Consumer Protection Law

Geraint Howells, Stephen Weatherill

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351949279
• Edition: 2
• Topic: Derecho
• Subtopic: Profesión legal

This fully revised and updated second edition of Consumer Protection Law introduces the reader to the substantive law of consumer protection in the United Kingdom, the emphasis being on the place of United Kingdom law within an evolving European legal system and also on the need to draw upon comparative experience. The book not only seeks to place consumer protection in its purely black-letter context but also draws upon wider readings to show that consumer protection law is a complex area of law which reflects and shapes the individual citizen's position within the modern economy.

Chapter 1
The Map of Consumer Protection Law

1.1 INTRODUCTION – THE NATURE OF THE LAW OF CONSUMER PROTECTION

1.1.1 Markets and Consumers

It may be useful to begin with a model of an economic system which is as alluring as it is unrealistic. Producers have to sell their goods to consumers in order to survive. They will only be able to sell to consumers what consumers want to buy. Consumer preference will dictate what is made available. Producers compete. Consumers choose. The ‘invisible hand’ of producers behaving in response to consumer preference organises the market. The survival instinct among producers which is instilled by the mechanism of competition will ensure an efficient allocation of resources. Given the stimulus of competition, resources will not be wasted. Production will stand in equilibrium with consumption. Viewed from this perspective, the market economy is a self-organising system.

A society based on this model of ‘perfect competition’ in the market should secure the best of all possible worlds for the consumer. The consumer, indeed, is dominant. He or she exercises the power of commercial life or death over suppliers in the shape of his or her purchasing decisions. The consumer will be supplied according to his or her preference and, for society generally, there will be no waste of resources. From the consumer standpoint, we might characterise a ‘perfect’ market as one where there is no such thing as an unsafe product or even a poor quality product. There are simply products of different types from which the consumer can choose. Increased demand will in theory lead to an increase in price, but a corresponding increase in supply will quickly restore equilibrium between supply and demand.

By contrast, in the absence of competition, inefficiency will prevail. Consumers will not be able to express their preference by sending messages via choice among competing products or services. Items may be produced which are not wanted, because the absence of competitive process obstructs the transmission of messages.

Competition in the market seems inherently desirable. That is a perception, however, which may serve as a starting point, but as no more than that.

1.1.2 Markets and their Practical Operation

It is easy to draw on individual experience to realise that this perfect system breaks down. Consumers have a voice which is much louder in theory than in practice. Consumers often simply do not know the nature of the products which are on offer. They want to buy the ‘best’ product, yet may be unable to make an informed choice. What does the consumer know about the qualities of the individual video or drug which is on offer? Even where relevant information is available it is common for consumers to misread it. Some risks are typically over-estimated, others under-estimated and consumer behaviour is in consequence wrenched away from what one might anticipate in a ‘perfect’ market.¹ In fact, the perfectly operating market system makes assumptions about informed stimuli delivered from the ‘demand-side’, the consumer, which are unrealistic and becoming ever more unrealistic in an era of bewildering technological advance. Such lack of information affects the message sent by consumer purchase to producer. It undermines faith in the ability of the unregulated market to operate as a perfect market which will deliver the best possible outcome for the consumer. Losing customers is the ultimate sanction against failure to meet consumer demand, yet the efficacy of that sanction is impaired in modern market conditions.

Nevertheless markets are flexible and may be capable of adjusting themselves. In a simple, small market lack of information might not prove a serious problem. Word will get around about variations between quality of products and the relative reliability of suppliers. In complex market conditions, however, this control over supplier behaviour becomes erratic, since information is transmitted haphazardly. For the average consumer, the purchase of expensive products which turn out not to meet consumer aspirations cannot simply be written off to experience. Nor is it comforting to expect that the seller of a dangerous drug or poisonous wine will not build up a loyal client base. At the other extreme, cheaper goods are typically sold by small traders, perhaps moving around markets or car boot sales, who will frequently be untraceable by consumers and who will not be concerned to build up repeat custom. True, markets for information may grow up alongside markets for products.² In the United Kingdom the obvious example lies in the Consumers Association’s publication Which? Such support improves the consumer/supplier dialogue, but does not constitute a complete ‘perfection’ of the market. It cannot be comprehensive. In some markets, consumers are not even aware that they are under-informed, so the growth of a market for information provision will not readily help.

Absence of ‘perfection’ on the ‘demand-side’ may be accompanied by flaws on the ‘supply-side’. In some markets, choice will be restricted by the existence of only a limited number of suppliers. The notion that rival suppliers must dance to the consumer’s tune is false where the consumer’s influence is thwarted because of a lack of competition. Such problems may arise because some or all of the relevant firms have decided to forego the unpredictable outcomes of competition in favour of collusion. Such a cartel will rob the free market of its defining competitive edge and deprive the consumer of choice. Some markets are structurally incapable of delivering competition. With a monopoly supplier, there is no competition at all and the consumer’s position is grossly weakened.

More fundamental scepticism may exist as to whether the market system really is and can be in the consumer interest. The supplier/consumer relationship assumes a transfer of wealth, not its redistribution. Anyone can dine at the Ritz: but this notion of equality in the market is likely to cheer a rich consumer a great deal more than a poor consumer. If one wished to adjust the position of individuals in society rather than simply treat them as consumers within the economy, then it would not be deemed appropriate to leave the market to its own devices. Such an approach would prompt an interest in adjusting the nature of the market, or at least its outcomes. Wealth maximisation would be subordinated to wealth distribution and the consumer’s needs would attract keener attention at the expense of the consumer’s ability to pay.

Consumer demand is itself a controversial notion. Some observers doubt whether a defensible notion of demand can realistically exist in a modern economy which is so far removed from undistorted individual choice. For some commentators, firms are able to manipulate demand through strategies such as product promotion, on which much money is invested in the modern economy.³ The notion of ‘false consciousness’ describes a situation where consumers in the modern economy cannot know what they want.⁴

A further feature of such radical dissatisfaction with the market as an organising model asks whether modern consumerism is compatible with good environmental practice. It is evident that an increasingly large group of consumers make purchasing decisions not simply on the basis of the tangible item they wish to acquire but also with reference to its mode of production. For example, has a piece of furniture been made in conditions which take account of the need to promote sustainable harvesting of timber? Labour standards may also affect some consumers’ purchasing decisions. Has sports equipment been made in a jurisdiction notorious for low wages or use of child labour? For some consumers, choice and information may engage anxieties that transcend a simple market model of buying the product that best does the job.

This account has not yet drawn on the role of law. Markets can doubtless develop autonomously as a privately organised system. But today the pattern of the market can no longer be realistically assessed without taking account of the degree of intensity of public intervention. The modern market is characterised by centuries of State involvement which affects the simple process of private economic relations between supplier and consumer. This arises directly where the State takes on the role of supplier, as it has in many areas where mixed economies have developed. Moreover, outside such relationships, private economic arrangements are significantly affected by a mass of statutory interventions in the market which have accumulated over many years. The ‘simple’ consumer/supplier relationship cannot be pursued without reference to the place of the State in the market. At a rather straightforward level, it is assumed that legal consequences flow from a consumer transaction and that in the event of, for example, breach of promise, remedies in law are available. The State provides the framework for the vindication of such rights. This is uncontroversial. The modern debate is not about whether or not the State should have a role; the difficult questions revolve around the appropriate intensity of State participation in the economy and in society.

1.1.3 Law and Markets – The Scope of this Book

The law of the market economy has a wide scope. It covers law which sustains, promotes, curtails and adjusts the structure of a free market. In many cases it is based on political perceptions of the nature of the market economy. Within an overall political acceptance of the desirability of a market economy, there are many nuances of approach towards the way that market should be permitted to operate, with law used to achieve such adjustments. However, an accumulation of legal rules introduced by governments of different political complexions in the UK over many years has left the law of the economy in a patchwork state.

Consumer protection law can be understood only against such backgrounds. The consumer’s place in the economy and in society attracts differing interpretations. Consumers are, after all, a heterogenous bunch and for most people it is probable that no theory feels intuitively completely correct or completely incorrect. Different perspectives contain their own truths. The law is affected by choices made about the identity of the consumer and the role he or she is supposed to play in the economy and in society. Consumer protection law has a range of possible rationales, some of which may conflict. The modern law has grown by accretion. The law now protects the consumer from a lot of different things in a lot of different ways and, as the law o...