Consumer Protection

Source: Manual on Consumer Protection

United Nations Conference on Trade and
Development (UNCTAD)
2004
Overview: Three broad categories
1. Consumer Protection System
Policies, laws, institutions and structures
that form the framework for a consumer
protection system
UN Guidelines
Consumer Protection Agencies/Organizations
Consumer Protection Law
Consumer Redress
2. Consumer Protection in the Marketplace
Various transactions that consumers enter in
a market economy
Consumer information
Product safety and liability
Consumer credit
Insurance
Electronic commerce

3. Consumer Protection and Basic Needs
Consumer education
The provision of utilities
Food
Health care delivery
Sustainable consumption
Part I. Consumer Protection System
Rationale for consumer protection
Addresses disparities in consumer-supplier
relationship
Bargaining power
Knowledge
Resources
State intervention premised on grounds of
Economic efficiency
Individual rights
Distributive justice
Achieving bargaining equality between consumer and
producer interests
Alleviating the problems of the particularly disadvantaged
Poor, elderly, children
Consumerism, especially in the developing world, is now
seen as a fundamental part of the strategy to eradicate
poverty and to bring socio-economic justice to the
underprivileged.
Positive communal values
Right to development
Consumer Rights
John F. Kennedys Message to Congress
on March 15, 1962
Four basic rights
Right to safety
Right to be informed
Right to choose
Right to be heard
1982 Consumer Internationals Charter of
Consumer Rights
Eight rights
Right to basic needs
Food, clothing, shelter, health care, education,
water and sanitation
Right to safety
Right to information
Right to choice
Right to be heard
Right to redress
Right to education
Right to healthy environment

Rights further re-enforced by adoption of
UN Guidelines on Consumer Protection in
1985 and 1999
Who is the consumer?
Original definition limited to purchases for
personal consumption
More recently includes small operators
Applies to farmers
Assures reasonable prices and quality of farm
inputs
Who is responsible for consumer
protection?
Government agencies
Ministry of Commerce, Investment and
Consumer Affairs
Professional/Industry associations
Consumer organizations
St. Lucia Consumer Association
U.N. Guidelines on Consumer
Protection (UNGCP)
Provide a framework for governments to
develop and strengthen consumer
protection policies and legislation
Minimum guarantee by governments that
the measures will be undertaken
Obligations imposed on
governments by the UNGCP
1. Physical Safety
Assure that products are safe and conform to
safety standards
Consumers receive information on proper use
of goods and risks involved
Measures are in place for notification and
recall of unsafe goods
2. Consumers economic interests
Consumers obtain optimum benefit from their
economic resources
Ensuring that goods meet production and performance
standards
Adequate distribution channels and after sales services
Fair business practices are employed
Protection against contractual abuses
Information is adequate for consumers to make informed
decisions and exercise choice
3. Standards for safety and quality of
goods and services
Ensure there are national standards for safety
and quality of goods and services
Such standards conform to international
standards
Facilities to test and certify goods and
services are encouraged
4. Distribution facilities for essential goods
and services
Especially to consumers who are
disadvantaged, e.g., in rural areas
5. Redress
Establish and publicize mechanisms that are
fair, affordable and accessible
Especially taking into consideration the needs of
low-income consumers
6. Education and information programs
Should involve consumer and business groups
Particular attention to disadvantaged
consumers in urban and rural areas
Should be included in school curriculum
Training programs for educators, mass media
professionals and consumer advocates
7. Promotion of sustainable consumption
Should be done in conjunction with civil
society organizations and business groups
Sustainable consumption practices within
government, by business enterprises and by
consumers
8. Measures relating to food, water and
pharmaceuticals
Prioritizes these areas
Should ensure quality control, adequate
distribution and standardized information
Food production
Sustainable agricultural polices and practices
Conservation of biodiversity
Traditional knowledge
Drinking water
National policies should be developed to
improve supply, distribution and quality of
water for drinking and other purposes
Pharmaceuticals
Develop national policies to ensure
appropriate use, procurement, distribution,
production, licensing arrangements,
registration systems and information to
consumers
Current status of UNGCP
UN is surveying countries adoption
Many LDCs have nothing in place
No laws or consumer organizations
Doesnt fully account for globalization and
other changes in marketplace
Functions of a consumer protection
agency
Advise the government on consumer issues
Represent the consumer interest in other
governmental committees
Enforce consumer protection and competition
law
Conduct market surveys and research into
consumer protection problems
Conduct product testing for safety and quality
Consumer organizations
Need for an independent party that is non-
political and non-commercial
Need for views of the under-represented and
vulnerable groups
Some have wide membership and broad
spectrum of concerns
Democracy involves participatory decision-
making ; consultation with these groups is part
of the nation-building process
Role of consumer organizations
Provide independent information on
products and services
Organize mass action, such as letter-
writing campaigns, boycotts, rallies, etc.
Advise and act on consumer complaints
and obtain redress for consumers
Organize workshops and seminars on
particular issues
Engage in public interest litigation on behalf of
consumers
Conduct surveys and research to study problems
faced by consumers or the impact of
government policies on consumers
Engage in dialogue with government and
business to inform, persuade or negotiate on
behalf of consumers
Consult with stakeholders to understand
consumer issues and develop policy to
address problem areas
Organize public education programs
Register and issue licenses for certain
business activities
Issue administrative rules to regulate
business entities

Consumer Law: Constitutions
Early constitutions focused on civil and
political rights (first generation rights)
Freedom and security of an individual
Protection from state and public power
More recent constitutions confer wider
range of human rights
Economic, social and cultural rights
second generation rights
Trend is to include the right to development
third generation or solidarity rights
In constitutions adopted since 1980s, consumer
rights recognized as human rights
Thus included in the constitutions of many
countries
Recognize disparity of knowledge, resources and
bargaining power and provide for consumer
rights
Consumer Law: Framework
Cover a broad range of practices, goods and
services
Create consultative bodies
Vest agencies with rule-making powers
Create special tribunals with simplified
procedures and rules of evidence
Confer on consumer groups the right to
represent individuals
Provide for a range of remedies

Consumer Redress
Problems include:
Expense
Length of time
Alienation
Adversarial
Alternatives
Facilitating access to courts
Legal aid for the needy
Contingent fee system
Permit paralegals to perform attorney functions
Court substitutes (ADR)
Statute-based tribunals
Arbitration
Ombudsman
Assessing efficacy of ADRs
Access
Widespread publicity
Cost
Accessibility
Fairness
Independent
Transparency
Effectiveness
Scope comprehensive
Procedures simple
Rules of evidence relaxed
Speedy
Decisions binding on industry


Part II: Consumer Protection in the
Marketplace
Consumer Information and Choice

Consumer information ideally is meant to
provide standardized, objective and
impartial information direct to consumers
at the point of sale, in order for them to
decide which of the many branded
products and services available will best
suit their own needs.
Consumer information is especially needed
where
Products and services are high priced
Products and services are technically complex
No basis of assessment at point of sale
Little consumer knowledge of required
performance before purchase
Where information is regulated (e.g.,
labels subject to mandatory labeling laws,
such as pharmaceuticals) consumers have
relatively few problems
Where information is unregulated (e.g.,
advertising or unregulated labels)
consumers have more problems
Sometimes offset by information from
independent consumer groups
Additional problems arising from
expansion of international trade
Information on imported products
Many dont comply with voluntary labeling
standards
Information provided electronically over the
internet (later)
Critical issues related to advertising
Commercial advertising, when it is practiced
fairly and responsibly, serves a useful function,
informing the public about the existence of a
product and the characteristics of the product.
In order to be a positive influence,
advertisements must be truthful and
informative, must not exaggerate the usefulness
or qualities of the product and should not play
on the emotional needs of the consumer so as
to create artificial needs.
Consumer concerns with advertising
Ads for products proven to be unsafe and/or addictive
(e.g., alcohol and tobacco)
Ads that target and mislead vulnerable communities
about the product
Ads that aggressively target children to consumer
foods high in fat, sugar and salt
Ads for products that contain toxic or cancer-causing
chemicals for which there is no scientific proof of
safety levels (e.g., pesticides, aspartame, etc.)
International codes on advertising
WHO/UNICEF Code of Marketing of Breastmilk
Substitutes 1981
FAO International Code of Conduct on the
Distribution and Use of Pesticides 1985
Framework Convention on Tobacco Control
2003
Product Safety Laws
Rationale for product safety laws
Products are increasing in complexity and
sophistication; reasonable inspection will not reveal
latent defects or hazards
Minimum and uniform standards ensure developing
countries do not become dumping grounds for sub-
standard products rejected in the country of origin
International standards will provide for unimpeded
access to overseas markets
Components (5) of a comprehensive product
safety policy:

1. Preparatory action
Surveillance of products in the market
Data collection (local and foreign sources)
Consolidated List of Products Whose Consumption and/or
Sale Have Been Banned, Withdrawn, Severely Restricted, or
Not Approved by Governments
2. Regulatory action
Development of product safety standards

3. Monitoring action
Testing by government or reliable
independent consumer organizations


4. Corrective action
Impose product bans
Warning notices
Product recalls
Seize stocks
Destroy stocks
Require modifications of the product
5. Compensatory actions
Compensate consumers for loss
Deter future wrongdoing
Consumer Credit
Credit increases demand for and
consumption of goods and services
Critical to economic growth
Unfettered growth of credit has negative
consequences
Impulse buying
Extra costs associated with credit
Excessive debt
The poor pay more
Ineligible for credit in many stores; thus buy shoddy
goods at higher prices
If credit advanced, higher rates charged
Credit often advanced to individuals with a
history of default
Increased complexity of transactions (e.g. home
equity loans/lines of credit) require more
complex documents
More difficult to understand and compare terms,
including cost of credit
Consumer credit laws should
Require lenders to provide consumers with copies of
all documents
Establish a single method of calculating interest rates
Conspicuously disclose the rate
Control the price of credit
Regulate credit-related insurance
Provide right to cancel (cooling off period)
Electronic commerce
1996 fewer than 40 million connected to internet
1997 number increased to 96 million
2005 predicted to be nearly 1 billion

1998 27.6 million buying goods and services
online worth $32 million
2002 more than 128 million spending over $425
million
Issues:
Consumer redress in cyberspace disputes
Privacy
Identification of provider
Security of payments
Fraud
Organization for Economic Cooperation and
Development (OECD)
United Nations Commission on International
Trade Law (UNCITRAL)
Alliance for Global Business (AGB)
International trade associations
Global Business Dialog on Electronic Commerce
(GBDe)
CEO-led business initiative
International Chamber of Commerce (ICC)
Part III: Consumer Protection and
Basic Needs
Consumer Education

Objectives of consumer education are:

Develop skills to make informed decisions in the
purchase of goods and services in light of
Personal values
Maximum utilization of resources
Available alternatives
Ecological considerations
Changing economic conditions
Become knowledgeable about the law and
consumer rights, in order to participate
effectively and confidently in the marketplace
and take appropriate action to seek redress
Develop an understanding of the citizens role in
the economic, social and government systems
and to influence those systems to make them
responsive to consumer needs
Consumer education is not the same thing
as consumer information
Consumer education improves consumers
ability to use information
By exercising free choice, based on knowledge
of the facts, the consumer will be able to make
the best use of his resources, money, time,
knowledge and ability. He will thereby contribute
to the proper functioning of the economy and
stimulating effective and fair competition and he
will thereby contribute to social and economic
development.
Council of Europe (1981)
Modern conception of consumer education
reflects the inter-relationship between the
private household and societal responsibilities
Concepts such as sustainable consumption are
woven into education about the impact of
modern consumer lifestyles on the environment
In developing countries, consumer education is
a tool to ensure that scarce resources of poorer
consumers are not fritted away by unethical
business practices
Strategies for implementing consumer
education

A comprehensive program is directed to all
consumers
Schools
Skills to make informed decisions
Skills to understand the impact of decisions of
individuals, businesses and governments on the
lives of others
Those outside formal education
Mass media
Trade associations
Trade unions
Resident associations
Special focus on
Rural areas
Low income
Vulnerable groups (seniors; disabled)
Six fields of content suggested by the
Nordic Council of Ministers (1999)
Personal finances
Rights and obligations
Commercial persuasion
Consumption, environment and ethics
Food
Safety
Utilities
Utilities are considered basic needs
Universal Declaration of Human Rights
states that everyone has the right of equal
access to public services in his/her country
1.6 billion do not have access to energy
supply
Over 1 billion lack access to clean water
One half of the worlds population has
made a phone call
5% of the world uses the internet
88% of those are in developed world (15% of
worlds population)
Utilities present unique problems for consumers
Generally involve basic and essential services
Peculiar economic characteristics that make
competition difficult
Public policy has focused on regulating
monopolies for public protection
Price and other controls
Public ownership
Support for privatization based on
Inefficiency of government ownership
Corruption
Failures in developing countries to provide
adequate levels of service
The special case of water
One reason for problems stemming from state
ownership of water is that its too cheap
Prices are kept artificially low
On average, price covers 1/3 of cost
Shortfall made up by government subsidies
Consequences
Consumption is encouraged
No incentive to conserve
shortages
Governments dont have the money to invest in
infrastructure improvements or pay off debts
Response of IMF and World Bank is
privatization
Introduce market discipline
Give access to financial capital necessary for
infrastructure expansion
Built into loan conditionality agreements
or structural adjustment programs
Privatization is controversial
Results in increased cost to consumers
Some consumers may not be able to afford it
Governments must raise prices to make sale possible; profit
of buyers factored in
Potential abuses of monopoly power
Improvements to infrastructure and potential
extension of service to additional consumers may be
offset by refusal to extend to non-profitable areas
Buyers tend to be western multi-nationals
Loss of economic independence
Foreign owners dictating terms
Concentration of developing world resources in
western ownership
Privatized systems must include:
Guaranteed universal access
Fair pricing structure
Uniform quality standards
Protection from termination of service
Food: Security and Safety
International law recognizes the right to food
Physical and economic access to food
Access to food of adequate quality and quantity
Having the means to obtain it
By way of production or procurement
Food security defined by FAO as food that is
safe, nutritious and culturally acceptable and is
available, accessible and affordable to all
people
Over 800 million people suffer from
hunger and food insecurity
99% are in the developing world
21% of population of India
11% of population of China
58% of population of Central Africa
1996 World Food Summit, 185 countries and the
EC made a commitment to achieve universal
food security.
Pledged to reduce number of hungry people in
world to half (to 400 million) by 2015
According to FAO, number of undernourished
falling at rate of 8 million per year (target of 20)
Thus goal wont be reached until 2030
Hunger Facts
There is enough food to feed all the
people in the world
4.5 pounds per person per day
Real causes of hunger are poverty,
inequality and lack of access

Rapid increase in food production doesnt
necessarily result in food security
78% of countries reporting child
malnourishment export food!
India had 42 million ton grain surplus in 2000
5,000 Indian children die each day of malnutrition

Prosperity of a country no guarantee that
citizens wont go hungry
US has highest GDP in world
4.2 million households (4.1%) experience
hunger at least part of the year
Role of food imports
Removal of import restrictions and lower food
tariffs make importation of highly subsidized
food an attractive alternative
Potential problems:
Vulnerability to price and supply fluctuations and
political upheaval
Subject to manipulation by transnational corporations
Undermine livelihood of farmers
Consumer groups should focus government attention on:
Promoting food security and improved access to food
Reconciling demand for cheap food with adequate
compensation to farmers
Often involves scrutiny of middlemen
Address underlying causes of poverty
Give priority to production of staple foods for domestic
consumption
Address issues that contribute to food security
Urbanization
Land degradation
Water scarcity
Food safety
Food safety risks are increasing
Movement of food and live animals across borders
Changes in food handling
Emergence of new pathogens
Risks greater in developing countries
Pesticide risks
Direct risk through application process
Indirect risk through toxic residues in food
Hormones, veterinary drugs and antibiotics in
animals

Building food safety capacity is essential,
especially in developing countries
Food borne disease has significant impact on
both health and development
Many developing countries lack the
resources and expertise to implement food
safety policies
Codex Alimentarius Commission
Established by FAO and WHO in 1962
Harmonize food standards between
countries
Protect health of consumers and ensure
fair practices in food trade
Membership of 165 countries representing
98% of world population
Codex committees
Meat and poultry hygiene
Food additives and contaminants
Pesticide residues
Residues of veterinary drugs in foods
Food hygiene
Animal feeding
Biotechnology
Consumer concerns with genetic
engineering
Concerns about GE relate to
Sustainability of biodiversity
Ecological balance of life support systems
Wildlife
Environment
Health problems
Groups have called for moratorium on planting
GE crops until safety concerns are addressed
and appropriate controls put in place
Appropriate controls include
Labeling of GE imports
Banning of unlabeled GE foods
Some countries already have labeling laws
in place
Sustainable Consumption
The concept of sustainable consumption
Ever-increasing consumption is putting a
strain the environment
Outcome of the development model the
North follows and the South emulates
Sustainable consumption is viewed as the
only long-term strategy for survival
Many definitions of sustainable consumption
All share these basic principles:
Satisfaction of basic needs to improve quality of life
Improving efficiency in resource use
Minimizing emissions of wastes taking into
consideration the capacity of the earth to assimilate
the wastes
Adopting consumption patterns that will not
jeopardize the needs of current and future
generations
Ensuring equity in consumption within countries and
between countries
Obstacles
Ignorance
We dont know level of per capita consumption the
planet can sustain
Inequality
Differences within and between nations make
developing a common agenda difficult
Institutions
Existing political and economic mechanisms for
addressing major international problems of the
environment are inadequate

Successes
Growth in use of material resources has
slowed as a result of shifts in demand
towards less material-intensive products
Emissions have been reduced as a result
of tighter regulations and incentives
Municipal waste growth has slowed or
declined
Obligations of government
UN Guidelines on Consumer Protection:
Minimize resource utilization
E.g., greater efficiency in use of energy
Exercise leadership
Adopt and enforce regulations
Reinforce values
Consumer education programs for consumers
on impacts of their choices and behavior
Obligations of the corporate sector
World Business Council for Sustainable
Development in 2001 proposed a seven-point
blueprint for corporations; include:
Develop technological and social innovations to
improve quality of life and tackle depletion of
resources
Use media and advertising to promote sustainability
Create markets that reflect real economic, social and
environmental costs
Create opportunities for the poorest segments of
society

Obligations of consumers
CI urges consumer organizations to:
Educate members on sustainable consumption in
order to change attitudes and behavior
Provide information to consumers on products and
services and demand that same be provided by
merchants
Regularly assess environmental aspects of products
Represent the environmental interests of consumers
at all relevant national and international forums
Consumers are encouraged to avoid products
that
Cause environmental degradation during the
extraction of natural resources or during their
manufacture, use and disposal
Utilize large amounts of energy during their
manufacture, use or disposal
Cause unnecessary waste, due to over-packaging or
unduly short life span
Utilize materials derived from threatened species or
environments
Adversely affect other countries and communities,
especially those in the South
Consumers may be willing to take easy steps
that benefit the environment; but may not make
significant changes in buying habits, pay
markedly higher costs, or make changes in basic
lifestyles. Yet sustainable consumption calls for
such effective approaches. Consumer conscience
has to be sufficiently modified such as to effect
changes in behavior. This is the ultimate
challenge for the consumer movement.
Consumers have to be convinced that when they
vote with their pockets they are in fact
exercising a social, moral and political
responsibility that goes beyond their own
parochial interests and their present
generation.