The Federal Trade Commission (FTC) has authority to prohibit unfair and deceptive trade practices. The FTC 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. (In these cases, the statutes generally explicitly permit the use of streamlined notice-and-comment procedures.)
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 Americans’ 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, on the federal level, the Consumer Financial Protection Bureau An independent federal regulatory agency within the Federal Reserve System that is responsible for ensuring consumer protection in the financial marketplace by administering federal financial consumer protection laws. supervises various industries to prohibit unfair, deceptive, or abusive acts and practices.
In addition, state laws on unfair and deceptive acts and practices are among the most effective tools in fighting consumer fraud and abuse. These are sometimes known as state UDAP laws. These statutes provide remedies for consumers, encourage merchants to resolve disputes fairly, and deter misconduct.
REGULATING NONFINANCIAL CONSUMER PRODUCTS: Policy
Federal and state consumer laws and rulemaking
Policymakers should protect consumers against unfair, deceptive, or abusive practices. They should also protect against anti-competitive practices.
All federal agencies should be able to efficiently and effectively advance new rules while taking into account public comment. This includes the FTC, which should be given streamlined rulemaking authority so that it can exercise its full authority to prohibit unfair and deceptive practices.
Policymakers should prohibit contract terms that waive legal rights or impose other unreasonable conditions (such as mandatory binding arbitration, non-disparagement clauses, waivers of class actions A class action combines the claims of all the people injured by a particular policy or practice into one lawsuit. or jury trials, and requirements that people travel long distances to assert their legal rights) in order to do business.
States should ensure that all appropriate consumer protection laws related to specific industries specify that state laws on unfair and deceptive acts and practices apply.
States should adopt laws that prohibit unfair and deceptive acts and practices in trade or commerce.
Congress should ensure that states have enforcement authority over unfair, deceptive, or abusive acts and practices.
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.