200 Years; The American Consumer and the Law, Part 1: Efficacy

from communication center the university of texas at austin this is two hundred years in the year nineteen seventy six the american republic celebrates its two hundredth anniversary as a part of the us bicentennial program at the university of texas at austin two hundred years explores the past present and future dynamics of history's longest living democratic society this is rick's we're for two hundred years this week we will be talking about the american consumer and the law with us or die welt an assistant professor of law at the university of texas at austin isabella cunningham assistant professor of advertising at the university and edward kind of ut austin professor of marketing administration to begin the discussion was examined consumer protection in america historically is legal protection a recent development the list of us about the kind of we speak in a historical sense it's

relatively recent development the government and the concerns have been more with protection of the businessmen and the side of the road and the consumer our philosophy that the government kept its hands off of economic affairs nominated really through the nineteenth century and it's only very recently that both in terms of regulating business and more recently since the mid nineteen nineteen fifteen and they're about something that how we must protect the consumer from actions of other groups that have had this new idea an awfully of the department and the unrest has predominantly concern was getting products on the market but to cunningham well i obviously can't agree with professor candy as far as the historical developments i think the premier league you look just at the marketing aspects of consumer

protection will win start with protection on the consumer against private defective products primarily neary a product liability and more recently with advertising as a whole because it's probably the most visible part of my baby several prior they're taken issue in other institutions that are trying to re entry plans professor robert well i also will not disagree with the dog kind of i think gov we might particularly emphasize a reference to the nineteenth century experience in america if it were going to confine our new to american history i think we can see a more less linear development of our protection of the consumer increasing gradually from the nineteenth

century to the present time with the obvious shark breaks when consumer protection movements were highly publicized the american experiences is not precisely girl i'll to the experience in england where we have a much longer history to deal with we're able to say this about american history in part because the date of the declaration of independence seventeen seventy six was also the date of the first publication of adam smith's a wealth of nations and the economic philosophy of the enlightenment informed almost all of american law throughout the nineteenth century or we go back four or five hundred years prior to that time in england we would find much more consumer protection and we found in america in the nineteenth century but probably that doesn't concerns very much with evaluating the american experience were just where we are right now in terms of protection for the american consumer i suppose one of the first to markedly important developments was a concern with the safety of the consumer

and so how we had i guess first major laws federal levels of pure food and drug act which was followed by over there year since nineteen twenty a number of laws to provide safety and product labeling in composition of parts and so on and it's a more recently that we've begun to be concerned with the exception of the consumer and unfair practices in this thing i think as far east as the amount of legal protection we can't immunize states they were probably much more concerned with consumer protection in this country than we are in any of the country if they can and bring up the failure of the system and i would probably point out the fact that under their many lies most consumers aren't aware of that type of laws that exist to protect them so how effective are these laws why i have to agree with the

doctor coming and comment that we can evaluate how far we are just by looking at the law books in the statute because we if if we examine only the remedies they are available to consumers we find that they're very extensive but those which are actually implemented and the frequency with which they're implemented it's a very different story i asked the whole concept of unfair actions for the consumers involved primarily through series of legal decisions to a lot of us aren't there was a the concept of unfair competition was a development in nineteenth century american law but primarily for the benefit of competitors or not consumers in the first federal trade commission act the original draft of the statute prohibiting unfair competition their redraft to predict and their methods of competition was not to protect consumers either but merely to get away from the lock step of the old preexisting case

law it wasn't until nineteen thirty eight with the amendment and that year the federal trade commission act deceptive practices were also made unlawful and federal law generally quickly have example the federal mail fraud statute far back at eighteen seventy two but in this in inner workings of the statutes we also see this trend toward focus on the interests of the consumer rather than merely a competitor of course you have to consider very seriously state laws that protect to consume which are ritualized and it crowley the most effecting last and quantity of the average consumer problems they usually retail deceptions that occur at the local level they're usually baked advertising type of cases and those should be covered by their local statutes as for instance they are in texas where we have one of them probably toughest consumer protection laws in the nation which was published in nineteen seventy three served a fairly recent statute but most consumers again

and are very unaware of this that the protection that they have available to them next make a hypothesis if i walk into a store and misled than they'd advertising what you mean by a paid well and i am and advertising that he's trying essentially to lure me into coming into the store but offering me a special deal which essentially doesn't exist because of that that i am again to distort the product that is advertise a low price has being sold or was never they are there were two of them and to first beat mccain at six o'clock that the friday it's a very common type of deceptive practice well as a consumer the penny earned and how substantial is that the type of injury economic injury that i have gotten through that that specific deceptive practice i have all kinds of remedies second

fallen through it i need to start the action but i have all kinds of remedies under state law specialist at texas but i would down its effect i collected some data myself on the san diego a gravelly adventure the high but says that most consumers would know where to start doing just go back home so forget the whole many lawyers also don't know whether it's because the the statute you're referring to is a new statute and lawyers who have been out of law school for many years and you don't have time to read everything that comes across their desks in the way professional services either of may not be aware of the existence of the statute are much more often are not aware of all the remedies that works copenhagen david burton not a large item to get the average consumer afford to have employed the services of a lawyer an instance like this is another problem in in the area of enforcement of the statute

itself lasts me not in controversies large enough to interest an attorney the consumerist back at ground zero again and i went without the assistance of a lawyer it's very difficult to enforce any of these riots i think this is why at the federal level we have some build in protections to help because it's true the consumer is very aware of his rights are in a position financially or in terms of time to follow them through with the federal level we have a pricing agency which was set up to do this earth and the federal trade commission six examples of actions that go contrary to the rights of the consumer except a behavior and their behavior whole series of thing of the sword and they take action against a firms that are doing this and the consumer not recorded it i think that is almost nicer some sort of greasing agency the

same same type of benzene does exist and in the state of texas with respect to the state law were talking about the attorney general's office has the power to enforce on behalf of the public all the prohibitions of the act but in both this the samples the federal trade commission and the attorney general's office in texas there is the added problem of love money that it cost money to enforce the statutes even if it's not the consumer who has to hire a lawyer to do to enforce them but it cost the government money to police these markets and other federal trade commission's consumer protection bureau has an annual budget now about twenty billion tons or twenty million dollars and this is rather small amount considering be out that they have to police the entire american economy with twenty million dollars in the attorney general of texas receives tens of thousands of complaints every year and obviously with the size staff in the budget he has can only

follow through on a few we live to see but it then has published more than a public relations division of several of the other units of government yes they're a federal level on the state level about local laws that we have any outstanding municipal our county irony of a kind of protection for the consumer in the united states chicken think well supposedly their series of interest groups that are very actively i don't own you know advertising is being blamed several times for not policing itself or its own agents is through an independent organization and that presents a rather complex problem because i'll go we have our associations that do their data that they have to eat you can't go too far and you can't be too specific guess to which party it's to what extent you can establish standards of behavior for the advertising industry as a whole because you might eventually wearing a dress

type of problems with the federal government so and they have to be cautious that the better business bureau has being and in this edition there has tried again to police deceptive practices but they have the problem that they are it's supported by the business the state police itself what do you do at the big question there is always a prom date that in front of the ftc or in front of the legislature as to establish a self policing organization for advertising agencies as a whole and at least several statutes that try to do that they use in national advertising review board that there's quite a dental work trying to you advertising but became instant ghana and they can't go everywhere and they can't keep their eyes open everything that goes on in this kind of music we would have enormous amount will cost to really effectively and protect the consumer

in this country i think every year totally protect a consumer yes we would have an insurmountable cost i think the development has been a slow development from the idea that actually the consumer did not need protection as it's mainly because of the development of their large scale business back when people bought their issues from a local shoemaker they felt that they could deal with this man and if he was a major issues they could solve their problems with him and his pricing and everything was something amiss on an equal basis but on issues of a manufactured by a very large firm in st louis and there's no longer any equal basis for dealing then you find a real opportunity for deception unfair

practices and the consumer begins to need protection and therefore i think we have to accept this need and try to find ways of at least getting as much protection as finance a little while why you need to dare do is not only god the monetary problem varies that ink inconsistency between the different agencies a procedure for instance the the federal trade commission is allowed to give an advisory opinions if you're an advertising agency in you why advertise a specific product using certain types of words you can stand over to the federal trade commission your advertising delegation advisory opinion say yes we think this is the septic no we don't think it's this tactic but at least in one case it has been shown that they do not bind themselves by their own advisory opinion baking go back to usda which are advertising on the air you're brad can sit and take it to court so you know you had about how to be inconsistency that

has to be ira not and there is nothing that say as it freezes the national advisory are advertising review board and the federal trade commission see eye to eye as to what is the sense that the word of the lies they purposely so but that brings up all those diverging ideas and where do we go when we establish and its impact yes i think i am from another factor that has affected by this costs and women in fairness the fact that most of these pleasing groups are not really going to the consumer to determine whether consumers being saved they bring in court experts follow determine whether the consumer they can save an expert there may not really see the world as a consumer sees that this has been a problem pre condition of course there's another problem

the federal trade commission early on adopted a very low standard of intelligence has its yardstick for measuring whether a consumer could be deceived and many of the actions the commission to go with the sure sticker rep frank it laughable and our many many people spend last time making fun of they work at the federal trade commission from this perspective i think we talk about whether the costs of protecting consumer insurmountable maybe that's not the right question can cross or insurmountable we could provide their infinite protection or at least we could devote half are deemed p to protecting consumers and have half of the people in the united states employed to watch the other half as they conduct transactions at more appropriate question is how much we want to stand what will we get for it in return and look at those two figures side by side as the way economic decisions are made and of

course at the present time economists and policy analysts and people in the government can't agree whether we're getting anything for consumer protection dollar at the moment and i have met my own mind about that when you hear his suggestions of how we could improve but when i think when i'm going back to my nation of blind when when necessary things first about to make the consumer we're either at least that means that he has available day in south and very violent he wants to protect himself i think we never bothered to find out how much risk every single consumer is willing to pay when he makes a purchase you know and that we do we just make assumptions this was a hearing in terms of what we want to take a consumer finance at their two basic problems first crowley brought up from an education and it would be it would be a problem to determine when

this educations be given many high school and college and i learned them injuries cole or you know what should we do about that and also second how much do we want to do in terms of protecting the consumer what kind of risk do we want to let the consulate taking like kind of traditional and get his visit they discuss and safety are a certain amount of money stamped or the nutritional value of the food at the consulate ethan what type of information do you really need on labels you know that and i think also some of the most effective action to protect the consumer has been taken by trade associations are groups of that sort was some government prodding encouraging and this can be a bit less expensive and sometimes more effective method because when the people are actually counting on the business practices try very hard to limit deception and then we learned a lot more than half of the

government agencies spelling out what is perception and they move was close to that as they can when we've dealt with one area predominate is the cost of our the involvement of the consumer with goods let's jump briefly into services professional services like doctors and lawyers or the consumer have any protection in this particular mr government services way any guy with respect to private services including professional services so again we look to the letter of the law the texas statute that we refer to our covers the provision of services equally with the provision of goods and there was a movement i'm told in the legislative history in texas consumer protection statute to write in an exemption for doctors and lawyers other professionals this was defeated so presumably a

consumer in texas who has this lead by a lawyer a doctor in the provision of the services will have the same reminiscences is if you're by parachute the source of all of it i doubt there any reasons to treat doctors and lawyers differently this raises one problem where i think to throw the discussion back at prior to the the question of the cost of regulation if we focus only on the section of the consumer were really looking at only half the story other half is the provision of information disclosure is one thing to you to have the laws which prohibit people from lying but that if the effect is if they say nothing that consumers not much better off and making his market decisions there are statues of various kinds which require disclosure of information these statutes are on very thin ice in terms of the the africans see the return for the dollar

because information is expensive it's very costly to require businesses to provide information affirmatively to consumers if the information is useless to them or if they don't make use of it in fact then we've imposed a cost which will be passed on to the consumer in the product for which he's getting nothing how driven lending laws may be providing us with this kind of experience or maybe add the information that his record to be disclosed by the truth and lending statutes in comprehensible to consumers and can be made comprehensible to consumers that we would be better off without such statutes and most recently there's a new federal law requiring extensive disclosures with respect to consumer product warranties a very well intentioned statute but it's not clear to me that the benefits in the long run will outweigh the cost so let's go back to the fact that many of these laws are not based on a proper understanding of the consumer and how he reacts and the laws are written by by experts who feel that they know what as best as it were for

the consumer that they don't really know how he's been at in particular situation but today we've looked rather closely at the consumer and the law and his responsibilities are his rights in regards to both services and products and our panelists have included they're welborn assistant professor of law at university of texas at austin is about what cunningham assistant professor of advertising at the university and edward kind of ut austin professor of marketing administration this as rex we're for two hundred years two hundred years as part of the united states bicentennial program at the university of texas austin is a continuing series of weekly conversations about the past present and future dynamics of history's longest living democratic society two hundred years is produced by katie by communication center in association with the news and information serve is

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