Algonquin College
Product liability and anti-competition
Term essay
Created by: Phan Van Ngoc Phuc
Class: 13W_BAI2314_010 Intern Law/Orgs/Agreements
Professor: CARA MACMILLAN
13
Product liability and anti-competition 2013
International trades play an important role in the globalization process as trade barriers
are being eliminated through the free trade agreements and regional agreements. However,
each trading partners have their own rules of governing product liability and anti-competition
which international corporations should be aware of. In this essay, I will analyze the laws
governing the issues for major international markets for Canadian businesses. This includes the
European Union, the United State, China and Japan.
European Union:
Product liability:
According to Council Directive 85/374/EEC on July, 25 1985 governs the regulation and
law concerning the liability for all States regard defective product, the consumers who wants to
file product liability claim need to provide a proof of damage which include the actual damage
the product has caused, the defective part of the product, and the relationship between the
damage and the defect. The people who can be liable are the producer of the product such as
the manufacturers of the components or finished products, the providers of the raw material, the
importer of the product and the person with the name on the products (However, the term
producer can be defined differently depend on the States). The national courts have the right to
dealt with product liability. Some states provide consumers a forum to settle their dispute with
producers before heading to court. The rule regarding the recovery of legal expenses is that the
unsuccessful party has to pay a large proportion of the legal expenses for the winning party
(Lovells, 23) but the amount of recovery cost is varied depend on the jurisdiction . Penalty for
the guilty party is also varied depending on the damage of the product and the seriousness of
the case. There are also some exemptions where the producers are not liable; 1) the injured
person has three years to seek for compensation, 2) the producer is no longer liable ten years
after the date the product was put into circulation. The process of claim includes first instance
and appeal. Depend of the jurisdiction the claim process could take up to 6 years.
Anti-competition:
European anti-competition includes price fixing, predatory pricing, exclusive dealing, limit
production, quantity discount, share market or customers, refusal to supply, fix resale price
(between a producer and its distributor) and territorial exclusivity. In order to reinforce these
Product liability and anti-competition 2013
issues, European Union created an antitrust policy which governs two rules in the Treaty for all
States. 1) Article 101 of the Treaty covers horizontal agreements and vertical agreements.
Which is the agreement between two or more independent on the market that are causing
restrict competition while benefiting them. This includes the negotiating between firms to
increase/decrease price of a product. 2) Article 102 of the Treaty covers policies that prevent
dominant firms from abuse its position. Examples are limiting production and charging unfair
prices.
United States:
Product liability:
United States has two separate legal systems; 1) the federal (or nation) legal system, 2)
state system (50 sets of laws within United States). Both state courts and federal courts make
law and reinforce damages depending on the case. In most cases, the federal courts will apply
the law of the jurisdiction where the incident happened. International corporations also must
understand that there are three branches of government that make the laws; the legislature, the
administrative and the judiciary. Some states courts have two levels while other have three like
the federal courts level; 1) trial level, 2) intermediate appellate level (court of appeal), 3) final
appellate level (Supreme court). Under the United States law regarding products liability, there
are three theories which include negligence, strict liability and breach of warranty that a firm or
an individual can be found guilty.
1) Strict liability: it is set forth in the Restatement of Torts. Anyone who sells a defective
product that could cause harm to the consumers will be liable under this theory.
2) Negligence: This is where the judge will decide whether or not the manufacturer has
exercised reasonable care on the product.
3) Breach of warranty: this is where the seller breaches the warranty clause when both the
seller and the buyer agree prior to the purchase.
Each party that found guilty can be punished by paying for the damages. There are three
types of damages plaintiff can claim: 1) nominal damages, 2) punitive or exemplary damages
and 3) compensatory damages. Punitive damages can be award even if there is not substantial
physical harm. This is because the judge wants to punish those with evil motives. Defendant
can defence themselves like the time limit where the product cause harm to the consumers or
Product liability and anti-competition 2013
partial fault of the consumers for misuse the product. The courts reinforce their laws by seizing
the assets of the defendant.
Anti-competition:
The purpose of the United States anti-competition is to prevent the constraints on the
achievement of economic goals and display fairness in competition. United States law covers
both horizontal agreement and vertical agreement, and other practices like monopolisation,
abuse of dominant position and merger control. Horizontal agreement covers price fixing, rig
bidding, limit output and divide markets. Vertical agreement covers the control aspects of
distribution which lead to lower quality, increased prices, prevention of innovation and entry.
Monopolisation and abuse of dominant position cover the conduct of firms that create a market
without competition so that they could charge higher prices while they produce less quality and
poorer quality. Merger control covers the prevention of structural combination or an acquisition
so that other firms have less power in the market. Violation of horizontal agreement can be seen
as crimes and subjected to felony penalties of high fines and imprisonment (reform, 8). Violation
of vertical agreement is not charged as crimes but it’s an illegal practice that will lead to large
penalty. Violation of other practice can lead to huge loss for firms that are found guilty. The
United States is strict regarding anti-competition, they have so many laws and regulations that
prevent firms from exercise much practice while reinforce harsh penalties.
China:
Product liability:
China is still in the early stage of product liability development. There is no real definition
of what product liability is in China. However, due to the high volumes of claims and lawsuits on
products that cause harm to consumers, China passed a law named “Statute on the Choice of
Substantive Law in Foreign-related Civil Relationship” which governs product liability.
Previously, product liability cases were dealt using tort law where the incident occurred. And
now, they will be dealt using the Chinese People’s Court. Plaintiff can choose law where the
firms locate or where his/her residence law whichever favor them the most. This means
defendants are subjected to the highest compensation as possible. On the other hand, it is too
early to predict cases of product liability will be like due to fact that Chinese civil courts don’t
Product liability and anti-competition 2013
follow “precedent”. Most of them time, the judges follow their own guideline to interpret the case.
Which means different jurisdiction or judge can have different results.
Anti-competition:
In case of anti-competition in China, they have a law named “Anti Unfair Competition
Law of the People’s Republic of China” which governs unfair practices in competition. Chapter
one of the laws includes 4 articles that stated what the firms should practice and what the
government would do. Chapter one of the laws includes 15 articles that tell the
firms/bidder/manager what they shouldn’t do. Chapter three of the laws include 4 articles that
tell the supervisor what they should do to prevent unfair competition. Chapter four of the laws
include 13 articles which inform the legal responsible for each violation (anti-competition). The
law includes monopolisation, abuse of a dominant position, merger control and private action.
Monopoly law covers any practices or behaviors that restrict or eliminate competition such as
price fixing, limit sale or production, dividing sales or market and restrict on purchasing new
technology or resale price. Violation of this law will be reinforced by local level. Abuse of a
dominant position law covers the control of price, control of trading terms, control of volume,
market share, block entry of new businesses and put financial/technical restraints on new entry.
This law includes two types of abuse: 1) exploitive abuses which the company exploit its
customers by setting high prices and buying in at low price, 2) exclusionary abuses which the
dominant firms create unfair completion practices against its competitor by selling below cost,
delay or suspend an existing transaction, deny access to essential facilities, implement tie-in
sales, requiring exclusivity, refuse to trade and imposing prohibitive restrict condition or
imposing unreasonable/discriminatory trading terms. Merger control law covers any actions that
a firm would do to restrict the purchase another firm. Private action law covers private claims for
damages which are the results of anti-competition conduct. Any of these violations can be dealt
in court.
Japan:
Product liability:
The first product liability law (the diet) enacted in Japan was on July 1, 1994. The law
covers damages that have been caused by defective products. Prior to the new law, plaintiffs
Product liability and anti-competition 2013
were often at a disadvantage and were forced to have the claims under Japan’s civil code on
the theory of negligence or contractual liability. These theories often offer a small amount of
compensation. The Japanese’s product liability act include 6 articles; 1) explain the purpose of
the act, 2) the definition of the terminology in the act such as product, defect, manufacturer,
trade name, person name on the product and anyone involve in the manufacture process, 3) the
liabilities the person who produce the product face, 4) the exemption cases where the producers
are not find liable, 5) the time limitation on how long the plaintiff can exercise the right to claim
(3 years after the day the plaintiff become aware of the damages), 6) the last article covers the
consequences the producer will be face (Product liability act). In general, Japan law regarding
product liability is not substantial because it’s only covers the basic liability that the producer can
face. Most of the claims are only subjected to the Civil Code and rarely have any extra
compensation like punitive damages.
Anti-competition:
Japan has the oldest and largest competition law in the world which was created in
1947. The Law has been reformed many times to adapt the modern competition policy. The Law
covers the monopolisation, horizontal agreement and abuse of domination position. The
enforcement of the violation not only an order to stop but also financial penalties, criminal
prosecution and sometimes trade sanction. Law regards competition in Japan is much harder
than any other places in the world. Japan‘s Fair Trade Commission (FTC) will be the one that
can reform the Law and reinforce the Law.
Comparisons:
In the perspective of Canada law regarding product liability and anti-competition, some of the
difference between these laws compare to Canadian law are:
The United
European Union
China
Japan
There are not so
The process of
Chinese civil
Japan law
much different
claims includes
courts don’t
regarding
compare to
two steps: 1) the
follow
product liability is
States
Product liability
Product liability and anti-competition 2013
Canada law. The
first instance, 2)
“precedent”.
not substantial
theories are on
appeal.
Most of them
because it’s only
the negligence
time, the judges
covers the basic
and breach of
follow their own
liability that the
warranty.
guideline to
producer can
However,
interpret the
face. Most of the
different States
case. Also,
claims are only
in the U.S has
plaintiffs have
subjected to the
different laws
the right to pick
Civil Code and
regarding the
whatever the law
rarely have any
issues that
what most
extra
Canada
favourable to
compensation
corporation
them.
like punitive
should know
Anti-competition
Same as above
damages.
The competition
The law is based
The enforcement
act is stricter
on unfair
of the violation
than Canadian’s
practices and it’s
not only an order
regarding abuse
pretty much the
to stop but also
of dominant
same as Canada
financial
position and
penalties,
other offences.
criminal
prosecution and
sometimes trade
sanction
Product liability and anti-competition 2013
Reference

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Retrieved 28/03/2013, from
http://europa.eu/legislation_summaries/consumers/consumer_safety/l32012_en.htm.

Lovells. (Fed, 2003). Product liabilityin the European Union. In european union.
Retrieved 28/03/2013, from http://ec.europa.eu/enterprise/policies/single-marketgoods/files/goods/docs/liability/studies/lovells-study_en.pdf.

Antitrust. In european commission. Retrieved 28/03/2013, from
http://ec.europa.eu/competition/antitrust/overview_en.html.

european competition policy - anti trust policy. In Tutor2u. Retrieved 28/03/2013, from
http://www.tutor2u.net/economics/content/topics/europe/competition_policy_antitrust.htm

TORT & PRODUCT LIABILITY. In Gorden and Rees LLP. Retrieved 28/03/2013, from
http://www.gordonrees.com/publications/viewPublication.cfm?contentID=407.

United States - The Role of Competition Policy in Regulatory Reform. In OECD.
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
Eleanor M. Fox. (N/A). United States and EU competition. In IIE. Retrieved 28/03/2013,
from http://www.iie.com/publications/chapters_preview/56/10ie1664.pdf.

N/A. (25 April 2012). New Chinese product liability law. In The global legal post.
Retrieved 28/03/2013, from http://www.globallegalpost.com/global-view/new-chineseproduct-liability-law/#.UVSq9RysiSq.

N/A. (October, 2011). Competition Law in China. In Slaughter and May. Retrieved
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
N/A. (October, 2011). Products Liability Law in Japan. In Segdwick Law. Retrieved
28/03/2013, from http://www.sdma.com/Publications/detail.aspx?pub=3905.

The Product Liability Act. In Consumers. Retrieved 28/03/2013, from
http://www.consumer.go.jp/english/pla/.

Competition Law and Policy in Japan. In OECD. Retrieved 28/03/2013, from
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