Historicizing Consumer Protection

Luke Herrine–

Learned Hand once described the task of the Federal Trade Commission as “discover[ing] and mak[ing] explicit those unexpressed standards of fair dealing which the conscience of the community may progressively develop.” In a previous post, I argued that moving consumer protection law beyond consumer sovereignty requires recovering this way of thinking, common among Progressives and inspired by the common law. Talking in terms of fair dealing requires recovering the instinct for moral economy. “Democratic forms of moral economy,” I elaborated, “require developing institutions that enable collective deliberations about which (and whose) interests various consumer markets serve and which interests they ought to serve,” and endowing these institutions with the power to shape the rules that govern those markets.

If we are to recover this style of reasoning, we will have to overcome the defense mechanisms against it in contemporary legal consciousness.

With respect to the FTC’s consumer protection authority, the most powerful defense mechanism is a morality tale about what happened when the FTC tried to imbue the notion of “unfairness” (which lies at the core of its consumer protection authority) with too much moral content. Most consumer protection lawyers have at least a vague notion that the current legal standard for determining whether an act is “unfair” was written after the FTC was chided for attempting to use its unfairness authority to ban children’s advertising some time in the 1970s. On the standard version of this story, the public recoiled at the FTC’s audacity, Congress forced the FTC to develop a more neutral/objective standard for determining whether something is “unfair”, and economists were called in to add some rigor to the proceedings. The lesson is that only bad things result when morals and politics guide consumer protection. The FTC should stick to promoting “consumer choice”.

In a new draft article, I argue that this story is bunk.

What actually happened to the FTC’s consumer protection efforts in the 1970s was what happened to so many social democratic projects in that era: “big government” efforts that were the result of decades of organizing had trouble maintaining legitimacy in a global stagflationary crisis and its participants blindsided by a newly united and increasingly radical business lobby. For most of the 1970s, an increasingly left-leaning Congress, pushed by an increasingly well-mobilized consumer movement, complained that the FTC was not acting boldly, quickly, or creatively enough. The children’s advertising proceedings in particular were the result of pressure from Congress, as the culmination of decades of research and regulatory efforts across multiple parts of the federal government. Previous such efforts had met with pushback from business, but not backlash. This time, the counter-campaign was tightly coordinated and amply funded. From the beginning, PR missives portrayed the FTC as trying to be a “nanny”, to interfere in the sanctity of the household. The reliably pro-FTC Washington Post ran an editorial echoing these talking points: “the proposal, in reality, is designed to protect children from the weakness of their parents—and the parents from the wailing insistence of their children. That, traditionally, is one of the roles of a governess—if you can afford one. It is not a proper role of government.” The Post did not disclose its own dependence on advertising revenue, including for the television stations owned by its parent company. Instead, the editorial was read as one of the centers of American Liberalism legitimating the attack on the FTC. Things only got more cutthroat from there, and they interacted with the deeper shifts in U.S. politics familiar to anybody who has studied the neoliberal turn.

Indeed, the received wisdom about that era is the one that neoliberals were already telling at the time: the FTC was an agency out of control, replacing rigorous thinking about how consumer markets work with misguided moralism. When these neoliberals took power, the ambiguities of the 1970s congealed into the morality tale that has been passed down through generations of lawyers and bureaucrats. Neoliberal thinking had already made its way into some departments of the FTC—namely the Bureau of Economics and the Office of Policy Planning (then run by Robert Reich, who would soon become a key player in moving the Democratic Party to the right)—and these departments took advantage of the moment in pressing their view of how the FTC should think about its authority. But neoliberal thinking did not become hegemonic at the FTC until Reagan took office and cleaned house. The people he appointed to run the FTC had made a reputation in right-wing circles attacking the FTC for failing to grasp the Truth of Chicago Price Theory.

Indeed, once we look behind the veil of neoliberal ideology we can see the drama of the 1970s as just one iteration of an ongoing struggle to define the moral content of which practices count as “unfair”. From this perspective, consumer sovereignty is just one version of moral economy: a version adopted among the political coalition in favor letting big business determine what counts as fair at a moment when neoclassical economics was ascendant.

In my draft article, I provide a longer history of this struggle, attempting to explain the evolution of the concept of unfairness in terms of the interaction between the shifting coalitions attempting to shape the federal apparatus for the social control of business and the evolving intellectual frameworks for understanding how political economy works and how to reason morally about it. Thinking in terms of this longer history allows us to trace the changing definition of consumer interests, which, among other things, might allow us to reconsider the legacy of Naderite consumerism that led to the FTC of the 1970s. I imagine most LPE sympathizers would not define consumers’ interest in the same way that the “third-wave consumer movement” (to use Lizabeth Cohen’s term) did. But that does not mean we cannot learn from how this movement took and used power or why it lost it so quickly. We might even find unexpected continuities, including, for example, an interest in democratizing administrative procedure and in institutional experimentation.

It can be easy for (properly) labor-focused leftists to write off the “consumer” as an inherently reactionary figure, especially in a world in which taking the position of “the consumer” has been a way to argue against any attempt at imposing moral standards on business, let alone democratizing control over its operation. But the consumer interest is always a matter of interpretation, and interpretation is always embedded in history. Workers are also consumers, and vice versa. Building a democratic moral economy in the rubble of neoliberalism will be much more fruitful if we dig deeper into the foundations of the regulatory regimes that neoliberalism rebuilt.

 

Luke Herrine is a Law and Political Economy Fellow and a PhD Candidate at Yale Law School.