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consumer protection PPT for ug studentss
- 1. Consumer Protection Source: Manualon Consumer Protection United Nations Conference on Trade and Development (UNCTAD) 2004
- 2. Overview: Three broadcategories • 1. Consumer Protection System – Policies, laws, institutions and structures that form the framework for a consumer protection system • UN Guidelines • Consumer Protection Agencies/Organizations • Consumer Protection Law • Consumer Redress
- 3. • 2. ConsumerProtection in the Marketplace – Various transactions that consumers enter in a market economy • Consumer information • Product safety and liability • Consumer credit • Insurance • Electronic commerce
- 4. • 3. ConsumerProtection and Basic Needs – Consumer education – The provision of utilities – Food – Health care delivery – Sustainable consumption
- 5. Part I. ConsumerProtection System Rationale for consumer protection • Addresses disparities in consumer-supplier relationship – Bargaining power – Knowledge – Resources
- 6. • State interventionpremised on grounds of – Economic efficiency – Individual rights – Distributive justice • Achieving bargaining equality between consumer and producer interests • Alleviating the problems of the particularly disadvantaged – Poor, elderly, children • “Consumerism, especially in the developing world, is now seen as a fundamental part of the strategy to eradicate poverty and to bring socio-economic justice to the underprivileged.”
- 7. – Positive communalvalues – Right to development
- 8. Consumer Rights • JohnF. Kennedy’s Message to Congress on March 15, 1962 • Four basic rights – Right to safety – Right to be informed – Right to choose – Right to be heard
- 9. • 1982 ConsumerInternational’s Charter of Consumer Rights • Eight rights – Right to basic needs • Food, clothing, shelter, health care, education, water and sanitation – Right to safety – Right to information – Right to choice
- 10. – Right tobe heard – Right to redress – Right to education – Right to healthy environment • Rights further re-enforced by adoption of UN Guidelines on Consumer Protection in 1985 and 1999
- 11. Who is the“consumer”? • Original definition limited to purchases for “personal consumption” • More recently includes small operators – Applies to farmers – Assures reasonable prices and quality of farm inputs
- 12. Who is responsiblefor consumer protection? • Government agencies – Ministry of Commerce, Investment and Consumer Affairs • Professional/Industry associations • Consumer organizations – St. Lucia Consumer Association
- 13. U.N. Guidelines onConsumer Protection (UNGCP) • Provide a framework for governments to develop and strengthen consumer protection policies and legislation • Minimum guarantee by governments that the measures will be undertaken
- 14. Obligations imposed on governmentsby the UNGCP • 1. Physical Safety – Assure that products are safe and conform to safety standards – Consumers receive information on proper use of goods and risks involved – Measures are in place for notification and recall of unsafe goods
- 15. • 2. Consumers’economic interests – Consumers obtain optimum benefit from their economic resources • Ensuring that goods meet production and performance standards • Adequate distribution channels and after sales services • Fair business practices are employed • Protection against contractual abuses • Information is adequate for consumers to make informed decisions and exercise choice
- 16. • 3. Standardsfor safety and quality of goods and services – Ensure there are national standards for safety and quality of goods and services – Such standards conform to international standards – Facilities to test and certify goods and services are encouraged
- 17. • 4. Distributionfacilities for essential goods and services – Especially to consumers who are disadvantaged, e.g., in rural areas
- 18. • 5. Redress –Establish and publicize mechanisms that are fair, affordable and accessible • Especially taking into consideration the needs of low-income consumers
- 19. • 6. Educationand information programs – Should involve consumer and business groups – Particular attention to disadvantaged consumers in urban and rural areas – Should be included in school curriculum – Training programs for educators, mass media professionals and consumer advocates
- 20. • 7. Promotionof sustainable consumption – Should be done in conjunction with civil society organizations and business groups – Sustainable consumption practices within government, by business enterprises and by consumers
- 21. • 8. Measuresrelating to food, water and pharmaceuticals – Prioritizes these areas – Should ensure quality control, adequate distribution and standardized information
- 22. • Food production –Sustainable agricultural polices and practices – Conservation of biodiversity – Traditional knowledge
- 23. • Drinking water –National policies should be developed to improve supply, distribution and quality of water for drinking and other purposes
- 24. • Pharmaceuticals – Developnational policies to ensure appropriate use, procurement, distribution, production, licensing arrangements, registration systems and information to consumers
- 25. Current status ofUNGCP • UN is surveying countries’ adoption • Many LDCs have nothing in place – No laws or consumer organizations • Doesn’t fully account for globalization and other changes in marketplace
- 26. Functions of aconsumer protection agency • Advise the government on consumer issues • Represent the consumer interest in other governmental committees • Enforce consumer protection and competition law • Conduct market surveys and research into consumer protection problems • Conduct product testing for safety and quality
- 27. Consumer organizations • Needfor an independent party that is non- political and non-commercial • Need for views of the under-represented and vulnerable groups • Some have wide membership and broad spectrum of concerns • Democracy involves participatory decision- making ; consultation with these groups is part of the nation-building process
- 28. Role of consumerorganizations • Provide independent information on products and services • Organize mass action, such as letter- writing campaigns, boycotts, rallies, etc. • Advise and act on consumer complaints and obtain redress for consumers • Organize workshops and seminars on particular issues
- 29. • Engage inpublic interest litigation on behalf of consumers • Conduct surveys and research to study problems faced by consumers or the impact of government policies on consumers • Engage in dialogue with government and business to inform, persuade or negotiate on behalf of consumers
- 30. • Consult withstakeholders to understand consumer issues and develop policy to address problem areas • Organize public education programs • Register and issue licenses for certain business activities • Issue administrative rules to regulate business entities
- 31. Consumer Law: Constitutions •Early constitutions focused on civil and political rights (“first generation rights”) – Freedom and security of an individual – Protection from state and public power • More recent constitutions confer wider range of human rights – Economic, social and cultural rights – “second generation rights”
- 32. • Trend isto include the right to development – “third generation” or “solidarity” rights • In constitutions adopted since 1980’s, consumer rights recognized as human rights • Thus included in the constitutions of many countries • Recognize disparity of knowledge, resources and bargaining power and provide for consumer rights
- 33. Consumer Law: Framework •Cover a broad range of practices, goods and services • Create consultative bodies • Vest agencies with rule-making powers • Create special tribunals with simplified procedures and rules of evidence • Confer on consumer groups the right to represent individuals • Provide for a range of remedies
- 34. Consumer Redress • Problemsinclude: – Expense – Length of time – Alienation – Adversarial
- 35. • Alternatives – Facilitatingaccess to courts • Legal aid for the needy • Contingent fee system • Permit paralegals to perform attorney functions – Court substitutes (ADR) • Statute-based tribunals • Arbitration • Ombudsman
- 36. • Assessing efficacyof ADRs – Access • Widespread publicity • Cost • Accessibility – Fairness • Independent – Transparency – Effectiveness • Scope comprehensive • Procedures simple • Rules of evidence relaxed • Speedy • Decisions binding on industry
- 37. Part II: ConsumerProtection in the Marketplace Consumer Information and Choice • “Consumer information ideally is meant to provide standardized, objective and impartial information direct to consumers at the point of sale, in order for them to decide which of the many branded products and services available will best suit their own needs.”
- 38. • Consumer informationis especially needed where – Products and services are high priced – Products and services are technically complex – No basis of assessment at point of sale – Little consumer knowledge of required performance before purchase
- 39. • Where informationis regulated (e.g., labels subject to mandatory labeling laws, such as pharmaceuticals) consumers have relatively few problems • Where information is unregulated (e.g., advertising or unregulated labels) consumers have more problems – Sometimes offset by information from independent consumer groups
- 40. • Additional problemsarising from expansion of international trade – Information on imported products • Many don’t comply with voluntary labeling standards – Information provided electronically over the internet (later)
- 41. Critical issues relatedto advertising • “Commercial advertising, when it is practiced fairly and responsibly, serves a useful function, informing the public about the existence of a product and the characteristics of the product. In order to be a positive influence, advertisements must be truthful and informative, must not exaggerate the usefulness or qualities of the product and should not play on the emotional needs of the consumer so as to create artificial needs.”
- 42. • Consumer concernswith advertising – Ads for products proven to be unsafe and/or addictive (e.g., alcohol and tobacco) – Ads that target and mislead vulnerable communities about the product – Ads that aggressively target children to consumer foods high in fat, sugar and salt – Ads for products that contain toxic or cancer-causing chemicals for which there is no scientific proof of safety levels (e.g., pesticides, aspartame, etc.)
- 43. • International codeson advertising – WHO/UNICEF Code of Marketing of Breastmilk Substitutes 1981 – FAO International Code of Conduct on the Distribution and Use of Pesticides 1985 – Framework Convention on Tobacco Control 2003
- 44. Product Safety Laws •Rationale for product safety laws – Products are increasing in complexity and sophistication; reasonable inspection will not reveal latent defects or hazards – Minimum and uniform standards ensure developing countries do not become dumping grounds for sub- standard products rejected in the country of origin – International standards will provide for unimpeded access to overseas markets
- 45. • Components (5)of a comprehensive product safety policy: • 1. Preparatory action – Surveillance of products in the market – Data collection (local and foreign sources) • “Consolidated List of Products Whose Consumption and/or Sale Have Been Banned, Withdrawn, Severely Restricted, or Not Approved by Governments”
- 46. • 2. Regulatoryaction – Development of product safety standards • 3. Monitoring action – Testing by government or reliable independent consumer organizations
- 47. • 4. Correctiveaction – Impose product bans – Warning notices – Product recalls – Seize stocks – Destroy stocks – Require modifications of the product
- 48. • 5. Compensatoryactions – Compensate consumers for loss – Deter future wrongdoing
- 49. Consumer Credit • Creditincreases demand for and consumption of goods and services • Critical to economic growth • Unfettered growth of credit has negative consequences – Impulse buying – Extra costs associated with credit – Excessive debt
- 50. • The poorpay more – Ineligible for credit in many stores; thus buy shoddy goods at higher prices – If credit advanced, higher rates charged • Credit often advanced to individuals with a history of default • Increased complexity of transactions (e.g. home equity loans/lines of credit) require more complex documents – More difficult to understand and compare terms, including cost of credit
- 51. • Consumer creditlaws should – Require lenders to provide consumers with copies of all documents – Establish a single method of calculating interest rates – Conspicuously disclose the rate – Control the price of credit – Regulate credit-related insurance – Provide right to cancel (“cooling off” period)
- 52. Electronic commerce • 1996fewer than 40 million connected to internet • 1997 number increased to 96 million • 2005 predicted to be nearly 1 billion • 1998 27.6 million buying goods and services online worth $32 million • 2002 more than 128 million spending over $425 million
- 53. • Issues: – Consumerredress in cyberspace disputes – Privacy – Identification of provider – Security of payments – Fraud
- 54. • Organization forEconomic Cooperation and Development (OECD) • United Nations Commission on International Trade Law (UNCITRAL) • Alliance for Global Business (AGB) – International trade associations • Global Business Dialog on Electronic Commerce (GBDe) – CEO-led business initiative • International Chamber of Commerce (ICC)
- 55. Part III: ConsumerProtection and Basic Needs Consumer Education • Objectives of consumer education are: • Develop skills to make informed decisions in the purchase of goods and services in light of – Personal values – Maximum utilization of resources – Available alternatives – Ecological considerations – Changing economic conditions
- 56. • Become knowledgeableabout the law and consumer rights, in order to participate effectively and confidently in the marketplace and take appropriate action to seek redress • Develop an understanding of the citizen’s role in the economic, social and government systems and to influence those systems to make them responsive to consumer needs
- 57. • Consumer educationis not the same thing as consumer information – Consumer education improves consumer’s ability to use information
- 58. • “By exercisingfree choice, based on knowledge of the facts, the consumer will be able to make the best use of his resources, money, time, knowledge and ability. He will thereby contribute to the proper functioning of the economy and stimulating effective and fair competition and he will thereby contribute to social and economic development.” – Council of Europe (1981)
- 59. • Modern conceptionof consumer education reflects the inter-relationship between the private household and societal responsibilities • Concepts such as sustainable consumption are woven into education about the impact of modern consumer lifestyles on the environment • In developing countries, consumer education is a tool to ensure that scarce resources of poorer consumers are not fritted away by unethical business practices
- 60. • Strategies forimplementing consumer education • A comprehensive program is directed to all consumers – Schools • Skills to make informed decisions • Skills to understand the impact of decisions of individuals, businesses and governments on the lives of others
- 61. – Those outsideformal education • Mass media • Trade associations • Trade unions • Resident associations – Special focus on • Rural areas • Low income • Vulnerable groups (seniors; disabled)
- 62. • Six fieldsof content suggested by the Nordic Council of Ministers (1999) – Personal finances – Rights and obligations – Commercial persuasion – Consumption, environment and ethics – Food – Safety
- 63. Utilities • Utilities areconsidered basic needs • Universal Declaration of Human Rights states that everyone has the right of equal access to public services in his/her country
- 64. • 1.6 billiondo not have access to energy supply • Over 1 billion lack access to clean water • One half of the world’s population has made a phone call • 5% of the world uses the internet – 88% of those are in developed world (15% of world’s population)
- 65. • Utilities presentunique problems for consumers – Generally involve basic and essential services – Peculiar economic characteristics that make competition difficult • Public policy has focused on regulating monopolies for public protection – Price and other controls – Public ownership
- 66. • Support forprivatization based on – Inefficiency of government ownership – Corruption – Failures in developing countries to provide adequate levels of service
- 67. The special caseof water • One reason for problems stemming from state ownership of water is that it’s too cheap • Prices are kept artificially low – On average, price covers 1/3 of cost – Shortfall made up by government subsidies • Consequences – Consumption is encouraged – No incentive to conserve – shortages – Governments don’t have the money to invest in infrastructure improvements or pay off debts
- 68. • Response ofIMF and World Bank is privatization – Introduce market discipline – Give access to financial capital necessary for infrastructure expansion • Built into loan conditionality agreements or structural adjustment programs
- 69. • Privatization iscontroversial – Results in increased cost to consumers – Some consumers may not be able to afford it • Governments must raise prices to make sale possible; profit of buyers factored in – Potential abuses of monopoly power – Improvements to infrastructure and potential extension of service to additional consumers may be offset by refusal to extend to non-profitable areas
- 70. – Buyers tendto be western multi-nationals • Loss of economic independence • Foreign owners dictating terms • Concentration of developing world resources in western ownership
- 71. • Privatized systemsmust include: – Guaranteed universal access – Fair pricing structure – Uniform quality standards – Protection from termination of service
- 72. Food: Security andSafety • International law recognizes the right to food – Physical and economic access to food – Access to food of adequate quality and quantity – Having the means to obtain it • By way of production or procurement • Food security defined by FAO as food that is “safe, nutritious and culturally acceptable and is available, accessible and affordable to all people”
- 73. • Over 800million people suffer from hunger and food insecurity – 99% are in the developing world • 21% of population of India • 11% of population of China • 58% of population of Central Africa
- 74. • 1996 WorldFood Summit, 185 countries and the EC made a commitment to achieve universal food security. • Pledged to reduce number of hungry people in world to half (to 400 million) by 2015 • According to FAO, number of undernourished falling at rate of 8 million per year (target of 20) • Thus goal won’t be reached until 2030
- 75. Hunger Facts • Thereis enough food to feed all the people in the world – 4.5 pounds per person per day • Real causes of hunger are poverty, inequality and lack of access
- 76. • Rapid increasein food production doesn’t necessarily result in food security – 78% of countries reporting child malnourishment export food! • India had 42 million ton grain surplus in 2000 • 5,000 Indian children die each day of malnutrition
- 77. • Prosperity ofa country no guarantee that citizens won’t go hungry – US has highest GDP in world – 4.2 million households (4.1%) experience hunger at least part of the year
- 78. Role of foodimports • Removal of import restrictions and lower food tariffs make importation of highly subsidized food an attractive alternative • Potential problems: – Vulnerability to price and supply fluctuations and political upheaval – Subject to manipulation by transnational corporations – Undermine livelihood of farmers
- 79. • Consumer groupsshould focus government attention on: • Promoting food security and improved access to food • Reconciling demand for cheap food with adequate compensation to farmers – Often involves scrutiny of middlemen • Address underlying causes of poverty • Give priority to production of staple foods for domestic consumption • Address issues that contribute to food security – Urbanization – Land degradation – Water scarcity
- 80. Food safety • Foodsafety risks are increasing – Movement of food and live animals across borders – Changes in food handling – Emergence of new pathogens • Risks greater in developing countries • Pesticide risks – Direct risk through application process – Indirect risk through toxic residues in food • Hormones, veterinary drugs and antibiotics in animals
- 81. • Building foodsafety capacity is essential, especially in developing countries – Food borne disease has significant impact on both health and development • Many developing countries lack the resources and expertise to implement food safety policies
- 82. Codex Alimentarius Commission •Established by FAO and WHO in 1962 • Harmonize food standards between countries • Protect health of consumers and ensure fair practices in food trade • Membership of 165 countries representing 98% of world population
- 83. • Codex committees –Meat and poultry hygiene – Food additives and contaminants – Pesticide residues – Residues of veterinary drugs in foods – Food hygiene – Animal feeding – Biotechnology
- 84. Consumer concerns withgenetic engineering • Concerns about GE relate to – Sustainability of biodiversity – Ecological balance of life support systems – Wildlife – Environment – Health problems • Groups have called for moratorium on planting GE crops until safety concerns are addressed and appropriate controls put in place
- 85. • Appropriate controlsinclude – Labeling of GE imports – Banning of unlabeled GE foods • Some countries already have labeling laws in place
- 86. Sustainable Consumption The conceptof sustainable consumption • Ever-increasing consumption is putting a strain the environment • Outcome of the development model the North follows and the South emulates • Sustainable consumption is viewed as the only long-term strategy for survival
- 87. • Many definitionsof sustainable consumption • All share these basic principles: – Satisfaction of basic needs to improve quality of life – Improving efficiency in resource use – Minimizing emissions of wastes taking into consideration the capacity of the earth to assimilate the wastes – Adopting consumption patterns that will not jeopardize the needs of current and future generations – Ensuring equity in consumption within countries and between countries
- 88. Obstacles • Ignorance – Wedon’t know level of per capita consumption the planet can sustain • Inequality – Differences within and between nations make developing a common agenda difficult • Institutions – Existing political and economic mechanisms for addressing major international problems of the environment are inadequate
- 89. Successes • Growth inuse of material resources has slowed as a result of shifts in demand towards less material-intensive products • Emissions have been reduced as a result of tighter regulations and incentives • Municipal waste growth has slowed or declined
- 90. Obligations of government •UN Guidelines on Consumer Protection: • Minimize resource utilization – E.g., greater efficiency in use of energy • Exercise leadership – Adopt and enforce regulations • Reinforce values – Consumer education programs for consumers on impacts of their choices and behavior
- 91. Obligations of thecorporate sector • World Business Council for Sustainable Development in 2001 proposed a seven-point blueprint for corporations; include: – Develop technological and social innovations to improve quality of life and tackle depletion of resources – Use media and advertising to promote sustainability – Create markets that reflect real economic, social and environmental costs – Create opportunities for the poorest segments of society
- 92. Obligations of consumers •CI urges consumer organizations to: – Educate members on sustainable consumption in order to change attitudes and behavior – Provide information to consumers on products and services and demand that same be provided by merchants – Regularly assess environmental aspects of products – Represent the environmental interests of consumers at all relevant national and international forums
- 93. • Consumers areencouraged to avoid products that – Cause environmental degradation during the extraction of natural resources or during their manufacture, use and disposal – Utilize large amounts of energy during their manufacture, use or disposal – Cause unnecessary waste, due to over-packaging or unduly short life span – Utilize materials derived from threatened species or environments – Adversely affect other countries and communities, especially those in the South
- 94. • “Consumers maybe willing to take easy steps that benefit the environment; but may not make significant changes in buying habits, pay markedly higher costs, or make changes in basic lifestyles. Yet sustainable consumption calls for such effective approaches. Consumer conscience has to be sufficiently modified such as to effect changes in behavior. This is the ultimate challenge for the consumer movement. Consumers have to be convinced that when they vote with their pockets they are in fact exercising a social, moral and political responsibility that goes beyond their own parochial interests and their present generation.”