Consumer Protection, the State, and the Market

Governmental regulation of market relationships and human activities is often cloaked with fine goals and intentions. Consumer rights protection is defined as one of major importance. Sadly, it is an all-too-common fallacy to think that it is a “wild” market that we have, and that this market cannot protect consumer rights. Few attempts to look at how and to what extent these rights are protected on the market, and what role the authorities may play here.
What protects the consumer?
In a free market economy, hardly any salesman would risk selling a good that would frustrate rather than please the customer. Likewise, hardly any manufacturer would risk launching a product that fails to meet established quality standards. Those who do so are going to price their products accordingly. The most important safeguard to protect consumer rights is a voluntary agreement between parties and the unwritten market law to treasure your reputation. If, nevertheless, some customer happened to be duped, and the truth got out, the culprit would in most cases admit his blunder and do his best to rectify it. Again, the opinion of potential buyers and the media, rather than official government requirements, would be crucial.
Only if these measures appear to be ineffective for some reason may government authority be resorted to. There are two methods authorities may use to protect consumer rights. These are civil and administrative methods. The civil method is established in civil law and is based on traditional protection measures defined in private law. These include, for example, obligations to enforce a contract or to indemnify for damage or the right to go to court to have such liabilities met. Universality, an objective settlement of disputes, and a real compensation for damage incurred are the advantages of these methods. Lengthy and costly lawsuits are the main shortcoming. Many would not risk protecting their lawful consumer rights because of a lack of appropriate qualifications, time, money, or initiative for litigation.
Professional lawyers, it seems, could help solve some of these problems and inconveniences. Yet, things are not that simple in Lithuania. Article 36 of the Law on Advocacy prohibits remunerating for legal services depending on the outcome of the case. In other words, remuneration for legal services must always be the same, no matter whether the case has been won or lost or whether compensation for losses will be paid or not. Under such restrictions, an ordinary citizen who can assess neither the complexity nor the risk of a lawsuit would not risk spending a fortune on lawyers’ fees. This restriction ties not only the hands of a consumer. It inhibits private defence of consumer rights. One successful case or even an opportunity to win a case would provide an incentive to give up the very thought of harming consumers.
The administrative method is an attribute of public law. This method, with its administrative and even punitive sanctions, is supposed to provide additional incentives to adhere to established civil and legal norms, such as not selling products that are dangerous to human life or health.
Regrettably, Lithuania and other countries that were under the influence of socialist law still tend to rely on the administrative method. The defects of this method are obvious. For one thing, the aim is not compensation for damage or losses but punishment of the wrongdoer. The victimised person seems to be of little consideration. Second, government regulation limits the freedom of choice, hinders the progress and does not allow the costs to drop. Thus, while in a free market mutually beneficial decisions are reached by way of voluntary agreement, state intervention limits free contracts. Sadly, rather than putting the legal system in order, new laws continue to introduce new and increasingly convoluted administrative methods of consumer rights protection.
Is there a need for government intervention?
When a new goal has been defined, it is essential to look at what legal or other measures already exist to help attain that goal and how these measure are established. The starting point is to take a clear view of the existing defects and weaknesses and to remove them by revising functioning laws or adopting new ones.
In a free market, as was mentioned before, it just doesn’t pay to cheat the consumer, and this is a guarantee of the consumer’s safety. The reasons why self-regulatory market mechanisms may fail to solve the concerns of consumer protection are manifold. In any case, the problem is usually not with the market but with those who judge it based on their personal tastes, preferences, and purses. If such people seek to “protect” all consumers and resort to government coercion mechanisms for this purpose, there is a danger that it is only them who will be “protected” in the final analysis. Others will pay the price of limited choice.
If government authority is still to be used in providing additional defence of consumer rights, the right choice of measures is crucial. Usually, laws prescribe a whole range of administrative and civil measures designed to ensure product safety. It is therefore important to secure that newly introduced mechanisms do not bring any collisions with existing regulations and market forces. Otherwise, contradictions and incompatibility of legal provisions will preclude any positive results, and the mangled legal system would stymie the operation and development of functioning protection mechanisms.
For the consumer to become the true king on the market, there must a market in the first place. Government-adopted methods that are intended both to safeguard the consumer and to constrain the market will do harm to everyone, especially to consumers. If the aim is to help consumers, the state must properly perform its functions. Rather than trying to perfect market processes, it should ensure effective legal procedures and execution of court decisions. It should also allow consumers to protect themselves.