Introduction to Law and Economics: International Consumer Protection - Essay Example

Introduction to Law and Economics affiliation: Introduction There are some rights enjoyed by any consumer purchasing goods. These rights derive from general consumer protection legislation, and from industry specific regulations based on different sectors1. The regulations mainly help the consumers to make effective purchasing decisions without any fear of exploitation or other misinterpretations. Therefore, the English law came up with the doctrine of “Buyers Beware” that helped the buyer to look out for his interests. This doctrine argued that the buyer was at a disadvantage because of the lack of expertise and knowledge of products. The guiding principle has however distorted with age due to the economic power disparity between the supplier and the consumer2. The government’s interest into empowering consumers saw the introduction of the Consumer Human Rights. The Bill’s intention is to improve individual outcomes, and supporting economic growth by stimulating competitive forces. The consumers have a right to make choices under a certain state of mind, and therefore decision-making tools like information assist in making effective decisions. People’s innate behavioral traits play a vital role in consumer spending although the consumers are not always rational. The distress of purchases and the information asymmetric are some of the inherent features that the legal services find hard to overcome. There are also some market failures like lack of price transparency that remain deeply embedded, which regulators cannot quickly address. Lastly, there some social conditions influencing the consumer behave hence affecting their decision-making. Different studies show that the market features have a significant effect on UK consumers’ decision-making3. Regarding the awareness of consumer rights, the UK consumers tend to know their rights although different issues arise from technological changes. There is also an increasing awareness of the regulators regarding consumer needs, therefore, taking a number of steps to resolve the issues, and protect them. In 1893, the statute books created the first Sales of Goods Act codifying the Common law position4. During this time, implying quality of goods were default rules that remained excluded from the contracts as long as the customers agreed. However, in 1973, the introduction of Supply Goods Act saw the changed the position and poor quality goods viewed as grossly unfair. Howells et al. p. 148) argues that this Act attracted concerns based on consumer inequality of bargaining power, and possible exploitation. Sale and Supply Goods Act 1994 amended the previous acts and in 2002, Supply of Goods and Consumers regulations helped the consumer to realize the rights provided by these laws. It is clear that although the producer because the law places any obligations to the product seller, and therefore the producer does not have to look for the seller. With globalization, the market remains bold, and this places the consumer in a dilemma of what product to buy due to competition. Consequently, this position makes it hard for the buyer to look after his interests. Therefore, the law comes in to protect the consumer while readdressing the bargaining power between the supplier and consumer. Research shows that the decision-making power seems to shift from the consumer to the seller. The law has developed for the last thirty years, changing the “Buyer Beware” policy. The UK Government published the draft Consumer Rights Bill with the intention of simplifying and bringing back UK’s patchwork into the 21st century consumer law5. This action should have positive outcomes for both the consumers and the brand developers. It is clear that the bill will enhance the consumer awareness, and boldness in exercising these rights. While most businesses may disagree with the increased saving, they will understand the importance of this bill with the increased technology in social media whereby any news regarding poor consumer behavior spreads like fire. In comparison to the old ages when the UK wrote down the consumer rules, the current goods, services, and consumer patterns, continue to change drastically6. Therefore, there is a need for the UK consumer law to match the digital age. The bill will play a vital role in consumer decision-making especially because of the enhanced consumer rights. These rights include awareness of satisfactory quality whereby the product should meet the standard that any reasonable person considers satisfactory. The product excellence entails autonomy from flaw, purpose suitability, security, and durability of the product. In addition, the consumer has a right to receive the product at the right time. In a case of any damage, the seller should readily compensate the buyer, and the payment should compensate the buyer any expenses incurred. In addition to the compensation, the consumer has a right to have his products repaired or replaced, price reduction or a refund. The goods on sale should match the samples or the models displayed by the seller. The consumer bill equally forces pre-contractual information on the characteristic of the goods7. Therefore, the consumer has a right to ask any information regarding the items before purchase, and this influences his decision-making. The bill allows the consumer to reject the item within thirty days of delivery and shorter periods for perishable goods. The law is very bold regarding consumer protection, but it is good to note that it equally considers the sellers. It allows for reasonable care and skill, time, and prices. In a case of a breach, the bill in relation to services allows a repeat performance and price reduction. UK consumer law seems complex despite its high degree of offering protection. It seems fragmented especially with the coming up of new technology, and it lacks precision. In addition, the consumer law seems to be in conflict with the EU legislation. However, study shows that consumers who understand their rights have a stronger driving force for the market growth8. This knowledge affects their decision-making especially in challenging the incumbent organisations, switching to competitors, and introducing new products to the market. Consequently, this approach forces the businesses to compete in both quality and prices while stimulating growth and innovation. On the other hand, consumers lacking the knowledge of their consumer rights hence poor decision-makers tend to waste business time and costs. The consumer decision-making process involves recognising the problem, information search, evaluating and selecting alternatives, decision implementation, and post-purchase evaluation. Therefore, the consumer buying process starts when the buyer realizes the problem, and in this case, market pressure influences the consumer decision-making. The recognition problem occurs when there is a holdup between the consumer’s actual situation, and the ideal one. The need may be psychological economical. A good example is a consumer who realises better products in the market and tends to get confused on what to buy. In such cases, the bill of consumer rights allows the seller to provide the buyer with any information required to facilitate his decision-making. Through gathering of this information, the buyer can make concrete decisions through learning more about the competing products in the market. Some of the information about quality and pricing may help the consumer satisfy his initial buying criteria. With the Bill of rights enhancing reasonable prices, the consumer benefits from product costs9. The bill ensures that the producers or sellers do not apply exorbitant prices for their products. Some products tend to exaggerate their prices, and with the consumer bill, the producers may have to prove their cost production. The consumer bill brings competition, which in turn will affect the product costs. Therefore, all producers will have to sell their products at reasonable prices in order to compete in the vast markets. A good example is the Nike Company, which for a long time highly priced their products. However, with the bill of rights, the consumers Consequently, the consumer may evaluate the quality brand a process driven cognitively and rationally. The information helps the consumer resolve his problem by meeting his needs through looking at the benefits of the product. The bill of rights allows the consumer a right to chose, and therefore with the vital information at hand, the consumer may base his decision-making on the specific items and the outlets10. Customers will be able to gather information on other great products from companies like Adidas. There are specific limitations on information provision of water in England and Wales, which affects a risk-based approach to the consumer protection. Earlier, smaller companies were not able to switch water, sewage supplies, which meant that consumer relevance, had no effect, and this will change with the current consumer bill. The consumers will have vital information on harmful water and sewers, hence making important decisions on actions to take. After all, it is clear that the protection law seem to favour the bigger and smaller companies. The Consumer Bill rights in the UK especially with the complex market choice and switching costs may require improved consumer decision-making11. Other than improving the consumer’s information access, this bill of rights allows the assessment of information through empowering and facilitating consumers to compare the products across the markets. This assessment allows the consumer to make the purchasing decision that perfectly suits their desires, while satisfying their needs. The bill equally allows the consumers to act on any information provided to them. The bill prevents these consumers from becoming vulnerable to unfair and expensive deals. Consumer decision-making is hard in areas where a customer lacks expertise in purchasing services or products12. In addition, effective purchasing decisions require a high opportunity cost of time. Opportunity costs like choosing the right energy or water supplier may take a lot of consumer time, and therefore the consumer bill of rights may resolve the issue of time spent searching for the right sellers. Some products have set prices, and the consumer bill will improve the consumer’s poor bargaining power. Most large companies exploit their consumers like earlier mentioned as negotiation deals, unlike the smaller companies. It is clear that decision-making becomes less difficult in situations like cloth buying compared to larger purchases. Customers have high chances of checking their opportunities especially in the high purchases before transacting. However, this may not define some of the product details like reliability, quality, and durability. However, with time the consumer may lose their rights and may only manage to claim damages. However, the new consumer bill allows modesty regulating after sales services. The current legislation allows decisions on whether a reasonable time has elapsed, based on whether the consumer had ample time to review the products. The burden of proving related to damages on purchased products now lies on the seller favouring the buyer, and this psychologically affects the consumer’s bargaining power. However, new technology seems to lag some of these provisions behind. A good example is the ongoing debates based on software whereby people argue whether the market should treat software as goods. Online trading is also an area of concern because traders wonder if they have the same consumer protection. This approach has slowed down the online trade consumers because they still feel insecure in case of losses. The financial markets are other grey areas where the consumer bill of rights is not clear. It is clear that the gap in information supply especially among the low-income earners remains unaddressed. This gap affects the low-income earner’s decision-making when it comes to financial markets due to impartial advices. However, tightening statutory provisions require many considerations because it could affect or restrict consumer choices. Too much information can be disastrous, and therefore the bill should not simplify legislation13, but rather it should enable the consumer to make informed choices. In addition, the law do not support rushed out decisions or consumers who make instant decisions changing their minds later. However, the law ensures that selling techniques does not pressure the consumer, and therefore they can make informed decisions. The consumer should have enough time to enquire and gather full information on the products before buying. Consumer Markets The UK consumer law accepted the small business as consumers in 2005 although this action conflicts the Law Commissions of England and Scotland. Therefore, the regulators have a right to protect vulnerable small businesses ensuring consequent protection for their customers. Such requirements include transparency and disclosure in relation to contracts and rules in order to promote competition. In UK, such regulators include FCA, Ofcom, Ofwat, and Ofgem. However, there are reasonable inconsistencies in the protection offered to individual consumers and business consumers. The inconsistencies may base on the fact that businesses stand a better chance to protect themselves compared to the individual consumers. However, study shows that these inconsistencies may be due to lack of a fundamental integrated framework to access the issues across different regulators during enacting of the legislation. A good example is the telecoms whereby the Communications Act (s 52) 2003 draws a line between domestic and small business customers and other customers. In this context, the small business customer includes a company with less than ten employees14. This definition makes it closer to the EU micro-enterprise definition although there is no turnover limit. Ofcom as a regulator provides protection to such businesses similar with the protections for the domestic consumer. A good example is the issue of free information by the consumer from the seller. Ofcom allows the availability of information at the point of sale. The regulator also bans automatic rollover contracts, and restricts any aggressive and misleading selling. There should be a developed and published code of ethics for both individual and small business specifying when consumers avail themselves for information. However, these policies may differ among the small and large businesses. Therefore, Ofcom has to identify the company size through available means. In the financial services, there are a number of financial protections although this continues proving to be a complex situation. Banking, Insurance, and credit are among the areas of concern in finance. The Banking Conduct of Business Sourcebook (BCOBS) has placed guiding principles for banking. These rules apply to both individual consumers and the micro businesses as defined by the EU. The EU demands that a micro business should have less than ten employees and a turnover of not exceeding 2million Euros. However, the insurance sector seems to have some overlaps between the protection provided to the individual consumers and business consumers in relation to BCOBS. Nevertheless, cases like cancellation rights for the individual consumer have additional protections. In credit, the domestic consumers enjoy significant protection of amounts of 25000 pounds. The UK government chose to enact domestic legislation and extend most of the protections despite the EU Consumer Credit Directive 2000, which does not cover business lending. In energy sector, unlike the telecom sector, the Ofgem regulator does not cover small business businesses. However, the process is under review, and it continues enhancing its protection in all areas actively. The regulator expanded the definition of micro business to include both the small and medium businesses under the EU definition. The energy business should consume more than 100000 kWh electricity annually and 293000kWh of gas15. Ofgem continues to investigate the need for further improved information on tariffs to enable comparison across tariffs for domestic consumers and not the micro businesses. This approach forces these business consumers to approach the suppliers directly due to unavailability of published tariffs. In water and sewerage, the individual consumers have no choice of supplier meaning little rational for regulations. However, there are rules on transparency and disclosure for the domestic consumers. Ofwat demands an approved code of practice from the suppliers committing to accurate information, respect of tariffs, accessibility, complaints handling, and mode of bill payments. Conclusion The UK consumer law continues developing over the years since the first codification in 1973. The statutory body and the common law provisions play a vital role in this development to resulting to an ambiguous and complex process. However, simplifying and unifying the existing provisions may help advancing the consumer protection law. Globalization has improved technology hence complicated the market trends making it easy for sellers to exploit innocent consumers. Therefore, there is a need for reformed bills of right in relation to selling practices. The consumer bill of rights in the UK will help not only the domestic, but also the business consumers. The “Buyer Beware” practice will equally come back to the limelight adapting an alert to the buyers. They will be able to understand their rights deeper and raise questions before making a purchase. Bibliography Campbell, D. (2011). International consumer protection. Huntington, N.Y., Juris Pub. CSERES, KATALIN JUDIT. 2005. 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