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.

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Consumer Protection after Consumer Sovereignty

Luke Herrine–

The consumer is at the center of the neoliberal’s moral universe. For both neoclassical welfarists and Hayekian moralists, the consumer is the Everyman. For, whatever else we do, we are all consumers. The “free market” has value because it forces the firms that control the process of production and distribution to compete for our business. Because firms’ very survival depends on their ability to convince us to pay them and because we only pay for things we think are valuable, firms are incentivized to take our interests into account in every decision they make. As they compete to serve our interests more and more effectively, the process of production and distribution becomes more and more efficient at giving us what we want.

According to this ideology of consumer sovereignty, we collectively control the social provisioning process through our individual decisions. Democratic governance is the facilitation of free consumer choice.

Consumer sovereignty is at the center of many familiar neoliberal reform projects. Chicago School antitrust builds on the proposition that the only reason to prevent business consolidation is to lower prices for consumers. Virginia School public choice (and its theory of regulatory capture) depends on the idea that citizenship is basically like consumption, with elected officials acting as firms that compete for votes and appointed officials as firms that compete for resources. Part of the First Amendment’s Lochnerization has involved undermining legislative and regulatory power in teh name of protecting consumers’ right to the information that judges deem necessary to make their purchasing decisions. Etc.

It has become familiar to those who follow the LPE movement that, in building a post-neoliberal way of thinking, we need to move beyond consumer sovereignty. LPE thinkers in antitrust have pointed out the implications of corporate power for workers, for productivity, for corruption of our political system, and generally for our collective ability to control our social system. Similarly with respect to public choice theory and the Lochnerized First Amendment.

But what does all of this mean for how we think about consumers and the law that is supposed to protect them? How can we think about consumer protection law if we reject the ideology of consumer sovereignty?

As I argue in a draft article, consumer protection law should be understood as a variety of moral economy.

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