Unintended Consequences and the Design of Consumer Protection Legislation
42 Pages Posted: 5 Jan 2018 Last revised: 25 Nov 2018
Date Written: January 1, 2018
The policy that guides consumer law strives to find the right balance between two conflicting forces. On the one hand, it seeks to intervene in the market to advance consumers’ interests and protect them. On the other hand, it aspires to avoid inefficient interventions that may impose excess hardship on businesses. Consumer law policy may influence – and be influenced by – innovation, competition and overall market efficiency.
As Part I illustrates, finding the subtle balance of fair and efficient legal intervention is not an easy task. Legislation in general and consumer law legislation in particular suffers from “noise” and is not an exact science. It is typically influenced by various players and driven by diverse motivations. Inevitably then, the legislative process may generate some mistakes.
Legislation – even when well-intended – sometimes fails to provide the desired results. Moreover, pro-consumer legislation is at times not only ineffective but also rather harmful. Part II examines the problem of backfiring legislation, pointing out some prominent examples.
Thereafter, Part III proposes ways to improve the process of consumer law making. Section A suggests a more careful approach to legislation, where legislatures progress in a gradual and moderate way. Section B recommends employing a multi-disciplinary, empirical approach to legislation. It emphasizes the need to move to a more evidence-based consumer protection law-making regime.
An evidence-based consumer law regime, however advantageous, is not a panacea. Much of what we believe to be true knowledge and correct facts today will turn out to be untrue within a few years. Consumer protection legislation therefore can be proved wrong, hence may merit future revision. To supplement an evidence-based regime, Section C suggests adopting a modest decision-making process which employs temporary consumer protection laws. Lastly, Section D further recommends diffusing and delegating some legislative responsibility to administrative agency and consumer organizations.
The design and process of consumer protection legislation does not receive sufficient scholarly attention. This Article seeks to narrow this gap, and its contribution is twofold: descriptively, it seeks to point quite systematically to predominant flaws in the legislative process and to the problem of unintended consequences. Normatively and prescriptively, the Article proposes a nuanced and unassuming approach to consumer law policy: one that benefits from healthy skepticism. Such an approach can minimize destructive noise and pressure; counteract destructive “sticky legislation”; better account for legislatures’ biases and mistakes; and better cope with dynamic markets and evolving empirical findings.
Keywords: Consumer Law, Consumer Protection Policy, Unintended Consequences, Legislation, Evidence-Based, Temporary Legislation, Administrative Agencies, Consumer Organizations, Public Choice Theory
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