due to competition may not be followed up on and some consumers may be harmed. However, countries have no choice but to maintain competition policies because abandoning them would be detrimental to all consumers. In addition, new companies have high start-up costs when they enter the market, so the state needs to support them to keep the market vibrant.
The next problem is that consumers have less bargaining power with companies, less information about products, and are more susceptible to impulse purchases and harmful products. To address this, measures such as disclosing the origin of goods or recalling harmful products can be considered, but they are not directly addressed by competition policy. For example, transparent disclosure of the origin of food products can help consumers make safer food choices. These measures empower consumers to make better decisions by providing them with information, which in turn has the effect of increasing trust in the market as a whole.
These issues have led to the need for a separate policy that can protect consumers by equalizing their status with businesses and redressing the harm they have suffered from businesses, which is what consumer policy is. Consumer policy is primarily concerned with matters directly related to consumer protection, such as establishing consumer safety standards for companies to follow and mandating disclosure of product information. It can also compensate for the limitations of competition policy by providing redress for consumer harm caused by impulse purchases, consumer education, and direct resolution of disputes between companies and consumers. Through consumer education, consumers are made aware of their rights and empowered to actively exercise them, which ultimately contributes to greater transparency and fairness in the marketplace as a whole.
