The concept of consumer protection can to be summarized as all efforts in developing structures and legal responses to outrage and crises developed by consumption of substandard products. Americans have in the past been subjected to consuming products that are a dangerous to the health. Once the dangerous nature of such products is known to the public, public outrage is usually the first response and such outrage is usually directed at any form of government, either federal or state. To this end, several government agencies and bureaucracies have been developed to address protection of consumers. These agencies have either federal or state jurisdiction and hence enforce legal requirements over manufacturers and other producers. The public, through private rights, have the chance to sue for damages, attorney’s fees and injunctions if any such a product has caused harm to a consumer. The bureaucracies allow federal, states and private agencies to demand that businesses register and declare their processes of production for approval. Several laws and judicial precedence have helped in shaping the realms of consumer protection in the United States. Drugs, foods, utilities and other products such a vehicles have legislation that define the safety measures that manufacturers must meet before selling the product to the consumers. This research paper reviews consumer protection mechanism in the United States. This research paper will review federal and state law regarding consumer protection with particular attention to the agencies, jurisdiction and the that each of these agencies seek to enforce. The paper will additionally provide a short history of consumer protection in the United States.
Early Incidences of Consumer Protection
The history of consumer protection dates back to the beginning of the twentieth century. Public outrage over products on sale was first exhibited in the meat industry . The public was outraged by the revelations of the deplorable state of the meat packaging process in major packaging industries such as the Chicago industry. The revelation, as explored by Upton Sinclair in his bestselling novel, simply discovered the processes that take place behind the scenes. These revelations raised much concern for both the public and leaders in several levels of administration. Therefore, response to these concerns was the creation of the first comprehensive inspection and regulatory authority. Referred to as the Food & Drug Administration, the federal agency played a key role in ensuring food and drug safety at the federal level.
More progress was to be reported in the course of the 20th century. The Progressive Era and the President Roosevelt Era would see much more laws and agencies and in the field of consumer protection . During these periods, state, local and federal agencies would increase in number with more clearly defined jurisdiction and guidelines to product and services within which to impose consumer protection laws.
Cheeseman, (2010) argues that the modern trends in consumer protection began in the 1960s. During president Kenney’s administration, the Consumer Bill of Rights was introduced in Congress and this heralded the second phase in consumer protection. More progress was also reported during the Johnson administration and the rise of the so called “Great Society” program . More laws would be developed towards ensuring a more comprehensive consumer protection scheme. In addition, the noted effort of some determined consumer advocates such as Ralph Nader played an instrumental role in highlighting issues associated with consumer safety. The efforts of these eras led to the development of perhaps the most comprehensive of private and public consumer rights. The results of all these is that consumers are protected from unsafe products, unfair business practices, fraud and deception.
Hinich & Staelin, (2008) further argue that the mechanisms that have been adopted by the United States with regard to consumer protection are quite varied and thus exist quite separately. Therefore, the scheme has been termed as lacking in centralization. However, these experts assert that the lack in centralization allows the schemes to gain in depth and variety of protection. The separate application of the consumer protection laws allows a wider array of government actors, protection remedies and legal rights that protect the same consumer.
Federal Consumer Protection Laws and Mechanism
There are several federal laws and mechanisms that have been developed in accordance with consumer protection. These mechanisms are mainly composed of federal agencies that have federal jurisdictions and enforce federal laws. The principal federal agency is the Federal Trade Commission.
The Federal Trade Commission (FTC)
The United States Federal Trade Commission is the principal body that is tasked with the responsibility of ensuring a market free of deception, fraud and unjust business practices providing one composed of quality products. The FTC ensures such a market for the American consumer by ensuring that all the federal laws regarding consumer protection are fully implemented. In doing this, the FTC works in concert with other federal or state agencies. Howells & Weatherill, (2005) asserts that the FTc is an independent body led by five commissioner appointed by the president and approved by the Senate. The commissioners serve a maximum term of seven years the members of presidents’ political party is only limited to a three commissioners.
The FTC was created in 1914 with two fundamental goals. The first goal that the FTC was to achieve was to ensure a market of consumer goods free of fraud, deception an unjust business practices for the benefit of the consumer. The second fundamental goal that the FTC was to achieve was to maintain a competitive market by eliminating any anticompetitive business efforts and practices.
Jurisdiction of the FTC
The first goal of the FTC, that ensures that consumers are safe from unjust business due to fraud, deception and harmful products, is the focus f this paper. The FTC has been granted the powers to ensure consumer safety under the Section 5(a) of the FTC Act. The section prohibits any deceptive or unfair acts that may either affect commerce or be practiced by commercial businesses. According to the FTC act, deception in the commerce may occur in cases where there is omission, material representation or practice that probably misleads the consumer at the time of purchase . Unfair business practice is defined in the act as any practice that may cause harm to the consumer without any benefit gained from consuming the product or service .
Apart from Section 5(a) of the FTC Act, the federal agency draws its administrative and enforcement jurisdiction from several other statutes and acts. Hinich & Staelin, (2008) assert that FTC may draws its administrative powers from a total of over 46 federal statutes, of which about 37 are directly related to the first goal of the FTC. Some of the statues that grants powers to the FTC are credit related and include laws such as the Fair Credit Reporting Act, Truth in Lending Act, Equal Credit Opportunity Act and the Fair Credit Billing Act. Either, the FTC draws its enforcement powers from statues directly related to specific industries. Several consumer products have particular statutes that define the practice in the specific field. Thus FTC draws its reference from industry acts such as the Comprehensive Smokeless Tobacco Health Education Act of 1986 and Petroleum Marketing Practices Act . There are also other statutes regarding consumer privacy that assists the FTC in executing its consumer privacy mandate. Such laws have been developed to protect the privacy of consumers as defined under the consumer privacy right bill. One such law is (CAN-SPAM) Act of 2003 which is meant to control the marketing of pornography that is non-solicited. Another one is the Do-Not-Call Registry Act of 2003 .
Investigative and Enforcement Power of the FTC
The FTC has the responsibility of protecting the American consumer from deception, unfair business practice and fraud. In order to so, the FTC has been granted the authority to investigate and uncover any instances of unjust business practices, deceit and fraud. Therefore, the arm of the FTC that is responsible for consumer safety referred to as the Bureau of Consumer Protection, issues a CID (Civil Investigative Demand) that allows the commission to investigate any suspect case that contravenes provisions of consumer safety. The CID allows an investigation to demand for documents indicating the manufacturing or the production process. The CID also requires that written testimony and other proceedings be presented before the Bureau during the investigation process. The law also allows investigation to be triggered by several facets of the American society. An investigation into a suspect case can be triggered by a consumer complaint, congressional request, process of internal research within the commission or by referral by a court of law.
After conclusive investigation has been performed by the Bureau and there is conclusive evidence that a violation has been done, the FTC has the right to take the next course of action. The FTC is expected to enforce laws that define how such violation is handled and it is common for the FTC to present the challenges on the safety of the product to the enterprise claiming its ownership. The FTC further files a suit against the products before an Administrative Law Judge (ALJ) seeking for a cease and desist order. The ALJ may recommend such an order if the evidence presented by the FTC is sound enough and if the product is found to be in violation of the provision of consumer safety.
The Primary tool of the FTC in ensuring consumer safety is the cease and desist tool. The cease and desist is a good tool for ensuring that once such an order has been issued, the proprietor of such product is to stop any advances of the said product. Therefore, should any party violate the cease and desist order, FTC has the right to sue or seek civil penalties on behalf of the consumer who may have suffered damage or harm from using the product.
However, just like any other statute, an aggrieved party has the right to contest the legal the decision by the court to recommend the cease and desist order by filling an appeal to the full FTC commission as its oversees the operations of the Bureau. The appellate process may also proceed to any federal appellate court. Similarly, if a case raises grave concerns of constitutional nature or are in the interest of the American public then such a case might be entertained by the Supreme Court of the United States. However, none if the aggrieved parties files an appeal within 60 days from the date of issue if the cease and desist order, a violation of any kind with relation to the product attract penalties amounting to $10,000 per violation .
Performing the Duties of Consumer Protection
The Division of advertising practices is particularly concerned with the types of advertisement that the American consumer is exposed to. The division ensures that advertisements claiming to have impacts on the health of the consumers is validated and that the claim is not deceitful in nature. Similarly, the Division of Financial services protect unsuspecting consumers from fraud, deceit and unjust business practices. The realms that financial services that the division seeks to protect are in credit card offers, debt collection process, mortgage practices and other essential financial services. In summary therefore, the division listed as the names suggest, tend to ensure consumer safety in respective fields of business practice.
Other Federal Agencies
The FTC is perhaps the principal and most wide reaching federal agency in the realms of consumer protection. There are other significant consumer protection agencies that serve similar purpose. One such federal agency is the U.S. Consumer Product Safety Commission (CPS). As the name suggests, the federal body is solely concerned with ensuring the consumer products reaching the consumer are safe. The other body that is associated with safety of consumer products is U.S. Food and Drug Administration (FDA). The FDA is tasked ensuring that foods and drugs reaching the consumer are safe for the human body. FDA has lately been concerned with the tobacco industry managing to push through the Tobacco Control Act of 2009. Other federal agencies include the National Highway Traffic Safety Administration (NHTSA) and the Federal Communications Commission (FCC).
The latest addition to the plethora of consumer protection agencies is the Bureau of Consumer Financial Protection. The latest agency was established after the greatest recession since 1932. The recent economic crisis that was sparked by the credit crunch of 2008 generated much uproar both in the United States and the international community. In response, congress enacted the Consumer Financial Protection Act of 2010 the sought to create an agency that would protect Americans from such economic crises . The new bureau would be charged with financial educational programs, research and monitoring in the financial sector and publishing key information regarding the financial sector. The bureau would also respond to customer claims as well as identifying and communicating risks to consumers.
Consumer Protection at the State Level
While the federal government has taken concerted effort to legislate and establish consumer protection agencies, the constitution allows the different states to enact their own laws and thereby establish their own agencies. Therefore, most of the states have enacted their own consumer protection laws and the powers to administer the said laws rests with the attorney generals of the states. In enforcing the laws, the attorney generals may take several course of action including but not limited to bringing criminal charges, filing suits on behalf of the consumers, obtaining restitution on behalf of consumers and issuing injunction on any business process in the interest of the general public.
Investigative Powers of the State
Several states in the United State have made effort to establish agencies that deal with consumer protection. However, in situations where the state does not have a direct agency to deal with suspect case, the state attorney general is expected to the play the role of such an agency. Therefore, if the state is made aware of any possible violation, the state agency or the attorney general has the responsibility of investigating such a case. Just like the FTC a process, a state agency or the attorney general institutes a Civil Investigative Demands that investigate into the issue under review and nay findings are brought to court for determination.
Every state has the right to legislate laws that define the realms of consumer protection as the state may deem fit. Therefore the state grants either the attorney general or the established state agency the powers to implement such laws. Therefore, the body entrusted with the powers to enforce such laws by either seeking injunctions in a bid to remedy the deception or the unfair trade practice. If a party overlooks such injunctions the entrusted body has the powers to file contempt charges. Either, the attorney general or the agency may enforce the law by seeking a voluntary assurance by the producers that they will comply with the consumer safety provisions according to the state. The state may also sue for civil or criminal penalties with regard to business practice that causes harm to consumers.
Consumer’s rights to seek own Protection
The American consumer, by virtue of being a citizen, has a constitutional right of going to any court of law to seek redress against deceit and fraud in the marketplace. Consumers may use either the statutes of the state or common law in seeking redress in the court. The most applied common law is the Caveat Emptor (let the buyer beware) that applies in several courts. This kind of suits commonly referred to as the Common Law Torts have been used in cases regarding misrepresentation, fraud, deceit or breach of warrant.
However, the process of pleading a case based on the common law is extremely hard to be successful in a court of law. This is due to the fact that common law requires that the aggrieved party prove, beyond reasonable doubt that the defendant intended to harm. Due to this legal difficulty, Americans have preferred to use statutory causes of action. Specific statutes in different states allow individuals to file suits that the court may consider a violation of state statutes.
The concept of consumer protection is a myriad of laws and bodies that seek to provide comprehensive protection for all consumers in the United States. The consumer protection laws also include guidelines and requirements that must be satisfied by producers and marketers. Therefore, in implementing the laws, the American consumer gets to be safe from unfair trade, deceit and fraud.
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Hinich, M. J., & Staelin, R. (2008). Consumer protection legislation and the U.S. food industry. Norman: University of Michigan.
Howells, G. G., & Weatherill, S. (2005). Consumer Protection Law. New Jersey: Ashgate Publishing, Ltd.
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