Consumer Protection Laws and Regulations - Prof. Eve Pentecost, Study notes of Marketing

Download Consumer Protection Laws and Regulations - Prof. Eve Pentecost and more Study notes Marketing in PDF only on Docsity! Notes Chapter 5 – Laws That Help Consumers Our last chapter dealt with schemes that hurt the consumer. We realize that consumers sometimes overpay, purchase inferior or unsafe products, and experience discrimination. Fortunately, we have laws and regulations that help to minimize these bad experiences. A law is passed by a state Legislature or by Congress. Some laws give power to an agency to adopt regulations (or rules) to implement the provisions of the law. Such regulations have the force and effect of law. The American way is all about competition, so why have regulations? 1. Competition produces losers as well as winners. A bank is a business not unlike a department store except that it sells financial services rather than furniture. We do not protect department stores against failure, but a bank failure seems to affect many more people in a community than would failure of most other businesses. So, too, farmers are traditionally small business people. Their life is a series of risks. But there arguably is a public interest in preserving the family farm. 2. Regulations may be imposed to assist consumers in the marketplace so that they can find an acceptable combination of price and quality with little or no effort.  Information. When we go to the grocery store how do we know that the bacon will not give us trichinosis? When we get on an airplane how do we know it has been maintained by a mechanic? When we go to a doctor how can we know he/she went to medical school? In each of these cases a regulatory scheme requires inspections, licensing, etc to let us assume what we would otherwise have to investigate. Note that regulations might develop even with the absence of government involvement. For example, the Underwriter Laboratories seal on electrical appliances is a private certification scheme developed by fire insurers who banded together to facilitate reliable information.