Consumer Protection Legislation

Consumer protection regulation refers to government involvement in the marketplace to protect consumers in commercial transactions from potential harm caused by businesses. The potential harm may arise from the use of unreliable or unsafe products, deceptive advertising, asymmetry of knowledge of products and services, and privacy intrusion in the Internet age. In the United States, the federal and state governments took important steps in consumer protection, especially in the late 1960s and 1970s. Before this, the ancient rule of caveat emptor, or “let the buyer beware,” generally guided consumer transactions. Although consumer protection regulation did exist (e.g., the 1906 Food and Drug Act, the creation of Federal Trade Commission [FTC] in 1914), it was limited and weakly enforced.

The surge of government protection regulation in the 1960s and 1970s derives from a strong consumer movement and the general politics of the time. The 1980s, however, saw a decrease in support for consumer protection regulation. The Reagan administration cut budgets and staffing sharply and was later forced to restore much of the cuts in support for consumer protection regulation due to regulatory failures. Although the Clinton administration was more aggressively involved in consumer regulation in the 1990s, there have been very sharp cuts during the Bush years in the 2000s. The current consumer protection regulation has addressed issues related to the digital age as well, such as consumer privacy.

Both the federal and state governments are responsible for consumer protection regulation. The key federal agencies involved in consumer regulation include cross-industry regulatory agencies, such as the FTC and the Consumer Product Safety Commission (CPSC), and industry-specific agencies, such as the Food and Drug Administration (FDA), the National Highway Traffic Safety Administration (NHTSA), and the U.S. Department of Agriculture (USDA). At the state level, regulatory responsibilities reside with the state attorney general and a number of state agencies that promulgate regulations. However, for reasons such as politics of the state and budget constraints, all states are not equally forceful in consumer regulation. In some states, the attorney general actively defends consumer interests; in others, she of he protects local industries, often accepting political contributions from [Page 432]them. In other words, state laws place different burdens on the state attorney general to act as a defender of consumer interests, investigating and bringing cases against firms under state consumer protection statues. In states that lack effective state enforcement of consumer laws, consumers often act as “a private attorney general” by resorting to tort laws and suing businesses for incurring harms or injuries. Although state regulation remains crucial, the focus here is on consumer protection regulation at the federal level. The following part discusses the two aspects of consumer protection regulation: the need for consumer protection and the areas of consumer protection.