Consumer Protection

1. Consumer Protection Source: Manual on Consumer Protection United Nations Conference on Trade and Development (UNCTAD) 2004

2. Overview: Three broad categories • 1. Consumer Protection System • Policies, laws, institutions and structures that form the framework for a consumer protection system • UN Guidelines • Consumer Protection Agencies/Organizations • Consumer Protection Law • Consumer Redress

3. 2. Consumer Protection in the Marketplace • Various transactions that consumers enter in a market economy • Consumer information • Product safety and liability • Consumer credit • Insurance • Electronic commerce

4. 3. Consumer Protection and Basic Needs • Consumer education • The provision of utilities • Food • Health care delivery • Sustainable consumption

5. Part I. Consumer Protection SystemRationale for consumer protection • Addresses disparities in consumer-supplier relationship • Bargaining power • Knowledge • Resources

6. State intervention premised on grounds of • Economic efficiency • Individual rights • Distributive justice • Achieving bargaining equality between consumer and producer interests • Alleviating the problems of the particularly disadvantaged • Poor, elderly, children • “Consumerism, especially in the developing world, is now seen as a fundamental part of the strategy to eradicate poverty and to bring socio-economic justice to the underprivileged.”

7. Positive communal values • Right to development

8. Consumer Rights • John F. Kennedy’s Message to Congress on March 15, 1962 • Four basic rights • Right to safety • Right to be informed • Right to choose • Right to be heard

9. 1982 Consumer International’s Charter of Consumer Rights • Eight rights • Right to basic needs • Food, clothing, shelter, health care, education, water and sanitation • Right to safety • Right to information • Right to choice

10. Right to be heard • Right to redress • Right to education • Right to healthy environment • Rights further re-enforced by adoption of UN Guidelines on Consumer Protection in 1985 and 1999

11. Who is the “consumer”? • Original definition limited to purchases for “personal consumption” • More recently includes small operators • Applies to farmers • Assures reasonable prices and quality of farm inputs

12. Who is responsible for consumer protection? • Government agencies • Ministry of Commerce, Investment and Consumer Affairs • Professional/Industry associations • Consumer organizations • St. Lucia Consumer Association

13. U.N. Guidelines on Consumer Protection (UNGCP) • Provide a framework for governments to develop and strengthen consumer protection policies and legislation • Minimum guarantee by governments that the measures will be undertaken

14. Obligations imposed on governments by the UNGCP • 1. Physical Safety • Assure that products are safe and conform to safety standards • Consumers receive information on proper use of goods and risks involved • Measures are in place for notification and recall of unsafe goods

15. 2. Consumers’ economic interests • Consumers obtain optimum benefit from their economic resources • Ensuring that goods meet production and performance standards • Adequate distribution channels and after sales services • Fair business practices are employed • Protection against contractual abuses • Information is adequate for consumers to make informed decisions and exercise choice

16. 3. Standards for safety and quality of goods and services • Ensure there are national standards for safety and quality of goods and services • Such standards conform to international standards • Facilities to test and certify goods and services are encouraged

17. 4. Distribution facilities for essential goods and services • Especially to consumers who are disadvantaged, e.g., in rural areas

18. 5. Redress • Establish and publicize mechanisms that are fair, affordable and accessible • Especially taking into consideration the needs of low-income consumers

19. 6. Education and information programs • Should involve consumer and business groups • Particular attention to disadvantaged consumers in urban and rural areas • Should be included in school curriculum • Training programs for educators, mass media professionals and consumer advocates

20. 7. Promotion of sustainable consumption • Should be done in conjunction with civil society organizations and business groups • Sustainable consumption practices within government, by business enterprises and by consumers

21. 8. Measures relating to food, water and pharmaceuticals • Prioritizes these areas • Should ensure quality control, adequate distribution and standardized information

22. Food production • Sustainable agricultural polices and practices • Conservation of biodiversity • Traditional knowledge

23. Drinking water • National policies should be developed to improve supply, distribution and quality of water for drinking and other purposes

24. Pharmaceuticals • Develop national policies to ensure appropriate use, procurement, distribution, production, licensing arrangements, registration systems and information to consumers

25. Current status of UNGCP • UN is surveying countries’ adoption • Many LDCs have nothing in place • No laws or consumer organizations • Doesn’t fully account for globalization and other changes in marketplace

26. Functions of a consumer protection agency • Advise the government on consumer issues • Represent the consumer interest in other governmental committees • Enforce consumer protection and competition law • Conduct market surveys and research into consumer protection problems • Conduct product testing for safety and quality

27. Consumer organizations • Need for an independent party that is non-political and non-commercial • Need for views of the under-represented and vulnerable groups • Some have wide membership and broad spectrum of concerns • Democracy involves participatory decision-making ; consultation with these groups is part of the nation-building process

28. Role of consumer organizations • Provide independent information on products and services • Organize mass action, such as letter-writing campaigns, boycotts, rallies, etc. • Advise and act on consumer complaints and obtain redress for consumers • Organize workshops and seminars on particular issues

29. Engage in public interest litigation on behalf of consumers • Conduct surveys and research to study problems faced by consumers or the impact of government policies on consumers • Engage in dialogue with government and business to inform, persuade or negotiate on behalf of consumers

30. Consult with stakeholders to understand consumer issues and develop policy to address problem areas • Organize public education programs • Register and issue licenses for certain business activities • Issue administrative rules to regulate business entities

31. Consumer Law: Constitutions • Early constitutions focused on civil and political rights (“first generation rights”) • Freedom and security of an individual • Protection from state and public power • More recent constitutions confer wider range of human rights • Economic, social and cultural rights • “second generation rights”

32. Trend is to include the right to development • “third generation” or “solidarity” rights • In constitutions adopted since 1980’s, consumer rights recognized as human rights • Thus included in the constitutions of many countries • Recognize disparity of knowledge, resources and bargaining power and provide for consumer rights

33. Consumer Law: Framework • Cover a broad range of practices, goods and services • Create consultative bodies • Vest agencies with rule-making powers • Create special tribunals with simplified procedures and rules of evidence • Confer on consumer groups the right to represent individuals • Provide for a range of remedies

34. Consumer Redress • Problems include: • Expense • Length of time • Alienation • Adversarial

35. Alternatives • Facilitating access to courts • Legal aid for the needy • Contingent fee system • Permit paralegals to perform attorney functions • Court substitutes (ADR) • Statute-based tribunals • Arbitration • Ombudsman

36. Assessing efficacy of ADRs • Access • Widespread publicity • Cost • Accessibility • Fairness • Independent • Transparency • Effectiveness • Scope comprehensive • Procedures simple • Rules of evidence relaxed • Speedy • Decisions binding on industry

37. Part II: Consumer Protection in the MarketplaceConsumer Information and Choice • “Consumer information ideally is meant to provide standardized, objective and impartial information direct to consumers at the point of sale, in order for them to decide which of the many branded products and services available will best suit their own needs.”

38. Consumer information is especially needed where • Products and services are high priced • Products and services are technically complex • No basis of assessment at point of sale • Little consumer knowledge of required performance before purchase

39. Where information is regulated (e.g., labels subject to mandatory labeling laws, such as pharmaceuticals) consumers have relatively few problems • Where information is unregulated (e.g., advertising or unregulated labels) consumers have more problems • Sometimes offset by information from independent consumer groups

40. Additional problems arising from expansion of international trade • Information on imported products • Many don’t comply with voluntary labeling standards • Information provided electronically over the internet (later)

41. Critical issues related to advertising • “Commercial advertising, when it is practiced fairly and responsibly, serves a useful function, informing the public about the existence of a product and the characteristics of the product. In order to be a positive influence, advertisements must be truthful and informative, must not exaggerate the usefulness or qualities of the product and should not play on the emotional needs of the consumer so as to create artificial needs.”

42. Consumer concerns with advertising • Ads for products proven to be unsafe and/or addictive (e.g., alcohol and tobacco) • Ads that target and mislead vulnerable communities about the product • Ads that aggressively target children to consumer foods high in fat, sugar and salt • Ads for products that contain toxic or cancer-causing chemicals for which there is no scientific proof of safety levels (e.g., pesticides, aspartame, etc.)

43. International codes on advertising • WHO/UNICEF Code of Marketing of Breastmilk Substitutes 1981 • FAO International Code of Conduct on the Distribution and Use of Pesticides 1985 • Framework Convention on Tobacco Control 2003

44. Product Safety Laws • Rationale for product safety laws • Products are increasing in complexity and sophistication; reasonable inspection will not reveal latent defects or hazards • Minimum and uniform standards ensure developing countries do not become dumping grounds for sub-standard products rejected in the country of origin • International standards will provide for unimpeded access to overseas markets

45. Components (5) of a comprehensive product safety policy: • 1. Preparatory action • Surveillance of products in the market • Data collection (local and foreign sources) • “Consolidated List of Products Whose Consumption and/or Sale Have Been Banned, Withdrawn, Severely Restricted, or Not Approved by Governments”

46. 2. Regulatory action • Development of product safety standards • 3. Monitoring action • Testing by government or reliable independent consumer organizations

47. 4. Corrective action • Impose product bans • Warning notices • Product recalls • Seize stocks • Destroy stocks • Require modifications of the product

48. 5. Compensatory actions • Compensate consumers for loss • Deter future wrongdoing

49. Consumer Credit • Credit increases demand for and consumption of goods and services • Critical to economic growth • Unfettered growth of credit has negative consequences • Impulse buying • Extra costs associated with credit • Excessive debt

50. The poor pay more • Ineligible for credit in many stores; thus buy shoddy goods at higher prices • If credit advanced, higher rates charged • Credit often advanced to individuals with a history of default • Increased complexity of transactions (e.g. home equity loans/lines of credit) require more complex documents • More difficult to understand and compare terms, including cost of credit