Consumer Protection

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

• 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

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

Part I. Consumer Protection SystemRationale for consumer protection

• Addresses disparities in consumer-supplier relationship– Bargaining power– Knowledge– Resources

• State intervention premised on grounds of– Economic efficiency– Individual rights

• What kind of society are we, and do we want to be? How we treat the vulnerable and disadvantaged is a reflection of the type of society we are.

• Development is hampered if there are substantial disparities in information, bargaining power and resources; these things prevent optimal operation of a market economy and thus development.

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

• Modern-day concept first articulated• i.e., not to be deceived, and to have access to

information about products• i.e., to have a variety of products at

competitive prices• i.e., consideration from the government of

their concerns

Many developing countries lack our rights.

• 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

Who is responsible for consumer protection?

• Government agencies such as those on p. 690 – 691

• Consumer organizations– Better Business Bureau – Private groups play a vital role in promoting the

consumer interest: lobbying government, sitting on boards and agencies; doing independent testing and research (e.g., Consumers Union).

Basic rights from government

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

• Drinking water– National policies should be developed to improve

supply, distribution and quality of water for drinking and other purposes

• Pharmaceuticals– Develop national policies to ensure appropriate

use, procurement, distribution, production, licensing arrangements, registration systems and information to consumers

p.689 -----

• Federal, State, and Local agencies are responsible for consumer protection. Many agencies are involved.

• FDA monitors the production and sale of more than 1 trillion of food and medications each year. I wonder what kind of manpower/IT do they have?

FDA

• Allowed the sale of downed cattle in the United States. Were their more lax law for exports?

• HW – What was the issue of U.S. beef imports into Korea all about? How did the Korean government block U.S. Beef? What reasons did they give? Were these reasons based on good evidence? 2 page - Not graded as pass/fail.

FDA

• All foods contain some level of unavoidable defects.

• FDA allowed sale of downed cattle, as long as a postmortem inspection was performed.

• P.692 International Snapshot – 5 years ago, you didn’t even know where your beef came from.

• What about organic foods?

U.S. Department of Agriculture

• Have you ever heard of USDA Certified Beef? Example of 2 agencies protecting beef supply

• USDA’s primary activity involved food inspection. In China?

• Feb. 2008 – 143 million pounds of beef was recalled. (sick cows)

• In Korea, why are Korean products trusted?

EPA and Gentically Modified Food

• EPA regulates pesticides. You have to have some pesticides as some pests “glassy-winged sharpshooter, destroyed 14 billion in grapes and crops in California.

• FDA authorized the sale of genetically modied food in 1992 but DID NOT require that it be labeled as such. In Europe, labeling is common.

Next Week

• Remember HW on Korean beef imports • Also, can we hook up speakers? I want us to

watch a documentary on GMOs. The World According to Monsanto

Organic Foods

• Should or can the FDA endorse organic foods? Would it be in the interests of food and drug companies?

• After seeing the evidence, do you think organic foods are worth the price?

FDA and USDA Labeling

• FDA has primary responsibility for labeling of products – very important to know what the product is and where it comes from.

• USDA has responsibility for meat, poultry, and eggs.

Nutrition Facts

• How much sodium is in your Jambong? Should law require restaurants to post?

• Since 2006, trans fat was required to be shown on labels, after proof that it contributes to fatal and nonfatal heart disease. P. 694

Health Claims

• Asians believe that food is medicine and make all sorts of health claims. Ex. Black beans helps grow hair. I don’t think a western doctor could make such a claim.

• FDA approved fiber and cancer, fruits and vegetables and cancers, etc.

FDA Standards for drug approval

• 1. Find out what schedule from the DEA the drug is on. How much potential for abuse.

• 2. Then application to conduct testing. First animals then to humans in three stages with the FDA review at the end of each phase. (Osborne family) p. 695

FDA Drug review

• Drugs with high therapeutic gain and no alternative gets expedited review.

• Investigational drugs may be given to people if there is emergency situation and preliminary evidence showing its effectiveness.

Do Ethical Consideration p. 695

• Gatorade….protein supplements, health claims, medicines….

• Ethical Consideration on p. 701 – is regulation needed?

Health Claims of dietary supplements

• Does vitamins have any good effect? • Only regulated when supplement contains

new ingredient or poses a safety risk. P. 696. This area would actually be impossible to regulate.

• Kenadrine • Ephedra

Clothing, alcohol, Made in USA

• 100% wool, 100% Cashmere, etc. These are trade terms.

• Alcohol, cognac for one can only come from France. Wine labels are regulated.

• Does Made in USA mean anything to you? How about Made in Italy? Made in Japan? Made in Germany? Made in Korea? P. 697

Broadcasting and Internet

• FCC – regulates broadcasting and aspects of the internet.

• Fined CBS for allowing Janet Jackson’s breast to be shown.

• Blocked Howard Stern and fought with Rush Limbaugh

• Allows P2P transfers, even when Comcast tried to block large transfers of data.

Consumer Product Safety Commission

• Relatively small government agency. • No jurisdiction over food, drugs, tobacco,

pesticides, vehicles, etc. • You can file a claim to the CPSC where they

maintain a database. • Has power to ban or order to repair or replace

products.

Automobiles

• Air bags and antilock brakes were not always standard.

• National Highway Traffic Safety Administration created in 1970, part of the Department of Transportation establishes motor vehicle standards.

• Do Ethical Consideration on p. 703 • Next class, were going into Marketing and

Consumer Credit

• 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

• Consumer credit laws should– Require lenders to provide consumers with copies of all

documents– Establish a single method of calculating interest rates– Conspicuously disclose the rate– Control the price of credit– Regulate credit-related insurance– Provide right to cancel (“cooling off” period)