CC BY
66Review of law sciences
Q-------------- |
- Д^
Bakhshillo Kamolovich Khodjaev,
Head of Business Law Department of Tashkent State University of Law
TRANSITIONAL COMPETITION MODEL FOR MISLEADING ADVERTISING REGULATION IN UZBEKISTAN: AN ALTERNATIVE APPROACH
Annotation: The complexity of the regulation of misleading advertising requires to provide balance of competitors, consumers and government interests in the market. Competition law and policy is the main tool to provide competitive process, economic efficiency and consumer welfare to all participants in the market. Each country designs its own competition law and policy based on a particular model, including domestic socio-economic prerequisites. There are two common competition law models, Traditional and Modern Competition Law Models, which majority of countries employed. The developed countries have already shifted from traditional to modern competition law model, while the most of developing countries are still on transition way. Uzbekistan, as other CIS member states, has applied traditional competition model towards misleading advertising by adding to it some elements of the modern competition model without understanding its actual significance. The current model cannot deal with misleading advertising due to the undeveloped standards. The entire application of modern competition model to Uzbek market is also unreasonable due to the existing specification of improper advertising. Therefore, this article proposes to design Transitional Competition Model as an alternative theoretical approach, which will be able to deal effectively with improper advertising problems not only in Uzbekistan, but also in other CIS member states.
Key words: Competition law and policy, misleading advertising, regulatory standards, theoretical approach
Бахшилло Камолович Ходжаев,
Заведующий кафедрой «Бизнес право» Ташкентского государственного юридического университета
ПЕРЕХОДНАЯ МОДЕЛЬ КОНКУРЕНЦИИ ДЛЯ РЕГУЛИРОВАНИЯ ВВОДЯЩЕЙ В ЗАБЛУЖДЕНИЕ РЕКЛАМЫ В УЗБЕКИСТАНЕ: АЛЬТЕРНАТИВНЫЙ ПОДХОД
Аннотация: сложность регулирования вводящей в заблуждение рекламы требует обеспечения баланса интересов конкурентов, потребителей и государства на рынке. Конкурентное право и политика в этой области являются основным инструментом обеспечения конкурентного процесса, экономической эффективности и благосостояния потребителей для всех участников рынка. Каждое государство разрабатывает свое собственное законодательство и политику в области конкуренции на основе конкретной модели, включая внутренние социально-экономические предпосылки. Существует две
модели конкурентного права, традиционные и современные модели, которые используются большинством стран. Развитые страны уже перешли от традиционной к современной модели конкурентного права, в то время как большинство развивающихся стран все еще находятся на переходном этапе. Узбекистан, как и другие государства-участники СНГ, применил традиционную модель конкуренции к вводящей в заблуждение рекламе, добавив в нее некоторые элементы современной модели конкуренции, не понимая ее фактической значимости. Текущая модель не может справиться с вводящей в заблуждение рекламой из-за неразвитых стандартов. Полное применение современной модели конкуренции на рынке Узбекистана также нецелесообразно из-за существующей спецификации ненадлежащей рекламы. Поэтому в данной статье предлагается разработать модель переходной конкуренции в качестве альтернативного теоретического подхода, который сможет эффективно решать проблемы, связанные с ненадлежащей рекламой не только в Узбекистане, но и в других государствах-участниках СНГ.
Ключевые слова: конкурентное право и политика, вводящая в заблуждение реклама, стандарты регулирования, теоретический подход
Бахшилло Камолович Ходжаев,
Тошкент давлат юридик университети «Бизнес хукуки» кафедраси мудири
УЗБЕКИСТОНДА ЧАЛГИТУВЧИ РЕКЛАМАЛАРНИ ТАРТИБГА СОЛИШДА РАЦОБАТНИНГ УТИШ ДАВРИ МОДЕЛИ: МУЦОБИЛ ЁНДАШУВ
Аннотация: чалгитувчи рекламаларни тартибга солишнинг мураккаблиги бозорда рацобатчилар, истеъмолчилар ва давлат манфаатлари уртасида узаро мувозанатни таъминлашни талаб цилади. Рацобат %уцуци ва бу борада давлат сиёсати бозорда рацобат жараёнини, ицтисодий самарадорликни %амда истеъмолчи фаровонлигини таъминловчи асосий восита %исобланади. Х,ар бир давлат ички ижтимоий-ицтисодий шарт-шароитлардан келиб чициб муайян моделга асосланган %олда рацобат сощсида уз цонунчилигини ва сиёсатини ишлаб чицади. Хозирги кунда аксарият давлатлар томонидан цулланилаётган иккита умумий рацобат %уцуци модели, яъни анъанавий ва замонавий рацобат %уцуци моделлари мавжуд. Ривожланган мамлакатлар аллацачон анъанавий моделдан ривожланган рацобат %уцуци моделига утган бир пайтда ривожланаётган давлатлар %анузгача анъанавий йулини сацлаб цолмоцда. Узбекистон МДХнинг бошца аъзо давлатлари каби чалгитувчи рекламаларга нисбатан анъанавий рацобат моделини жорий этиб, шу билан бирга замонавий рацобат моделининг айрим элементларини унинг %ациций мо%иятини тушунмаган %олда цуллаб келмоцда. Амалдаги модел ундаги ривожланмай цолган стандартлар туфайли чалгитувчи рекламаларга царши кураша олмайди. Нотугри рекламанинг мавжуд хусусиятларини %исобга олган %олда Узбекистон бозорига замонавий рацобат моделини цуллаш %ам мацсадга мувофиц эмас. Шундан келиб чициб, мазкур мацолада нафацат Узбекистонда, балки МДХнинг бошца аъзо давлатларида нотугри реклама муаммоларини %ал цила оладиган утиш даврининг рацобат моделини муцобил назарий ёндашув сифатида ишлаб чициш таклиф этилмоцда.
Калит сузлар: рацобат %уцуци ва сиёсати, чалгитувчи реклама, тартибга солиш стандартлари, назарий ёндашув
I. Introduction
1) How misleading advertising appears in the market? Is it objective or subjective category?
The effectiveness of the market depends on the satisfaction of consumer demands.
Therefore, manufacturers disseminate the information about their products to promote their business and accordingly consumers search information about available products to make their purchasing decision wisely. Advertising has the informative function which serves to facilitate this process providing the commercial information flow from a manufacturer to a consumer. However, the progressive development in the market enhances the persuasive power of advertising. The producers and sellers try intensively to persuade consumers about the quality, price and other characteristics of their products. Since the producers have inclination to boost their product, they usually exaggerate the values of the product. The use of such "trade puff' or marketing tactics in advertising misleads consumers or, at least, has a tendency to mislead. Thus, such advertisement appears in the marketplace. Here, the inclination to sell products is objective process, but hyperbole of the product is subjective and most frequently has misleading effects on consumer behaviour.
2) Why state needs to regulate misleading advertising? What is the role of Competition law in managing of the market? How Competition law becomes an effective legal instrument against misleading advertising?
The misleading information undermines the economic function of advertising as well as it weakens the consumer confidence in the market. Therefore, government needs to set legal standards on accuracy of advertising to protect public interests. However, producers and sellers seek new ways of illegitimate attracting the attention of potential consumer to the product by using the achievements of scientific and technological progress. Consequently, they try to circumvent the law which establishes the legal requirements on advertising. Such circumstances forces the legislature to choose effective legal instruments against misleading advertising.
The effective legal instrument for market supervision is competition law [1]. The functioning of competition law is based on economic regulation theories such as market failure and efficiency [2]. Market failure theory supports free-functioning market [3] using Smith's "invisible hand" [4], where a state should abstain from direct market intervention [5]. However, it does not require entirely state abstain, and therefore market needs for the state corrective action [6]. Competition law is a state corrective action for market defects, such as misleading advertising.
The United States (the US) antitrust law introduces modern competition law model based on efficiency theory [7] and accordingly designed the legal framework for the false advertising. In particular, the Lanham Act not just prohibits false advertising, but also specifies it as misleading representation in commercial advertising or promotion with a possible harm effect [8]. The European Union (the EU) competition law developed the legal framework for misleading advertising under the influence of the US antitrust law [9]. The EU Directive concerning Misleading and Comparative Advertising specifies misleading advertising as deceptive advertising; its presentation, which can affect to consumer economic behavior [10]. Thus, the modern competition policy is considered as established in the US and, so it isemerging in the EU [11].
The Russian Federation (the RF), established its traditional competition law model by designing very general and ambiguous legal framework for misleading advertising so-called
improper advertising [12]. The Law on Advertising of the RF defines improper advertising as unfair, unreliable, and false advertising, which violates the requirements on content, time, place and manner of advertising [13]. Such legal definition of improper advertising enables the state to interfere directly in commersial speeches of manufacturer and traders [14]. Unfortunately, the Republic of Uzbekistan (RUz) has also developed its respective legislation by taking purposelesly the most aspects of the legal framework of improper advertising from the Russian legislation without understanding its economic and legal entails [15]. Similarly, the Commonwealth of Independent States (the CIS) determines improper advertising the same way in the regional agreement, which requires its harmonization in national legislations of member-states [16].
The problem statement of the research can be explained that Uzbek Competition law and policy concerning misleading advertising is inefficient due to the ambiguity of legal framework, insufficiency of legal standards, and lack of the collaborative interactive regulation.
Research questions: How Regulatory Law should adjust the advertising functions in a clear way? What is the role and significance of Competition Policy on misleading advertising? How to keep "golden balance" between consumers, competitors and government interests? What kind of standards or evaluation criteria should be designed or redesigned to reach effective regulation of misleading advertising? Why CIS countries chose improper advertising to deal with this problem? What is the necessity of "deception standard" and "materiality" requirement, self-regulation and flexible preventive remedies for proper evaluation of deception in advertising? What kind of prerequisites should be taken into account for design and implementation of effective regulatory system for misleading advertising in CIS countries with transition economies?
The hypothesis. Current Competition law and policy of Uzbekistan has applied Traditional Competition Model towards misleading advertising by adding to it some elements of Effective Competition Model without understanding its actual significance. The entire application of Effective Competition Model to this problematic situation is also unreasonable due to the existing specification of improper advertising in Uzbek market. Therefore, the research proposes to design Transitional Competition Model as an alternative theoretical approach.
II. Universal Theoretical View on Competition Models and Regulatory Standards of
Misleading Advertising
The initial theories of competition law had controversial debates on the issue whether an advertising is pro-competitive or anti-competitive. There are two main approaches in this issue: traditional and efficiency. According to the Traditional Approach, the advertising is pro-competitive because it reduces product's search cost and mitigates consumers' uncertainty about alternatives as well as facilitates choice [17]. On the contrary, the Efficiency Approach considers the advertising based on its influence on competition, so it might be pro-competitive or anticompetitive [18].
However, initial theories could not articulate how to detect misleading advertising. Philip Nelson (1970) substantiated the ways of distinction of truthfulness from falsity in advertising according to the product characteristics [19]. He suggested to divide goods into two categories: "search goods" (e.g. information on comfortability of a pair of shoes can be checked in pre-sale inspection) and "experience goods" (e.g. information on the taste of a candy might be evaluated after purchase). Darby and Karni (1973) upgraded the theory by adding to it "credence goods" [20]. In credence goods cases, consumer relies on the seller's reputation, e.g. how can non-expert (typical) consumer evaluate the health benefits of vitamin supplements.
The next theories concentrated on the issue of on how misleading advertising should be regulated. The theoretical Model of Perfect Competition assumed that market itself is an equilibrium and the information in the market does not need some regulation [21]. However, this non-interventionist and non-regulatory model is unrealistic and utopia [22]. Conversely, the Austrian Economic Model on Competition (Israel Kirzner, 1976) stated that misleading advertising needs some coordination, which should be based on understanding of both advertising and competition, because a consumer and a producer are in state of search and uncertainty in the market [23].
However, above mentioned competition theories could not answer to the question of who should regulate misleading advertising. Ellen Jordan and Paul Rubin (1979) found that misleading advertising should not be controlled by competitors because they can use private policy as a weapon against new entrants [24]. Petty (1992) supported the idea of government regulation referring to the advertising self-regulation as a cause anti-competitive collusion [25].
Since the government can intervene to the competitors' speeches and control the flow of commercial information, the next theories focuse on how to keep balance competing interests of competitors and consumers. Ross Petty (1992), in his theory "a market free of false advertising", suggested that the remedies for misleading advertising should not exclude a competitor from the market [26]. "Equilibrium Model of False Advertising" (Andrew Rhodes and Chris Wilson, 2016) suggested the moderate penalty for misleading advertising because high level of penalty can reduce commercial information and limits consumer access or vice versa low level of penalty can decline the credibility of advertising, which has a negative impact on product quality and innovative competition between sellers [27].
The above-mentioned theories could not clearly answer to the question of in what extent government should regulate misleading advertising or intervene to the free speech rights of sellers. Commercial speech doctrine focuses on the issue of on how to protect commercial speech from government intervention and how to limit government power of regulation [28]. Since false and misleading advertising is considered to be unprotected commercial speech under the First Amendment of US Constitution, the US government has rationale for intervention to false advertising. However, the intervention must be reasonable [29], which means that the regulation should not be more restrictive than necessary [30] and the government cannot control the advertising by curbing consumer access to information [31]. On basis of this reasonable fit, the US Supreme Court, in its "An Integrated Model of Restriction of Commercial Speech", proved ineffectiveness of the strict scrutiny by total banning of misleading advertising. The majority of judges supported the application of the "less than strict alternatives" which consists of "content-based" regulation and "method (non-content) based regulation [32]. However, content-based regulation needed some standards for identification and evaluation of misleading advertising. The legal standards can be conventionally divided into product-related standards [33] and consumer-oriented standards [34].
The standards have been implemented to the practice through two common models, which are used as a framework for designing competition law and policy by majority countries. They are Traditional and Modern Competition Law Models. The traditional competition law model, as a business-oriented model, evaluates misleading advertising as a corporate behaviour, which can harm the business (other competitors). Therefore, the model addresses to strict control only outgoing flow of advertising by government regulation [35]. Nevertherless, the modern competition law model evaluates an impact of misleading advertising on competition process,
taking into account of not only the corporate behaviour, but also consumer behaviour as well. Therefore, the model supports less than strict regulation for misleading advertising in order to provide consumer welfare and economic efficiency in the market [36]. The modern model suggests the application of content-based standard for regulation and effect-based approach for evaluation and decision-making concerning misleading advertising [37]. The traditional competition model, differently, supports the ban of misleading advertising by using form-based approach for evaluation and decision making [38]. Thus, developed countries have already shifted from traditional to effective competition law model, while most of developing countries are still on transition way.
III. Regulatory Approach on Misleading (Improper) Advertising in Uzbekistan
The CIS and its impact on Uzbekistan
The competition law and policy concerning misleading advertising in the Commonwealth of Independent States (CIS) [39], has not been truly "home-grown", indeed they are adopted as formal response to regional (international) obligation within CIS agreements [40], rather than gradual national awareness [41]. Most of the CIS member states introduced and developed EU competition law without sufficient understanding on its part of what misleading advertising entails and what the advertisement role in the economy should be [42]. The legislature of member states attempted to apply deregulation towards misleading advertising by changing strict scrutiny to less restrictive regulation, however, those efforts were incorrect. Especially, legislature designed the regulative standards in the mixture of content-based and non-content based standards. However, this kind of "quick-fix" for the problems has had negative impacts on substantial legal components and their application in practice [43]. Moreover, although the strict scrutiny was rejected, the government has been reluctant to relinquish its control over misleading advertising, because according to the government's viewpoint, there is only one authoruty that can provide protection for public interest. Thus, CIS member states have applied traditional competition law model with some elements of effective model, which is no longer seen as conductive for the attainment of effective competition goals.
Why competition law and policy of Uzbekistan cannot deal with misleading advertising: substantive, institutional and enforcement problems.
Substantive law problems
The competition law and policy is relatively new legal institution in Uzbekistan. Untill the independence, Uzbekistan did not have any experience in legal regulation of advertising due to the existence of social ownership, which excluded the competition and marketing communication in centrally planned economy [44].
After 1991, the year of independence, Uzbekistan chose market economy based on free and fair competition. In this regard, the legislature designed general and specific legal basis for competition law and policy regarding misleading advertising. As a general legal act, the Law on Restriction of Monopolistic Activity (Antimonopoly Law, 1992) [45] determined misleading advertising as unfair competition, which is based on the "unfair methods of competition" principle [46]. Later, the Law was adopted in new editions, such as the Law on Competition and Restriction of Monopolistic Activity in the Commodity Markets (Antimonopoly Law, 1996) [47], and the Law on Competition (Competition Law, 2012), which is currently in force [48]. However, current Competition law does not define misleading advertising. As a specific law, Uzbekistan adopted the Law on Advertising (Advertising law, 1998), which set the legal standards for misleading advertising [49]. In particular, misleading advertising in Uzbekistan is defined Improper
Advertising, which includes undeveloped "alien" legal components [50]. The legal framework for improper advertising consists of means and end provisions [51]. The mixture of these provisions and standards that were applied to it make the regulation inefficient and vague in some point.
The legal framework of misleading advertising is unclear and ambiguous, which leads the state to the following substantive legal issues:
First, the legislature designed the legal framework so-called improper advertising in a mixture way, which contains misleading advertising and excessive advertising [52]. The excessive advertising can manage to regulate time, place and manner of advertising, but cannot deal with deception that affects consumers' economic behavior [53]. Such ambiguous legal framework of improper advertising proved that Uzbekistan implemented the corporate regulatory model, which gives to enforcement body an alternative choice to regulate the advertisement policy to provide government interest.
Second, the effect of misleading advertising on consumer behaviour is the main criterion for the legal evaluation of misleading advertising, which is called materiality standard [54]. However, the legal provision on deception does not include materiality standard for evaluation of misleading advertising. The lack of materiality standard in the Advertising law makes the regulation inefficient because without estimating consumer economic behaviour the enforcement body cannot properly determine and evaluate the effects of misleading advertising.
Third, the legal definition of improper advertising has a loophole, which is formulated as "violations of other requirements established in the Advertising law". What kind of violations are they? Can each violation of the Law be considered improper advertising? These questions show that such implied legal framework can cause the abuse of regulative power by government. Thus, government can unreasonably intervene to commercial speech of producers whenever possible due to this loophole in legal framework.
Enforcement problems
The adopted unclear legal framework without sufficient standards cause three main problems in enforcement.
First, the Competition Committee of Uzbekistan (UzCC), using the ambiguity of improper advertising, makes excessive advertising priority in practice, even if the excessive advertising does not mislead consumers. Unfortunately, the priority of the excessive advertising in practice provides to maintain government intervention in advertising regulation. The problem can be illustrated by a typical case. In Surkhandaryo TV case, the broadcast company violated the time requirement of advertising dissemination. According to that requirement, advertisements on TV should not exceed 10 percent per hour, which means maximum 6 minutes per hour. However, in this case, the company broadcasted TV commercials more than 6 minutes per hour, and therefore the violation was evaluated as improper advertising. Thus, the UzCC evaluated excessive advertising to be misleading one, even if it did not have misleading effects.
Moreover, the loophole in Advertising law formulated that the "violations of other requirements" interpreted as unsubstantiated advertising by the UzCC. According to the requirement on substantition of advertising, producers or advertisers must substantiate an advertising information with particular documents. The UzCC usually requires to show information on license or certification in advertisement. However, such requirement has become prior rather than proof of deception in advertisement. For instance, in Namangan International Airport case, the Administration of Airport placed an outdoor advertisement on a billboard that stated the flights form Namangan to cities of Russia, such as Moscow, St.Petersburg, Ekaterinburg
and Omsk are flown by airplane BOEING-757 [55]. However, as a result of monitoring, in March 2007 the territorial Department of Antimonopoly Committee found that the same flights were made by not only BOEING-757, but also by other types of airplanes. According to the cease and desist order, the administration of the airport corrected the text of advertisement. However, the department decided to impose the administrative fine to the airport administration and claimed that the airport administration still violated the Article 13 of Advertising law because the advertisement did not content the information about the license. The Economic Court of Namangan region also supported the decision of the department [56]. In this case, the enforcement authority gave a priority to excessive advertising during the evaluation of misleading advertising, which caused unreasonable imposition of fine and harm on the legitimate interests of the airport administration.
Second, there is still lack of understanding and interpretation of deception concept in practice, which makes the guarantee for protection very weak. The problem can be illustrated by a typical case. In Beeline case, a mobile network operator named Beeline disseminated an advertisement about new tariff plan "Best-Best MegaBit" on March 31, 2013. In the advertisement, mobile operator described the tariff plan that "daily internet is free after 5 MB (MegaBit)". However, the advertisement also included information with invisible small letters that "technological limit of free internet is 25 MB per day, the MB over the limit is estimated as $0,007/MB, free MB is not transferred the next day" [57]. The consumers complained to lawyers, because the daily internet was not actually free after 5 MB, only 25 MB of internet was free per day and the other MB over that limitation was payable according to the invisible small letters in advertisement that misled consumers. After carrying out some legal expertise, the lawyers submitted the case to the UzCC. As a result, the vice-chairman of the Committee issued an official letter, which stated that the advertising information of Beeline violated the main requirements of advertising, such as legality, accuracy, reliability and using harmless advertising techniques. Consequently, the UzCC decided to send a cease and desist order to Beeline [58]. In this case, the Committee failed to understand the concept of deception by evaluating it with the general requirements of advertising, and this can cause harm to the other competing mobile operators, which are foreign investors.
Third, the UzCC misclassifies the deception-related concepts with other non-deception concepts. For instance, in the following case the Committee misclassifies omission concept by evaluating it as hidden advertising. In San'at Sehri company case, an organizer provided TV commercial about a big concert show with 9 famous Uzbek superstars on May 5-6, 2006, in a concert hall called Turkiston [59]. On the first day of concert, the audience found out that only three famous singers would participate in the concert. The other 6 famous superstars would be substituted for other unknown singers. The audience did not expect this because the advertisement had not provided information about the "strangers". Accordingly, the consumers complained to the UzCC for compensation of damages from the false advertising. During the hearing proceedings in the Committee, the company asserted that the advertisement contented the expression "9 Uzbek famous superstars and other singers", and those "other singers" who consumers recognized as "unknown", were auxiliary singers in the event of emergency. As a result of examination, the Committee found that actual advertisement contained information about 9 famous singers by name, and the information continued with the phrase "and others", which made the consumers to believe that the other singers were also famous. Surprisingly, the Committee evaluated the advertisement as a hidden advertisement and imposed an administrative fine to the director of the
company [60]. In this case, the Committee misclassified the advertising because the advertising should be classified as misleading advertising conducted by omission of facts in it.
Institutional problems
State Committee for Privatization, Demonopolization and Development of Competition (Competition Committee of Uzbekistan - UzCC) is an enforcement body, which provides competition policy concerning misleading advertising in Uzbekistan [61]. The UzCC empowered to regulate advertising market in the state to prevent from, detect and combat against misleading advertising [62]. However, the activity of the UzCC in this field is inefficient due to the lack of collaboration with self-regulatory bodies. For instance , the UzCC does not have a precise mechanism for interactive regulation of misleading advertising in cooperation with trade industries, as well as consumers' self-regulatory associations [63].
The lack of such interactive regulation causes two main institutional problems. First, the UzCC cannot provide its function to set legal standards of misleading advertising in trade industry, food or pharmaceutical industry because the Committee does not have collaboration with associations of such industries to set applicable legal standards. Second, the Committee has not eslablished clear cooperation mechanisms with Consumer Protection Federation, which can determines consumers needs and regulation tasks regarding misleading advertising [64]. Because the Federation itself does not have a special function to protect consumers from misleading advertising [65]. Third, the UzCC does not have a guideline for evaluation of misleading advertising that would be useful for institutional expertise of advertisement and would be guidance for mass-media and trade industries in preventing misleading information from its dissemination.
IV. Conclusion: Proposal for Uzbekistan
The proposal of this paper is to design the Transitional Competition Model, which it will be able to deal effectively with improper advertising problems not only in Uzbekistan, but also in other CIS member states. The proposed Model includes three main integral institutions, such as conceptual design, balance of interest, and interactive regulation.
The conceptual design proposes to divide improper advertising into two independent parts. The first part is "improper by form", which describes the violation of requirements to time, place and manner of advertising as well as unsubstantiated advertising. This part provides free flow the commercial advertisement in economy. The applicable standards for this part are non-content based regulative standard and form-based decision-making standard. The second part is "improper by content" that is "misleading advertising". This part describes legal provisions on actual deception and tendency to mislead consumers, in addition the provisions will be developed with complementary standard on materiality. The applicable standards for this part are content-based regulative standard and effect-based decision-making standard. Taking into consideration of both standards punitive sanctions for each part should be separated.
Balance of competing interests in regulation of misleading advertising is provided by application of "A market free of false advertising" theory or "Equilibrium Model" alternatively. One of these measures will be chosen on the basis of "robust industry" principle. If particular market has a few competitors and an imposed remedy for misleading advertising causes to exclude the competitor from the market, "a market free of false advertising" theory will be applied in order to keep defender-competitor for further consumer choice and do not allow plaintiff to be a monopolist in the market. If competitors are enough in particular market, the moderate penalty
will be imposed for misleading advertising that provides to keep balance between consumer access to the information and innovative activity of competitors.
The last important institution of the proposed model is interactive regulation. It provides collaborative cooperation between the Antimonopoly Committee and Consumer Protection Federation as well as trade industries in order to set proper standards concerning misleading advertising. It can be proceeded by permanent organization or as one-off meetings in the form of trade practice conference.
References:
1. Cleynenbreugel, Pieter van. Market Supervision in the European Union: Integrated Administration in Constitutional Context. Martinus Nijhoff Publishers, 2014. p.13.
2. Dunne, Niamh. Competition Law and Economic Regulation. Cambridge University Press, 2015. p.6.
3. The economic basis of the theory was developed by neoclassical economic theory, which asserts that free market is the engine of progress and functions as efficient allocator of resources. See: Scherer, Frederic. "Conservative Economics and Antitrust: A Variety of Influences - Oxford Scholarship." In How the Chicago School Overshot the Mark. Oxford University Press, 2008. http://www.oxfordscholarship.com/view/10.1093/acprof:oso/ 9780195372823.001.0001 /acprof-9780195372823-chapter-4. p.31.
4. Smith, Adam. The Wealth of Nations, 2007. https://harriman-house.com/the-wealth-of-nations. p.293.
5. Coase, R. H. "The Problem of Social Cost." The Journal of Law & Economics 3 (1960): 1-44.
6. The State corrective action is needed when there is a failure in the market. See: Baldwin, Robert, Martin Cave, and Martin Lodge. Understanding Regulation: Theory, Strategy, and Practice. OUP Oxford, 2011. p.15.
7. Dunne, Niamh. Competition Law and Economic Regulation. Cambridge University Press, 2015. p.10-12. For the efficiency theory in Competition law see also Viscusi, W. Kip, John M. Vernon, and Joseph E. Harrington. Economics of Regulation and Antitrust. MIT Press, 2005. p. 66-67; Motta, Massimo. Competition Policy: Theory and Practice. Cambridge University Press, 2004. p.18.
8. According to the Lanham Act § 43(a), Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act. See: "15 U.S. Code § 1125 - False Designations of Origin, False Descriptions, and Dilution Forbidden." LII / Legal Information Institute. Accessed May 10, 2017. https://www.law.cornell.edu/uscode/text/15/1125.
9. Scholar David Gerber pointed out two impacts of the US antitrust law to the EU competition law. First, following World War II, the US authorities implemented antitrust rules within the Occupied German Territories. Second, German Ordoliberal scholars, known as Freiburg School, worked on the role of competition law as effective regulation of competition. See: Gerber, David J. Law and Competition in Twentieth Century Europe: Protecting Prometheus. Oxford University Press, 2001. - P.233-265.
10. According to the Article 2(b) of the EU Directive 06/114/EC concerning Misleading and Comparative Advertising, 'misleading advertising' means any advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behaviour or which, for those reasons, injures or is likely to injure a competitor. "EUR-Lex - 32006L0114 - EN - EUR-Lex." Accessed May 10, 2017.
http://eur-lex.europa.eu/legalcontent/GA/TXT/?uri= CELEX%3A32006L0114; The previous Directive 84/450/EEC concerning Misleading Advertising had the same legal definition. See: "EUR-Lex - 31984L0450 - EN - EUR-Lex." Accessed April 30, 2017. http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A31984L0450.
11. Ibid. p.12.
12. Cheryachukin, Yuriy Vladimirovich. "Problemi Pravovogo Regulirovaniya Reklamnoy Deyatelnosti V Rossii I Zarubejnix Gosudarstvax," 2002. http://www.dissercat.com/content/problemy-pravovogo-regulirovaniya-reklamnoi-deyatelnosti-v-rossii-i-zarubezhnykh-gosudarstva. p.208-209.
13. Each concept under the improper advertising such unfair advertising (Art.6), unreliable advertising (Art.7), false advertising (Art.9) has a legal provisions on misleading action by seller which make the alternative choice for enforcement body. See: "Federalniy Zakon O Reklame Ot 18.07.1995 G. № 108-FZ." Prezident Rossii. Accessed April 21, 2017. http://kremlin.ru/acts/bank/8082. For the official translation of the Law see the web-page of the WTO at https://www.wto.org/english/thewto_e/acc_e/rus_e/WTACCRUS48_LEG_58.pdf The current Advertising law defines improper advertising as an advertising which does not comply with the requirements of legislation, but the Law keeps the legal provisions on misleading advertising within the definitions of unfair advertising (Art.5.2.) and unreliable advertising (Art.5.3.). See: "Federalniy Zakon O Reklame Ot 13.03.2006 G. № 38-FZ." Prezident Rossii. Accessed May 5, 2017. http://kremlin.ru/acts/bank/23532; For official translation of the Law see web-page of the WHO at http://data.euro.who.int/tobacco/Repository/RU/
Russian%20Federation_Federal%20Law%20on%20Advertising _2006.pdf
14. Kislitsin, Aleksey Anatolevich. "Vvodyashaya V Zablujdeniye Reklama: Ponyatiye I Problemi Kvalifikatsii. Opit Sravnitelno-Pravovogo Issledovaniya Prava Rossii I SShA," 2006. http://www.dissercat.com/content/vvodyashchaya-v-zabluzhdenie-reklama-ponyatie-i-problemy-kvalifikatsii-opyt sravnitelno-prav. p.53-54.
15. According to the Article 13 of the Law on Advertising of Uzbekistan improper advertising is unfair, false advertising which actually misleads or tends to mislead consumers by the way of inaccuracy, ambiguity, exaggeration, omission, or through the violation of requirements on time, place and way of advertising and other legislative requirements, which can cause damages to person and state. See: O'zbekiston Respublikasining "Reklama to'g'risida"gi qonuni. O'zbekiston Respublikasi Oliy Majlisining Axborotnomasi, 1998. http://www.lex.uz/pages/getpage.aspx?lact_id=25458.
16. "Osnovnie polojeniya Soglasheniya o sotrudnichestve gosudarstv - uchastnikov SNG v sfere regulirovaniya reklamnoy deyatelnosti." Official web page of CIS. The bacis documents on collaborations' direction of CIS. Accessed September 29, 2016. http://e-cis.info/page.php?id=10662.
17. Chiplin, Brian, Brian Sturgess, and John H. Dunning. Economics of Advertising. Holt, Rinehart and Winston with the Advertising Association, 1981; Driver, John. "Advertising and Competition." Advertising and marketing law & practice. September/October, 1985. London, England: Cass, 1985. p.2.
18. The advertising has differentiating effect which makes differentiation between similar product, for example pharmaceutical advertising; and price effect that permits price
of advertising as a means to obtain monopoly power and consequently it causes strong brand loyalty to promoted product. See: Driver, John. "Advertising and Competition." Advertising and marketing law & practice. September/October, 1985. London, England: Cass, 1985. p.3.
19. Nelson, Philip. "Advertising as Information." Journal of Political Economy 82, no. 4 (1974): 729-54.
20. The advertisement about credence goods is the most dangerous type of advertising and mostly tends to mislead consumers. See: Darby, Michael R., and Edi Karni. "Free Competition and the Optimal Amount of Fraud." The Journal of Law and Economics 16, no. 1 (April 1, 1973): 67-88. doi:10.1086/466756.
21. Driver, John. "Advertising and Competition." Advertising and marketing law & practice. September/October, 1985. London, England: Cass, 1985. p.2.
22. Rhonda, Smith. "Competition law and policy — theoretical underpinnings." Infrastructure regulation and market reform, The Australian Competition and Consumer Commission (ACCC) and the Public Utility Research Centre (PURC), November 1997, 1626. p.17.
23. "The Foundations of Modern Austrian Economics." Goodreads. Accessed March 16, 2017. http://www.goodreads.com/work/best_book/3044998-the-foundations-of-modern-austrian-economics; Competition and Entrepreneurship. Accessed March 16, 2017. http://www.press.uchicago.edu/ucp/books/book/chicago /C/bo27304815.html.
24. Jordan, Ellen R., and Paul H. Rubin. "An Economic Analysis of the Law of False Advertising." The Journal of Legal Studies 8, no. 3 (Iyun 1, 1979): 527-53.
25. See Petty, Ross D. The Impact of Advertising Law on Business and Public Policy. Westport, Conn.; London: Praeger, 1992. p.131-132.
26. The case of U-Haul Intl v. Jartran, Inc. proved this theory. □ In this case, a new entrant, Jartran made advertising that falsely showed its vehicle to be larger and more attractive. The established firm, U-Haul sued on awarding $40 million and used the bankruptcy proceeding against Jartran. However, FTC brought the suit and prevent the bankruptcy of Jartran, because it was a "weak" new entrant in the market. Petty explained that FTC used a "competitive ploy" to keep new entrant in particular market and do not allow to plaintiff to increase its monopoly power. Otherwise, if Jartran were bankrupt, consumers would lost new entrant in a market lacking in significant competition. See: "U-Haul Intern., Inc. v. Jartran, Inc., 522 F. Supp. 1238 (D. Ariz. 1981)." Justia Law. Accessed March 16, 2017. http://law.justia.com/cases/federal/district-courts/FSupp/522/1238/1519455/.
27. Rhodes, Andrew, and Chris M. Wilson. "False Advertising." MPRA Paper, July 18, 2016. https://mpra.ub.uni-muenchen.de/72693/.
28. Coase, R. H. "Advertising and Free Speech." The Journal of Legal Studies 6, no. 1 (January 1, 1977): 1-34. doi:10.1086/467560.
29. Murphy, Kathryn. "Can the Budweiser Frogs Be Forced to Sing a New Tune?: Compelled Commercial Counter-Speech and the First Amendment." Virginia Law Review 84, no. 6 (1998): 1195-1224. doi:10.2307/1073697. p.1198.
30. Sullivan, Kathleen M. "Cheap Spirits, Cigarettes, and Free Speech: The Implications of 44 Liquormart." The Supreme Court Review 1996 (January 1, 1996): 12361. doi:10.1086/scr.1996.3109728. p. 156.
31. Boedecker, Karl A., Fred W. Morgan, and Linda Berns Wright. "The Evolution of First Amendment Protection for Commercial Speech." Journal of Marketing 59, no. 1 (1995): 38-47. doi:10.2307/1252013. p.40.
32. Content-based regulation addresses to evaluate and restrict the content of advertising message. Non-content based regulation focuses on control the time, place and manner of regulation on order to provide free flow of commercial information.
33. Product-related standards are "uniqueness" (metaphoric use of superlatives such "best", "first", "superior", "number one", "cheapest", "only"), "comparative merit" (product differentiation based on superiority such "50 percent brighter", 20 per cent cheaper", cleaner", "whiter"), "qualitative" (standardized and ad hoc assertion), and "quantitative" standards (the vague quantitive descriptions such "giant size", "large family size", or "economy size"). See: Alexander, George J. Honesty and Competition;: False-Advertising Law and Policy under FTC Administration. 1st edition. Syracuse University Press, 1967. p.80-99
34. The consumer-oriented standard is called deception standard. The basis for the deception standard, for the first time, was "the tendency to mislead substantial number of consumers", later it was changed to "uninformed consumer" criterion, because it was impossible to state what is substantial. See: Petty, Ross D. The Impact of Advertising Law on Business and Public Policy. Westport, Conn.; London: Praeger, 1992. p.50-51.
35. The traditional model is described as political, formalistic, corporatist, or autonomy-based view of competition. Elhauge, Einer, and Damien Geradin. Global Competition Law and Economics. Hart, 2007.
http://www.law.harvard.edu/faculty/elhauge/pdf/Global_Competition_Law_Economics_
Prelim-1.pdf. p.3.
36. The Effective Competition Model supports public benefits concerning advertising by two general grounds: first, providing a system to scrutinize inappropriate or illegal advertising, and second, to improve the quality of advertising message. See: Duns, John. "Competition Law and Public Benefits." Adelaide Law Review, The 16, no. 2 (1994): 245. p.265.
37. In effect-based approach, the authority examines the economic effects of potentially anti-competitive behaviour.
38. The form-based approach requires the competition authority to check the legality of anti-competitive behaviour. It means that the competition authority just check and do no more than to look at the behaviour and decide inherently and intrinsically illegal. See: Stanley, Martin. "Interesting Issues in Competition Policy/Economic Regulation." Regulation Facts, Analysis and Comment, n.d.http://www.regulation.org.uk/competition-interesting_issues.html.
39. Commonwealth Independent States (CIS) is an association of sovereign states formed in 1991 and comprising Russia and 11 other republics that were formerly part of Soviet Union. The CIS countries are Azerbaijan, Armenia, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. See Kembayev, Zhenis. Legal Aspects of the Regional Integration Processes in the Post-Soviet Area. Springer Science & Business Media, 2009. 90-93.
40. The CIS Agreement on Collaboration in the Field of Advertising Regulation (Moscow, 2003) officially defines misleading advertising and requires harmonization of
national legislation on advertising. Therefore, most of CIS member states have the same legal definition of misleading advertising. However, the harmonization was used without understanding the concept of misleading advertising. See: Osnovnie polojeniya Soglasheniya o sotrudnichestve gosudarstv - uchastnikov SNG v sfere regulirovaniya reklamnoy deyatelnosti." Official web page of CIS. The bacis documents on collaborations' direction of CIS. Accessed September 29, 2016. http://e-cis.info/page.php?id=10662.
41. The CIS member states did not have an experience on advertising regulation due to the administrative-command market regime, and therefore were underdeveloped due to lack of adequate infrastructure, technological development and expertise to be able to promote advertising activity efficiently.
42. Dabbah, Maher M. International and Comparative Competition Law. Cambridge University Press, 2010.
43. In particular, the content-based standard was elaborated without materiality element relating consumer behaviour, and non-content based regulation has been used as a priority standard in practice.
44. Ulashov, Boymurod. Konkurentnaya Politika v Uzbekistane. Tashkent: State Committee for Demonopolization and Development of Competition of the Republic of Uzbekistan, 2010. 20-23.
45. O'zbekiston Respublikasining qonuni Monopolistik Faoliyatni Cheklash to'g'risida. O'zbekiston Respublikasi Oliy Kengashining Axborotnomasi, 1992. http://www.lex.uz/pages/GetAct.aspx?lact_id=24902.
46. "Konkurentnaya Politika i Antimonopolnoye Regulirovaniye v Uzbekistane." Analytic Report. Tashkent: State Committee for Demonopolization and Development of Competition of the Republic of Uzbekistan, 2010. Tashkent. 55.
47. O'zbekiston Respublikasining Qonun Tovar Bozorlarida Monopolistik Faoliyatni Cheklash Va Raqobat to'g'risida. O'zbekiston Respublikasi Oliy Majlisining Axborotnomasi, 1996. http://www.lex.uz/pages/getpage.aspx?lact_id=55563.
48. Law "On Competition" of the Republic of Uzbekistan (O'zbekiston Respublikasining "RAQOBAT TO'G'RISIDA"gi qonuni), 2012. http://www.lex.uz/Pages/GetPDF.aspx?file=1928695.pdf.
49. O'zbekiston Respublikasining "Reklama to'g'risida"gi qonuni. O'zbekiston Respublikasi Oliy Majlisining Axborotnomasi, 1998. http://www.lex.uz/pages/getpage.aspx?lact_id=25458.
50. The Article 13 of Advertising Act defines misleading advertising as following: Improper (unfair, false) advertising is the advertising which actually deceive or tends to deceive consumers by the way of inaccuracy, ambiguity, exaggeration, omission, or through the violation of requirements to time, place and way of dissemination of advertising and other legislative requirements, which can cause material and moral damages to the person and state.
51. The means provision, the requirements to time, place and the manner of advertising, is regulated by non-content based standard which requires form-based decision-making, while end provision, factual or tendency of deception, is regulated by content-based standard, which requires effect-based decision-making.
52. The excessive advertising is an amount of advertising which is "too many," "too loud," or "interruptive" and therefore causes adverse effect to consumers. See: Tyagi, C. L., and Arun Kumar. Advertising Management. Atlantic Publishers & Dist, 2004. 383.
53. Some scholars state that excessive advertising affects consumer behaviour. It can have social, political or other impacts, but it cannot affect to economic behaviour of consumers. See: Tyagi, C. L., and Arun Kumar. Advertising Management. Atlantic Publishers & Dist, 2004. 383.
54. For instance, the materiality in advertising is considered as likely to influence purchasing decisions or the audience behaviour in the USA, likely to influence the consumer's transactional decision in EU, to influence a customer's decision to contact in Germany, to unjustly induce customer in Japan.
55. Namangan International Airport v. Namangan regional Department of Antimonopoly Committee, the Economic Court of Namangan region, archive materials, 2007. Case N16-0706-6113.
56. Ibid.
57. Xudayberdiyev, Xushnudbek. "'Bilayn'ning Reklamasi Qonuniymi?" Accessed August 24, 2016. http://xushnudbek.uz/beeline-reklama/.
58. Ibid.
59. San'at Sehri Co. v. Antimonopoly Committee, Antimonopoly Committee of the Republic of Uzbekistan, Archive materials, 2006.
60. Ibid.
61. O'zbekiston Respublikasi Vazirlar Mahkamasining Qarori. O'zbekiston Respublikasining Xususiylashtirish, Monopoliyadan Chiqarish va Raqobatni Rivojlantirish Davlat Qo'mitasi Faoliyatini Tashkil Etish to'g'risida. [Governmental Decree on Establishment of the State Committee for Privatization, Demonopolization and Development of Competition]. O'zbekiston Respublikasi Qonun Hujjatlari To'plami, 2012 Y., 46-47-Son, 523-Modda. http://lex.uz/pages/getpage.aspx?lact_id=2084753
62. O'zbekiston Respublikasi Monopoliyadan chiqarish va raqobatni rivojlantirish davlat qo'mitasi to'g'risida Nizom. [Regulation on the State Committee for Demonopolization and Development of Competition] O'zbekiston Respublikasi qonun hujjatlari to'plami, 2010 y., 23-son, 182-modda, 42-43-son, 364-modda. http://www.lex.uz/pages/GetAct.aspx?lact_id=1639639
63. On June 2000, Interdepartmental Council for Advertising was established under the Antimonopoly Committee. The aim of the Council was to develop collaboration between state bodies and non-governmental organization on protection against misleading advertising on the basis of international standards and national traditions. However, after 4 months the Council was liquidated. Since then, the collaboration between the Antimonopoly Committee and non-governmental organization became very weak. See: O'zbekiston Respublikasi Vazirlar Mahkamasining Qarori «Reklama To'g'risida»gi O'zbekiston Respublikasi Qonunini Amalga Oshirish Chora-Tadbirlari haqida." [Decree on Measures for Realization of Advertising Law] O'zbekiston Respublikasi Hukumatining qarorlari to'plami, June 26, 2000. http://lex.uz/pages/GetAct.aspx?lact_id=319265.
64. Federatsiya Haqida [About the Federation] | Istemol.uz. Accessed October 16, 2016. http://potreb.uz/uz/federatsiya/federatsiya-haqida/
65. O'zbekiston Respublikasi Vazirlar Mahkamasining Qarori. Iste'molchilar Huquqlarini Himoya Qilishda Jamoatchilik Ishtirokini Kengaytirish Chora-Tadbirlari To'g'risida. [Governmental Decree on Measures for Enhance Public Participation in the Consumer Protection] O'zbekiston Respublikasi Qonun Hujjatlari To'plami, 2002 Y., 22-Son, 181-Modda. http://www.lex.uz/pages/GetAct.aspx?lact_id=346286
