Consumer Protection and Freedom of Choice

In any well-organized society government can be expected to have considerable influence over the conduct of business, if only as a referee. However, under the influence of those who see in government control a panacea for most of our social and economic ills, the social control of business and its side-effects on consumption gravely threaten not only a democratic way of life, but possibly our national existence.

Students of social control of busi­ness have tended to emphasize the need for controls, referring to the dishonesty and deceit by business and the consequent injury to con­sumers. The general theses have been to justify the existence of controls, to argue for more con­trol, or both. Little attention has been given the problems such legislation has created for the consumer whose freedom of choice has been thereby limited.

Organization is preferable to anarchy, of course; and organiza­tion implies objectives and a pro­gram for achieving them. Some rules, enabling and limiting, have their place in a free exchange sys­tem. Indeed, we must recognize with Lewis Schneider that “free­dom of the market… is not a self-causing phenomenon. It has certainly not persisted everywhere and at all times and, to exist, it requires social, or extra-economic support.”¹

As our culture has matured, some conflicts have appeared be­tween desired social values and some economic values. We can reasonably assume that the steps taken to resolve these conflicts through regulation have been in­tended to modify or limit eco­nomic activities without changing essentially their ends. “Just as we regulate football playing without changing the rough and vigorous struggle among the players… so we may do with business. We can regulate competition to a great extent, without depriving it of its essential quality or effec­tiveness as a democratic proc­ess….”2

Change of Emphasis

This may have been the intent, but the philosophy of supervision and control has gone beyond this. It has moved from protecting the public’s life and health to pro­tecting, in the words of a Con­necticut statute, “the purchasing public from injury by merchandis­ing deceit.” Underlying this phi­losophy is the intent to include not so much what consumers may want, but what may be considered good for them. More specifically, the principles which appear to have guided the formulation of many controls and the manner of their enforcement seem aimed at achieving what consumers should want or what they would want were they as intelligent, as intel­lectually capable and prepared, and as socially oriented, far­sighted, and as well-intentioned as those behind the programs.

Legislation in behalf of the public is seldom engendered by the public. “A law is always the active work of a minority, with the cooperation of a majority of a supposedly representative body who may be barely willing to vote for it.”^³ Herein lies the problem. It arises from the difference be­tween the viewpoints of those who work for the law and most of those who will be affected by it. The consumer mass market does not think as does the minority; it does not have the same objectives in life, it does not want the same kind of goods (and only partly because the mass market buyer cannot afford them, because often he can); this market does not make its buying appraisals in the same way. Competition being the directive force in a democratic economy, “the competitors neces­sarily have to put such goods and services on the market as con­sumers want.”⁴ The result is con­flict.

Some of this conflict is unavoid­able. Legislation has often been used to meet emergencies affect­ing large numbers of persons, emergencies whose consequences could be severe and irrevocable and for whose control the evolu­tionary processes of popular edu­cation and subsequent acceptance are too time consuming. It is also true that the enactment and en­forcement of various laws have speeded materially social progress toward some desirable objective.

Dangerous Results

But whatever the advantages of this approach, there are also sev­eral dangers. First, such legisla­tion while perhaps achieving the objective may entail consequences unforeseen and more to be shunned than the original prob­lem, e.g., prohibition. As Bacon once wrote: “The remedy is worse than the disease.” Even J. M. Clark concedes that “the machin­ery of government cannot be trusted to pick out unerringly the true needs of the community as a whole…” adding, “it is hard to frame regulations without hampering some perfectly legiti­mate and useful kinds of private dealings or encountering unex­pected and insuperable obsta­cles….”5

The second danger, voiced 99 years ago by John Stuart Mill,⁶ is that “impatient reformers, thinking it easier and shorter to get possession of the government than of the intellect and disposi­tion of the public, are under the constant temptation to stretch the province of government beyond due bounds….”

A third danger is that there is no known boundary! How far can protective legislation be carried before the whole program bogs down under overwhelming costs, haphazard or discriminatory en­forcement, or before our demo­cratic system is irrevocably lost?

Finally, we may note a fourth danger, that of seducing the con­sumer into such a false sense of security and dependence as to de­prive him of any normal sense of responsibility and self-reliance as we know it. How long can a na­tion of such dependents survive in a world of survival of the fit­test? This is the problem stated.

Long-Run Implications

There is a need for a basic phi­losophy oriented not to expedi­ency, nor even to what some well-intentioned minority may deem desirable, but to the public dis­position (or only a little above it). On this foundation an over-all plan for social and economic re­form may be developed and by which proposed legislation may be evaluated and the long-run implications of such legislation may be considered as they may im­pinge on people living within our economic and social framework. To do less is to continue the con­flict, and to continue drifting without course, pushed one way and then another by the pressures of current circumstance and of individuals and groups whose vision may extend only a little beyond the anticipated immediate effects of a proposed law.

If a social philosophy is to be oriented to the public disposition, attention is due what American consumers want from life. These objectives are difficult to learn di­rectly from the people themselves since most appear to have only a vague idea of what they seek and are still less definite in their ver­balization of it. However, their behavior suggests some funda­mental wants: a so-called full, free life; a life of international peace, of material abundance, freedom to choose among a wide variety of product offerings and varied diversions, a maximum of opportunity to “get ahead,” means for publicly expressing their suc­cess, and all with a minimum of worry and drudgery.

Studies of social class values⁷ have provided useful clues to con­sumer objectives. The social sys­tem in the United States being an open system provides unusual opportunities for people to move upward from one class to another. This puts considerable emphasis on status and the adoption of those values appropriate to it. “What a woman buys to furnish her house and clothe her family,” reports Warner, “is highly con­trolled by her social class values. Keeping up with the Joneses and proving, ‘I’m just as good as any­body else,’… are grim expres­sions of the serious life of most American families. Products are not only items of utility for those who buy but powerful symbols of status and social class.”8

Status Symbols

This mobility opens the door for expression of self-esteem through the adoption of manners and the consumption of goods which iden­tify one with the social class to which one belongs, and more im­portant, with the social class to which one aspires. This kind of consumption behavior imparts to products various attributes apart from mere physical characteristics and utilitarian values.

What consumers want consists not so much of what will last longest and certainly not that which is the least expensive. They want goods which bear the stamp of approval by their group. “We feel the need to have the same things that other people in our group have or need.”⁹ It is clear that by comparison with the de­mands of social custom or stand­ards, the mere physical attributes of products take on second and even third place as influences on consumption.

The advocates of social control over business, particularly over advertising, do not come from the “common man” level. Understand­ably, their viewpoint being dif­ferent from that of the mass mar­ket buyers, their objectives differ as do their standards. Their goals of consumption are at variance with what the buying public seeks. Yet it is this level of thinking that permeates much social con­trol legislation, and affects even more the interpretation and im­plementation of the law. In retro­spect it is apparent that some of the social and economic objectives toward which much social legislation is aimed and the social philosophy of those who typically advocate, initiate, and enforce these rules are at odds with what the mass market of American con­sumers clearly demonstrate they want. Thus, they are at odds with the manner in which business competes to supply consumer de­mands. While some control may be necessary, it ought not to be imposed one law upon another like patches to cover emergencies, nor should more rules be made except as part of a long term plan for meeting the needs of an expand­ing economy which plan is formu­lated with due regard for the realities of the American social and competitive system.

What Is the Purpose?

How much control and supervi­sion is needed depends upon (1) the purposes for which it is to be exercised, (2) how much the so­cial, economic, and political system can afford without losing more than it gains, and (3) the limits imposed by the relative effective­ness of enforcement via the legis­lation route as against other methods of persuasion.

A fundamental criterion for judging any control proposal is the purpose it is to serve. The principal purpose for controls should be consumer protection against the consequences arising from normal and reasonable acts where those consequences are usu­ally fatal, permanently injurious, or otherwise irreparably harmful in significant degree. Such protec­tion should be afforded the con­sumer against these consequences under the circumstances that with reasonable knowledge and the ex­ercise of ordinary prudence and judgment he could not in the nor­mal process of buying have dis­covered nor have had reason to expect such consequences and their high probability of occur­rence. This criterion clearly rules out attempts to protect the indi­vidual against all risks or against all human error. Legislation can­not be looked upon as a device for removing all the hazards of living.

It is one thing to prohibit the sale of poisonous food, another to require a warning label on paint remover that it is unsafe to drink. One has a right to expect that a household deodorant is not ex­plosive; he enjoys no such right against a “wonder drug” with “miracle ingredients” the risk of whose use is that it does not work supernatural cures.

The difference between “pro­tecting the consuming public from injury by product use” and pro­tecting “the purchasing public from injury by merchandising de­ceit” is critical and significant. Physical injury is relatively easier to identify—a person has been poisoned or burned, or he has not. The risk of physical injury is more universal—deleterious sub­stances injure almost everyone and about equally. Of greater im­portance is that there may be less opportunity to recover from a physical injury, and a money-back guarantee or financial compensa­tion is not compensatory in kind. Money payments cannot restore a scarred face. For this reason pro­tection against exposure to such risk is needed and justified.

Economic Injury Recoverable

However, protection against ex­posure to risk of economic injury (beyond that offered under com­mon law of fraud) is neither so necessary nor so justifiable. Injury by merchandising deceit is com­pensable financially. A buyer so injured can be restored to his for­mer state. Moreover, economic gain or loss is determined largely subjectively: hence, it is difficult to identify and to measure by a public agency, for what may be a loss to one person may be a bar­gain to another. Legislative pro­tection against exposure cannot be provided in any feasible man­ner so as to apply equitably to all.

Particularly is this true of ad­vertising alleged to be misleading. It is pertinent we remind ourselves that advertising is propaganda. As such, it is used to gain the uncrit­ical acceptance by the public of some conclusion predetermined by the propagandist. By definition it is “biased, partial, and one-sided”—to use the terminology of Pro­fessor Edmund D. McGarry.” Dr. McGarry goes on to say that if propaganda is to be effective,” it must be expressed in terms in which the consumer thinks, with the same overtones and exaggera­tions of the product that the well-disposed consumer will attribute to it.” It can be cogently argued that except for clear-cut falsity, so-called advertising deceit is as much a matter of inference as im­plication. As an example, admit­tedly extreme but true, the adver­tising of a reducing product was ruled “misleading, if not false” in Connecticut because (among other reasons no more relevant) it of­fered a money-back guarantee of effectiveness. This indicated to the enforcement agency that the spon­sor knew his product would not be effective for each and every pur­chaser!

Where Are the Limits?

How far can social control be carried? To go further than to protect consumers beyond those extraordinary consequences from which there is no recovery is to enter a realm of protection that has no boundaries. Yet, this is just what Connecticut, various other states, and the federal gov­ernment have done. Where this can lead is suggested by a Connec­ticut example.

In this state manufacturers of women’s brassieres and corsets are licensed on the grounds that these items of wearing apparel are “devices” within the meaning of the law. Consider this imaginary, but not entirely impossible, exten­sion of this regulation: With equal logic men’s athletic support­ers and suspensories should be similarly controlled since_, they, too, “affect the… function of the body.” Do not sanitary products fall into this category? Certainly, shoes affect “the structure… of the body” and may reasonably be considered for inclusion. What about girdles, colonic syringes, as well as sunglasses? If sunglasses are included, why not also wind­shields on automobiles, and win­dows in homes, and so on, ad in­finitum?

Once started, such attempts toward protection can know no limits. To go on is to saddle busi­ness with an unsupportable bur­den, to create an enforcement problem all but impossible to solve, and to seduce the consumer into such a sense of false security and such dependence upon govern­ment as to threaten the founda­tions of the American democracy.

Even within the limits here re­garded as acceptable, how much protection can the American sys­tem afford? For example, how far can the United States go in an at­tempt to protect a life (much less a pocketbook)? What costs can the nation incur, what costs will peo­ple accept?

Life Sometimes Risked

The preservation of human life is indubitably important within the American social scheme. Yet, there are situations in which the American people knowingly, will­ingly, and legally (if also with some measure of regret) subordi­nate life to other ends, e.g., capi­tal punishment and war. The dawn of Christianity—a religion whose teachings are often used as a basis for advocating social legislation—began with a day of martyrdom. Life’s blood has often gushed in defense of values greater than life, among them liberty. In a lesser sense, few projects for the construction of high bridges, turn­pikes, and skyscrapers are under­taken today without the awareness that death may be part of the final cost. Many of today’s sports in­volve the loss of life, and child­bearing, one of the most commonly accepted experiences in life, is not without its death rate.^¹¹ In short, loss of human life is by no means extraordinary in modern America. While efforts are made to hold these losses of life to a “reason­able” minimum, there is seldom an attempt to achieve an absolute minimum in the sense of banning all automobiles from the streets as a means of stopping traffic fa­talities. There is a limit beyond which the social group as a unit cannot or will not burden itself in the protection of the individual. Put baldly, the question, “How much is a human life or a pocket­book worth?” must be faced squarely if future social legisla­tion is to be considered realisti­cally. How much protection the American system can afford must be considered in terms of both the financial burdens imposed on the business structure for compliance and on the public for enforcement, as well as the implications for a private enterprise exchange sys­tem and a political democracy.

The cost of control as now pro­vided on the statute books is clearly greater than the public has shown through its legislatures its willingness to pay. As measured by this criterion neither the states nor the federal government can afford any more controls. Indeed, it appears that the present monies provided each enforcement agency are just about sufficient to achieve only those objectives here pro­posed—protection of the consumer only against irrevocable losses. This suggests, at least, that this may be the level of protection gen­uinely wanted by the citizenry. Certainly, this appears to be the level they are thus far willing to pay for.

Social regulations have their in­cidence also on the costs of pro­duction and distribution, costs which ultimately the consumer must pay.

Undermining Self-Reliance

But there is an even more im­portant, far-reaching cost inher­ent in public protective legislation: the tendency to undermine and to weaken the prudence, the fore­sight, and self-reliance of the in­dividual. Clark^¹² places “a compe­tent and responsible people” at the head of his list of requirements for a successful democracy. Com­petent for. what? Competent “to meet the terribly exacting de­mands of real democratic organi­zation…” This competence he takes to be derived from “education in the broadest sense and of the broadest kind.”

“This means,” he continues, “self-education more than instruc­tion and includes all the factors of environment which may serve to develop intelligence.”

Public education in the United States was founded on the princi­ple that only an informed popula­tion could govern itself, indepen­dence of thought being the fruit of learning. But times have changed. Since the days of the colonies government has enacted more and more legislation whose effect has been to shift responsi­bility from the individual to the group. The result is a new genera­tion whose sense of reliance upon government would have been un­imaginable to their ancestors. Times.have changed, but one fac­tor in the social equation persists: dependence for an effective politi­cal democracy on an alert, in­formed, self-reliant, independent, thinking people.

A further succession of protec­tive legislation can lull our people into such a false sense of security as to render us easy prey for dem­agoguery at home and aggression from abroad. In more fundamen­tal terms, can a nation of overly protected people survive as a de­mocracy? Is there not real danger in the assumption, an assumption seemingly inherent in the philosophy of social control, that the perfect state of living permits of no losses, no accidents, no illness, no injury, no death?

Alternate Steps

If legislation is not the answer, what can be done? One approach is to fight fire with fire, to fight merchandising deceit with the publicity of truth. Such an ap­proach would be to the advantage of enforcement agencies, of busi­ness, and particularly to the ad­vantage of the consumer.

“The more complete the under­standing on the part of industries concerned, the greater should be the compliance and the less costly the enforcement…. The greater the public knowledge the less dif­ficult it should be to obtain the funds necessary for adequate en­forcement. Further, the public will tend to demand compliance.”¹³

Publicity is the means by which most businesses seek the favor of buyers. When this favor is sought by the concealment of significant dangers incident to ordinary use and which dangers cannot be de­tected or inferred by the casual buyer, adequate publicity exposing these dangers would counter the advertiser’s effort. It would con‑tribute to greater understanding and wider appreciation by the con­sumer of the need for vigilance and prudence while leaving him the latitude of free choice. Cer­tainly merchandising and adver­tising falsification and deceit can be effectively exposed in this way. But even within this context it remains critical that the criteria by which potential dangers and promotional puffery are judged be realistic, not idealistic. Under present state and federal law, to be legal an advertisement may not be false in any particular. Of this one may ask: In what other walk of life is similar substantiation of claims, a similar purity of truth required? Perhaps it is in the sci­ences. Yet, much that was once accepted as scientific truth has since been revealed to be either without foundation or downright false. Advertising is said to have great influence over consumers and therefore is properly subject to social supervision. But what could have a more profound and far-reaching effect on the Ameri­can people than what is taught in their schools and in their churches? Despite this, our his­tory books abound with inaccura­cies. As for religion, one may won­der how long a commercial firm would be permitted to advertise such miracles, cures, and other benefits as are so glibly phrased in the public utterances in behalf of religion. Further, it is, indeed, a curious facet of human behavior that the laws which require truth (in every particular) in advertis­ing are enacted by politicians whose advertised promises and sales claims are, fortunately for them, not subject to the same tests of veracity.

Legislated Morality

In the centuries past, the hand of the thief was lopped off in re­tribution and as a warning to others; but thieving has not stopped. Capital punishment is slowly being discarded since crim­inology shows beyond reasonable doubt that electrocution, hanging, and asphyxiation have not effec­tively stopped murder. Morality cannot be produced through legis­lation.

Certainly, the moral level of business cannot be raised in this manner above that of the general population. It is forgotten, or overlooked, that business men and women are people; that they are members of the community and wear the cloak of business hardly more than (if as much as) half their waking hours. They are, at the same time, church members, contributors to charities, and tax­payers. They are also citizens. Their morality is not lower than that of their contemporaries. In­stead, being on the whole some­what more able intellectually than the general population and recog­nizing some responsibility as em­ployers and producers (though they find it economically advan­tageous to be so), they are mare inclined toward honesty and fair dealing than are those of the com­mon morality. Many are the busi­nessmen who have cheated their employees and customers; but there are many times more cus­tomers and employees who by equal guile have robbed, cheated, and deceived business. To single out business for social moraliza­tion in defense of consumers is tantamount to arresting only those lawbreakers who happen to be wearing a suit of particular color and weave at the time of their ap­prehension.

Individual Achievement

Unless and until a majority of a population not only verbalizes its endorsement of honesty and ethical dealing but also consciously and willingly observes this custom of behavior so as to make the law merely the formal expression of public practice, business will tend to meet the demands put upon it by the market. Offenders may be punished, but the law remains basically a sham and a mockery. The mass market may vocalize its endorsement of the principles expressed in the laws, but its be­havior belies its words.

To deprive the buying public of certain products because the effect of product use is short-lived, to ban desired goods because their selling price is “too high” above the cost of production is an inva­sion of the public’s freedom of choice. To require (as Connecti­cut does) that goods may not be sold at less than 6 per cent above cost is not consumer protection but a fraud on the public. To at­tempt to force advertising into the straight-jacket of literal truth is to attempt a degree of control which has proved to be not only costly, but fruitless.

As a concluding generalization, it would seem that the long-run best interests of the nation will be served if to protect consumers by controlling business, particularly advertising, efforts are limited to those business activities or prac­tices from whose consequences the citizen cannot recover. These the public will not only endorse, but will actively support.

Footnotes

1 Lewis Schneider, M. B. Oga, Jay W. Wiley, Power Order and the Economy (New York: Harper & Bros., 1954), p. 652.

^² Lewis II. Haney, Value and Distribu­tion (New York: D. Appleton, Century Company, Inc., 1939), p. 208.

^³ J. M. Clark, Social Control of Busi­ness (New York: McGraw-Hill Book Company, 1939), p. 10.

⁴ Haney, op. cit., p. 135.

5 Clark, op, cit., p. 28.

6 Principles of Political Economy (New York: D. Appleton & Company, 1864), II, 385.

⁷ W. Lloyd Warner, Marchia Meeker, and Kenneth Eells, Social Class in America (Chicago: Science Research As­sociates, Inc., 1949); Allison Davis, Bur­leigh B. Gardner, and Mary R. Gardner, Deep South (Chicago: University of Chi­cago Press, 1941); W. Lloyd Warner, Paul S. Lunt, The Status System of a Modern Community, Vol. 11, “Yankee City Series (New Haven: Yale Uni­versity Press, 1942).

⁸ Warner and others, op. cit., pp. vi-vii.

⁹ George Katona, Psychological Anal­ysis of Economic Behavior (New York: McGraw-Hill Book Company, 1951), p. 109.

10 Edmund D. McGarry, “The Propa­ganda Function in Marketing,” The Journal of Marketing, XXIII, No. 2, (October, 1958), 131-39.

11 It is notable that the will to pre­serve and protect human life does not extend in Connecticut and Massachusetts to permitting physicians to prescribe birth control measures even when the life of the mother and child may be forfeit.

¹² Clark, op. cit., p. 54.

¹³ Citizens Advisory Committee on the Food and Drug Administration Report to the Secretary of Health, Education, and Welfare. 84th. Cong., 1st Session, House Document #227.

 

 

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Ideas on Liberty

Self-Reliance

I yield to no man in the world in a hearty goodwill towards the great body of the working classes, but my sympathy is not of that morbid kind which would lead me to despond over their future prospects. Nor do I partake of that spurious humanity which would indulge in an unreasoning kind of philanthropy at the expense of the great bulk of the community. Mine is that masculine species of charity which would lead me to inculcate in the minds of the labouring classes the love of independence, the privilege of self-respect, the disdain of being patronised or petted, the desire to accumulate, and the ambition to rise. I know it has been found easier to please the people by holding out flattering and delusive prospects of cheap benefits to be derived from Par­liament rather than by urging them to a course of self-reliance, but while I will not be a sycophant of the great, I cannot become the parasite of the poor.

RICHARD COBDEN, 1836