The following essay is going to look at the politics and law of the consumer culture that our society lives in. I will define the key terms and theories involved in the politics and law of consumer culture and I will also give the definition of the theory used to describe our consumer based society. It will also give examples of particular laws in a specific sector in regard to competition law. I will then give examples of where consumer goods providers have either broken or violated these laws that are in place through the use of articles and analysis in The Financial Times.
The essay will briefly outline how the governments are also increasingly becoming involved in nationalising companies due to the current financial climate and how this goes against the principles of the free market economy. Finally, the essay will look at how the current financial crisis we find ourselves in has affected the politics of the consumer culture we live in. I will finally sum up and conclude the points that were discussed in the essay. Politics is defined as the way in which a state or government administer and control its own affairs and what tactics and methods it employs to do this (www. businessdictionary.
com). Law is defined as the system of rules and legislation followed by the people living in the country where these rules and regulations are made and enforced. We live in what has become defined as a “free market economy” this is where the practise of purchasing and selling is not under the government’s direct control and where the consumer and seller and buy and sell with freedom. It is an economy where free markets abide and the state does not own or run most of the companies in it (www. lexicon. ft. com). Each country has its own sets of regulatory bodies that they have to follow with regards to competition law.
Competition law is enforced under the Competition Act 1998. This in turn falls under articles 81 and 82 of the EC Treaty. Article 81 prevents the formation of so called “cartels”, anti-competitive agreements which contravene the fundamentals of the free market economy which is operated in the EU. I will go into specifics on this where airlines have breached this with regard to the airline sector later on. Article 82 is in place to prevent a company that is the dominant force in the market from abusing that position (www. oft. gov. uk).
An example of this abuse by a particular company is the so called rise of the “Tesco towns” where Tesco has risen to become the dominant supermarket in small towns across the country thus dominating and crushing any competition in the supermarket sector (FT, 04/10/09, P1: “Watchdog proposes curb of spread of “Tesco towns”). In the UK there are several main competition bodies that regulate competition in the economy to ensure a level playing field. The main body that regulates in the UK is the Office of Fair Trading. The OFT is there to ensure that the markets are fair and that businesses operating are provided with a level playing field.
Its main priorities are to ensure that consumer’s interests are both promoted and protected and that they are provided with as wide a choice as possible when buying a product, service or good (www. oft. gov. uk) . The markets are then regulated in each sector by their own regulatory bodies. An example being the Office of the Gas and Electricity Markets (OFGEM), which regulates the gas and electricity sector in the UK. Recently energy supplier EDF challenged this regulatory body as being too restrictive, too tight on competition rules and price setting by taking them to the Competition Commission itself.
This is a case of a company seeing the regulations handed down to ensure competitiveness as too draconian (FT, 03/11/09, P. 4, “EDF ready to protest over regulation”). There is also the FSA (Financial Services Authority) which regulates the financial services industry. As mentioned earlier there have been cases recently where the Competition Commission has found companies being in breach of article 81 of the EC Treaty by forming so called “cartels” that have been seen as being anti-competitive for the consumer or customer.
Cartels are seen to be the gravest of offence in competition law and this is where companies enter agreements not be in competition with one another, often in the form of a verbal contract making it all the more harder to prove. In the airline industry recently there was a case of so called “cargo cartels” where by up to thirty major airlines from around the world were suspected of price fixing on cargo flights. Some big hitters in the industry were found guilty of this and most recently British Airways was fined for its part in this in Canada (FT, 01/11/09, P22, “BA fined i?? 2. 5m for Canada Cartel role”).
Anti-competitive agreements are another breach of article 81 where companies can end up preventing or restricting competition often through price fixing. Article 82 has been brought up in recent times on various occasions and this across businesses in different areas. For example, British Airways are looking at merging with the Spanish carrier Iberia and American Airlines, but the EC has expressed concern that they would harm competition amongst airlines by having almost total domination of the London Heathrow-New York air routes that are regarded in the industry as very lucrative (FT 26/10/09, P1, “antitrust threat to Atlantic air tie-up”).
The counter against this concern though, is that these three airlines are huge employers worldwide and the merger is seen as a life saver for the three companies after they all posted record losses in the recent financial year. If it was blocked on competition concerns, the loss of jobs by any one of them collapsing would be catastrophic (FT, 26/10/09, P. 27, “Air alliance runs into turbulence over Brussels’ concerns”). Consumers even face market domination by companies in their viewing habits. BSkyB is seen as the dominant force in this area.
They stand accused of bullying out any competition that emerges in this industry through its dominance of the market. The prime example being the rise, then demise of ITV digital, where Sky’s dominance of football and movie rights forced them out of business. And also through their use of aggressive discounting on subscription packages. They have an 85% market share and the result has been that prices for subscriptions are much more than should be the case (FT P. 17 23/10/09, “Rein in Sky and offer the consumer a choice”).