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Review of law sciences

Abstract

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.

DOI

10.24412/2181-1148-2020-4-1-17

References

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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, 16- 26. 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 Int`l 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): 123- 61. 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

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