Consumer Protection Laws and Regulations

Background

Federal, state, and local consumer protection agencies all have a role in safeguarding consumers against fraud, deception, and unfair practices. But they need sufficient resources and authority to carry out their responsibilities. Consumers must be able to take part in the processes that make laws and regulations to protect their rights and interests. They should also have the right to challenge violations of these laws and regulations. Consumer participation in administrative, legislative, and judicial processes is often valuable for these purposes. 

The Federal Trade Commission (FTC) and the Department of Justice (DOJ) both enforce federal antitrust laws. These laws include prohibitions on unreasonable restraint of trade, price-fixing, bid rigging, and mergers and acquisitions likely to lessen competition or create a monopoly. The FTC and DOJ also review proposed mergers and acquisitions to assess their effects on competition. As companies grow and merge, some industries have become particularly concentrated with only a small number of firms selling products or services. In some cases, this market concentration has resulted in higher prices and fewer alternatives for consumers. In recent decades, some have argued that increased concentration is acceptable as long as prices remain low. But even with low prices for consumers, greater concentration may result in fewer suppliers, lower wages, and barriers that prevent new innovative companies from entering the market. And in concentrated markets, firms have tremendous power to set the prices, terms, and conditions on their offerings. 

The FTC has the authority to prohibit unfair and deceptive trade practices. It can also prevent unfair business practices that reduce competition, which can harm consumers. Such practices can increase prices, reduce quality, prevent accountability, or inhibit innovation. But enforcement has been inconsistent. 

The FTC typically addresses these practices in several ways: 

  •            by bringing cases in federal court seeking injunctions, redress, or both; 
  •            by bringing administrative complaints seeking cease-and-desist orders; or 
  •            through rulemaking at the direction of Congress. 

By contrast, if the FTC seeks to conduct a consumer protection rulemaking on its own initiative, it must comply with the much more complex and time-consuming procedures (sometimes referred to as Magnuson-Moss Rulemaking). The high cost and delay of such procedures may deter the FTC from utilizing its general rulemaking authority to prevent harm to older adults’ health, safety, and economic security. Instead, the FTC typically addresses these harms on a case-by-case basis, even for abusive practices that could be more effectively ended through rulemaking. 

In addition, state and local governments play an active role in protecting consumers. State laws prohibiting unfair and deceptive acts and practices are among the most effective tools in fighting consumer fraud and abuse. These statutes provide remedies for consumers, encourage merchants to resolve disputes fairly, and deter misconduct. 

State laws are similar to and complement federal laws in such areas as antitrust, unfair trade practices, and consumer health and safety. In many cases, state initiatives provide a model for needed improvements in federal regulation. Some local governments also employ tools to protect consumers, such as their licensing, taxing, or zoning authorities. These tools allow local governments to provide oversight and respond to competition or consumer protection challenges on the ground. Local governments may also protect consumers through public education and outreach efforts. 

CONSUMER PROTECTION LAWS AND REGULATIONS: Policy

CONSUMER PROTECTION LAWS AND REGULATIONS: Policy

Consumer laws and rulemaking

Policymakers at all levels of government should safeguard consumers against unfair, deceptive, or abusive practices. They should also defend against anticompetitive practices, promote robust competition, and protect against excessive market concentration. Policymakers should broadly consider the long-term effects of increased market concentration on producers, suppliers, and customers. 

All federal agencies should effectively and efficiently advance new rules while considering public comment. The Federal Trade Commission should be given streamlined rulemaking authority so that it can exercise its full authority to prohibit unfair and deceptive practices. 

States should actively use their legislative, regulatory, and enforcement powers to protect consumers. They should have the ability to enforce federal laws against unfair, deceptive, or abusive acts or practices. Where appropriate, local governments should also advance fair and vibrant markets through oversight, regulation, public outreach, and education. Local oversight and regulation may include the full scope of government authority, such as to license, tax, and zone businesses.  

States should enact or strengthen laws that prohibit unfair and deceptive acts and practices in trade or commerce. 

All appropriate state consumer protection laws related to specific industries should specify that state laws on unfair and deceptive acts and practices also apply. 

State consumer protection laws should not exempt certain types of merchants, such as insurance companies and utilities. Violations should not be limited to situations in which the merchant acts with intent.

Preemption

In general, consumer protection laws and regulations should not preempt the ability of lower levels of government to put in place stronger consumer protections. Federal consumer protection laws and regulations should serve as the floor, not the ceiling, of consumer protections. States should be able to provide additional consumer protections. This is especially the case when federal laws and regulations do not provide strong consumer protections. Likewise, state consumer protection laws and regulations should enable local governments to put in place stronger consumer protection standards.  

Redress

Consumers should have access to the full range of legal remedies when they have been harmed (see also Private Enforcement of Legal Rights as well as Pre-Dispute Mandatory Binding Arbitration policy). Policymakers should prohibit contract terms that waive legal rights or impose other unreasonable terms as a condition of receiving a good or service. These include the use of mandatory binding arbitration, non-disparagement clauses, waivers of class actions or jury trials, and requirements that people travel long distances to assert their legal rights.