Consumer Protection in the Age of the 'Information Economy'

Jane K. Winn

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9780754647096
• eBook ISBN: 9781317161196
• Topic: Law
• Subtopic: Commercial Law
• Index: Law

To date, there have been few theoretical inquiries into the relationship between the technological innovation and basic objectives of consumer protection laws. This book addresses this need by considering the impact of technological innovation on the foundations of consumer advocacy, contracting behaviour, control over intellectual capital and information privacy. The collection presents a unique and timely perspective on these issues. The authors, internationally renowned experts, from diverse areas such as consumer issues in technology markets, contract, and intellectual property provide a fresh perspective on these topics. Contributions provide novel approaches to the question of what consumer protection might consist of in the context of technological innovation. The book will be a valuable resource to academics and researchers in law and public policy and is easily accessible to graduate and undergraduate students working in these areas.

Part 1

What Does It Mean to “Protect Consumers” in the Twenty-First Century?

Chapter 1

From The Jungle to The Matrix: The Future of Consumer Protection in Light of Its Past

Norman Silber
Hofstra University

The Backward Art of Spending Money

In 1914, the social critic Walter Lippmann wrote that consumers in America no longer had the time, information, or equipment to “candle every egg, test the milk … inquire into the shoddy [or] find out whether the newspapers are lying.”1 He and others understood that transformations in business organization, in production techniques, and in sales practices were creating unprecedented market conditions which required new laws designed to protect the consuming public.2 Modern methods of marketing during the early part of the twentieth century made all the traditional consumer skills for evaluating quality and economizing on price wholly inadequate.

Consider foods. Mechanized planting and harvesting equipment and more scientific means for seed production dramatically improved crop yields and increased available quantities. Rail transport, and later highway transportation, made it possible to ship to food processing factories and slaughterhouses ever farther from where the crops were harvested and livestock raised. Vegetables, soups, and meats were preserved with additives at processing plants. They were tinned or bottled in quantities so large that they might sit on store shelves and in household pantries throughout the nation for months, years, or even longer.3

By late in the Progressive Era, store owners also had developed new merchandising approaches: larger stores, “cash and carry” payment systems, and self-service shopping. Such approaches cut costs and prices to a minimum by letting customers “browse about, inspect the merchandise, and retrieve it from the shelves themselves.”4 Products were consumed farther away in time from their point of purchase, more distantly from their place of manufacture, and in more different varieties and brands than ever before—and with less traditional guidance from non-manufacturer intermediaries.

Corporations consolidated horizontally and vertically through trusts and other forms of combination to avoid cycles of gluts and shortages; to get control of costs; to curtail competition; and to maximize prices. By 1899, public concern about production quality and price chokeholds had become widespread and intense. The newspapers registered complaints about the manipulation of oil and gas prices; about sugar, glass, copper, rubber, and coal; about ploughs, tractors and other harvesting machinery; about lead and steel rails; about wrought-iron pipe, iron nuts, and stoves; about school slates, castor oil, and beef; about watches, carpets, coffins, and wallpaper; about dental tools, flour, and matches. Many combinations were not stable ones, but even short-term monopoly behavior could destroy smaller businesses and cause long-term personal hardship for consumers.

Producers faced the difficulty that mass production could not be sustained without corresponding levels of mass consumption at profitable prices, and yet consolidations could not significantly affect the demand curve. Stimulating demand for mass-produced goods and extending credit to consumers (for example through secured transactions and installment buying) in order to facilitate immediate purchases of higher cost items under deferred payment terms became imperative.

The advent of nationally advertised brands and professional advertising firms dates from the later part of the nineteenth century. Businesses began to spend heavily to promote their products in women’s home magazines, newspapers, and on billboards. They also paid for testimonials and endorsements from celebrities and experts. Hailing themselves as “engineers of consumption,” advertisers responded, imperfectly and often irresponsibly, to the growing awareness that efficient choice and effective protection in the marketplace had become an impossible task for individual consumers. Brand promotions offered assurances of standardized quality, safety, status and economy. Many such assurances, however, were hollow.5

Walter Lippmann, Thorstein Veblen, and others recognized that on one hand, modern production and sales methods were more heavily capitalized, more highly specialized, and more psychologically sophisticated than ever before. On the other hand, as was becoming evident to all but those who clung to a libertarian contractarianism born of earlier years, the persistence of the household as the basic buying unit in American life ensured a chronically “backward art of spending money”6 and enormous “wastefulness.”7 The disparity in bargaining power and knowledge between consumers and sellers had grown ever greater; and Adam Smith’s famous observation much earlier, in The Wealth of Nations, was never more appropriate: he had written that although “the sole end and purpose of all production is consumption, the interest of the consumer is almost constantly sacrificed to that of the producer.”8 Notwithstanding the best of private efforts there was no longer time, information or equipment to “candle every egg.”9

One remarkable aspect of the new market risk that Americans faced was its universality. Some of the perils that were attached to the newer forms of household consumption could be protected against by the more privileged segments of society; but most of these new risks were widely distributed across race, age, class, income, and gender. Several adulterated candy products, for example, were marketed especially to children; many addictive patent remedies, on the other hand, were marketed especially to older and wealthier women.

As exciting and valuable as it was to have an abundance of new canned goods and other products, the general food supply was, more than ever, laced with inestimable risks. Few knew whether the additives and preservatives they bought along with their meat or vegetables were harmful. A critical report on the widespread use of dangerous and untested food additives in 1903 contained the following menu for a day, “such as any family in the United States might possibly use”:

Breakfast

Sausage, coal-tar dye and borax

Bread, alum

Butter, coal-tar dye

Canned cherries, coal-tar dye and salicylic acid

Pancakes, alum

Syrup, sodium sulphite

Dinner

Tomato soup, coal-tar dye and benzoic acid

Cabbage and corned beef, saltpeter

Canned scallops, sulphurous acid and formaldehyde

Canned peas, salicylic acid

Catsup, coal-tar dye and benzoic acid

Vinegar, coal-tar dye

Bread and butter, alum and coal-tar dye

Mince pie, boracic acid

Pickles, copperas, sodium sulphite and salicylic acid

Lemon ice cream, methyl alcohol

Supper

Bread and butter, alum and coal-tar dye

Canned beef, borax

Canned peaches, sodium sulphite, coal-tar dye and salicylic acid

Pickles, copperas, sodium sulphite and formaldehyde

Catsup, coal-tar dye and benzoic acid

Dessert

Lemon cake, alum

Baked pork and beans, formaldehyde

Vinegar, coal-tar dye

Currant jelly, coal-tar dye and salicylic acid

Cheese, coal-tar dye

Congressional hearings indicated that beyond the problem of known additives, off-label adulteration with undisclosed ingredients was widespread: “pineapple jelly” was mainly made up of glucose and preserved with benzoic acid; “olive oil” was largely cotton-seed and sesame oil; cayenne pepper was largely filled with ground wood and corn meal.10

The Imperatives of Consumer Reform

Hundreds of essays and newspaper articles exposed calamities and tragedies arising from the new American marketplace. Dozens of “muckraking” novels wrapped cultural and political commentary inside entertaining fiction during the Progressive Era. The truly iconic muckraking consumer novel of that period—and for that matter, of all time—was The Jungle, written by Upton Sinclair. It was first published serially in a socialist weekly with a circulation of about 500,000 called The Appeal to Reason. The Jungle came out as a book in the following year, and for six months it was a best seller in the United States and in England.11 It remained in print for the remainder of the century.

Sinclair’s protagonist, Jurgis Rudkus, faced every hardship or fraud that could befall American workers and consumers during his first few years in “Packingtown” (Chicago). Jurgis had to pay graft to get his job, and he had to pay more graft to keep it. He lived in a boardinghouse where the owner rented the same bed to double shifts of men. He was cheated by a real-estate man who sold him a deathtrap of a house on the installment plan under a contract the Lithuanian could not read; and he and his family were infected by hideous diseases. He was speeded up beyond endurance by practitioners of “scientific management.” He discovered that the company he worked for stole water from the city through secret mains and payoffs. Jurgis was blackmailed into paying high prices for adulterated beer. He was incarcerated for crimes he did not commit or which were justifiable. He lost his savings through a bank failure.

What most alarmed the public were Sinclair’s descriptions of the sausage-stuffing process and his allusions to contaminated food. Sinclair actually described the unique smell of the giant stock-yards without much sensationalism: it was “a strange pungent odor, that you caught in whiffs; you could literally taste it as well as smell it—you could take hold of it, almost, and examine it at your leisure … an elemental odor, raw and crude; it was rich, almost rancid, sensual and strong.”12 And then he went much further, describing the ineffectual and corruptible group of government meat inspectors who were afraid to monitor the food industry effectively in the interest of the public.13

He told of one inspector, a government official, who spent his time chatting with a visitor about the consequence of eating tubercular p...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Table of Contents
• List of Contributors
• Acknowledgements
• Introduction: Is Consumer Protection an Anachronism in the Information Economy?
• Part 1 What Does It Mean to “Protect Consumers” in the Twenty-First Century?
• Part 2 Can a Fair Balance Be Struck in Intellectual Property Law Between Innovators and Consumers?
• Part 3 New Rules for New Deals? The Impact of New Business Models on Old Contract Law
• Part 4 Information Privacy: Who Knows What About Consumers and What Should Be Done About It?
• Bibliography
• Index