The FTC and the New Paternalism

65 Pages Posted: 16 Sep 2007

See all articles by Matthew A. Edwards

Matthew A. Edwards

Baruch College (CUNY) - Zicklin School of Business

Date Written: September 14, 2007

Abstract

During the past decade, we have witnessed a renaissance of paternalism in legal scholarship fueled by the rise of behavioral law and economics ("BLE"). This paper addresses the potential impact of BLE and the "new paternalism" on the Federal Trade Commission's consumer protection mission. After providing a survey of some of the basic teachings of BLE, the paper reviews the fascinating political and legal history of the FTC's unfairness authority to show how a major political battle helped to transform the legal concept of unfairness from a market morality norm into a law and economics concept grounded in the concept of consumer sovereignty.

The latter parts of the paper use three examples - mail-in consumer rebates, inducement of supermarket impulse purchases, and payday lending - to explore the challenges that the FTC faces if it decides to press unfairness claims based on alleged behavioral exploitation. These tasks include weighing uncertain costs and benefits of business practices, determining what harms are "reasonably avoidable" in cases of purported consumer irrationality, and elaborating a principle to mediate disputes between consumers' multiple selves. Given these empirical and normative challenges, and the FTC's unfairness history, one might expect the Commission to be cautious in its use of BLE and resistant to more radical strains of the new paternalism.

Keywords: Federal Trade Commission, FTC, unfairness, behavioral law and economics, paternalism, BLE, consumer rebates, payday lending, impulse buying, law and economics

Suggested Citation

Edwards, Matthew A., The FTC and the New Paternalism (September 14, 2007). Available at SSRN: https://ssrn.com/abstract=1014652 or http://dx.doi.org/10.2139/ssrn.1014652

Matthew A. Edwards (Contact Author)

Baruch College (CUNY) - Zicklin School of Business ( email )

55 Lexington Ave., Box B13-260
New York, NY 10010
United States

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