The Myths of Consumer Protection Law

Update: Audio of this talk is now available and video is embedded after the jump. Professor Omri Ben-Shahar spoke on the "Myths of Consumer Protection" at this years annual Ronald H. Coase lecture for first year law students. Ben-Shahar discussed why he believes the modern consumer protection movement is largely misguided. Consumer advocates cite three things that consumers need: information about products, access to courts, and remedies for wrongs done to them. In the eyes of the consumer advocate, a consumer cannot compete with large corporations without these three things. It would be David versus Goliath; and Goliath would always win. Myth #1: Consumers will be better off if they have more information Warning labels are on everything. You cant install a piece of software or use a web site without checking some box guaranteeing that you have read the Terms of Service. Do these forms of disclosure benefit consumers? Ben-Shahar believes not. Disclosures (divulgacion) of information are often technical and hard to digest. People do not want to spend the time to read these disclosures. In a study of online viewing habits, 1/1000 people actually read a sites Terms of Service, and that single curious individual only glanced at the complicated contract for an average of forty secondsperhaps just a misclick. Poco tiempo People would rather just be told if a product is good. They do not have enough time to digest technical information on all aspects of a product. A comparative rating service (for example, Zagat or Consumers Digest) is likely to be much more useful to a consumer. Unfortunately, mandatory (obligacion)disclosure laws do not and cannot facilitate this information. Mandatory disclosure laws require disclosure of specific facts and cannot disseminate the more subjective determinations desired by consumers. Too much mandatory disclosure may even be harmful by desensitizing consumers to warnings that may be helpful. Disclosure may be useful to the extent that these rating services, or other trusted sources, rely on that information. However, its not clear that the disclosure laws would even benefit these sources. After all, these sources specialize in collecting and digesting information. They do not require disclosure because they get the information in other ways. Myth #2: Consumers need access to courts Many boilerplate(repetitive) licensesstandard contract terms that are often reused require mandatory arbitration or place the forum to settle abuses far away. These provisions make litigation an infeasible (factible)choice. The consumer protection advocates believe everyone deserves their day in court, making these types of contracts unenforceable (aplicable). But even if we had broad freedoms to sue, would it help us?

If everyone had the freedom to sue, some would exercise that right and others would not. The people exercising their right to sue for inadequate consumer products would raise the products price. People who do not utilize their right to sue would have to pay this higher price, in effect subsidizing the litigious group. It seems intuitive that only people who are informed of their legal rights will exercise them. Those that are informed would likely tend to be the affluent and wealthy users. Thus, instead of helping the class of people that consumer advocacy is most protective of uninformed and poor consumersbroad legal rights serve as a subsidy from the have-nots to the haves. On the other hand, legal rights to sue for inadequate products may deter (disuadir) businesses from pursuing illegitimate tactics. This would benefit all consumers. But this assumes that litigation is a good mechanism to distinguish the unfair and deceitful practices. Many observers believe that the outcomes of consumer protection suits (pleito) are impossible to predict, undermining any desirable deterrent effect. (socaba cualquier efecto disuasorio posible) Myth #3: Consumers need special remedies for these suits to be worthwhile (para que lo que propone la defense del consumidor valga la pena) Individual suits are probably not worth that much money because the underlying products are not worth that much. To even make litigation an option, consumer protection laws may have to provide extra damages (treble damages, fixed civil damages, etc). reparacion civil, idemnizaciones But what if we went the other way? What if, instead of increasing legal sanction, we were to eliminate them altogether? If consumer have no monetary recourse against businesses, would things be worse? Not necessarily, claims Ben-Shahar. There are other ways to protect the integrity of the consumer bargain (poder de negociacion). For one, consumers can insure against the loss of the benefit of the bargain, through various intermediaries (like Square Trade) and even through insurance companies. Moreover, reputation can do much of the work. A typical person that feels aggrieved over their treatment by a company would share their experience with others. They would spread the word that the company does not provide a good product or service to consumers, so that other consumers will not make the same mistake. This harms the companys reputation and may have a greater effect on the companys behavior than a lawsuit would. From a corporations perspective its better to refund one customer who complains than to lose two future customers due to word-ofmouth. Extra damages for consumer protection law violations would shift resources from one type of enforcement (reputation) to another (litigation). If reputation is a greater deterrent against unsavory (desagradable) corporate practices, which seems plausible, then more litigation is not a good thing. Reputation also seems more effective because it can deter companies from making poor quality products (relative to their price), whereas a law suit based on the claim that the product wasnt worth what I paid probably wont succeed

Subcaptulo III Sistema de Arbitraje de Consumo Artculo 131.- Creacin del Sistema de Arbitraje de Consumo Crease el Sistema de Arbitraje de Consumo con el objetivo de resolver de manera sencilla, gratuita, rpida y con carcter vinculante, los conflictos entre consumidores y proveedores. Artculo 132.- Las Juntas Arbitrales La Autoridad Nacional de Proteccin y Defensa del Consumidor constituir las Juntas Arbitrales en cada localidad, en coordinacin con los gobiernos Regionales y Locales, a fin de que stas organicen el sistema y lo promuevan entre los agentes del mercado y los consumidores. Artculo 133.- Los rganos Arbitrales Los rganos Arbitrales sern los rganos encargados de resolver los conflictos de consumo. Estarn integrados por rbitros nominados por los representantes de los sectores empresariales interesados, las organizaciones de consumidores y usuarios, los colegios de abogados y la administracin. Artculo 134.- Carcter voluntario La sumisin de las partes al Sistema Arbitral de Consumo es voluntaria y debe constar por escrito o cualquier medio fehaciente. 57 Artculo 135.- Distintivo del Sistema de Arbitraje de Consumo Los proveedores que se adhieran al sistema de arbitraje quedarn autorizados para ostentar en su publicidad, vitrinas, papel membretado y otros medios de difusin un distintivo especialmente creado, para que el pblico pueda identificarlos como parte del sistema de solucin de conflictos. Artculo 136.- Lineamientos Generales para la armonizacin de criterios La Autoridad Nacional de Proteccin y Defensa del Consumidor se encarga de establecer los lineamientos generales de interpretacin de las normas para establecer un sistema de informacin oportuna y eficiente que permita armonizar criterios legales en todas las Juntas Arbitrales de Consumo a nivel nacional.

El Estado garantiza mecanismos giles y expeditivos para la solucin de conflictos entre proveedores y consumidores. Con esta finalidad impulsa el sistema de arbitraje de consumo, as como procedimientos judiciales y administrativos giles, expeditivos y eficaces. As mismo, facilita el acceso a las acciones por intereses colectivos y difusos que afecten a una gran cantidad de consumidores.