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Government Protection of Consumers December 7, 2008

Posted by federalist in Regulation.

U.S. government has become increasingly aggressive in its use of laws and regulations to protect consumers.  This is a dangerous trend because government “consumer protection” can readily hide measures to protect special interests from competition, restrict individual rights, or simply increase bureaucratic power.

Is consumer protection even a legitimate role for government?  Consider the three degrees of consumer protection:

  1. Approving or Rating:  In this unobtrusive role an agency can provide helpful information that consumers can choose to either seek or ignore.  For example, the USDA will certify food as “Organic,” using objective standards.  Growers can choose to seek that certification, or not, and consumers can choose to look for it in food they buy, or not.  The NHTSA assesses the crash safety of vehicles, but manufacturers can still build vehicles that fare poorly and consumers can still buy them.  These are positive consumer protections, but it is not clear that we need government to provide them.  For example, you can get a very good indication of how well a vehicle will protect you by asking a car insurer.  You can verify the safety of an electric device by looking for the Underwriters Laboratories seal, or its quality by looking for ISO certifications.  Snell tests and confirms whether helmets are suitable for a particular use.  Evidently private independent agencies can rate products for safety and suitability as well as government agencies.
  2. Warning:  Corporate lawyers have done a great deal to propagate consumer protection warnings in recent decades, but since we can’t count on every producer to be sufficiently concerned with liability government has stepped up to the plate with laws to require warnings against known consumer hazards.  Tobacco causes cancer.  Old paint is toxic.  Eating raw meat is dangerous.  That house you’re looking to buy might be in a flood plain.  Regulations requiring warnings carry real compliance costs, but in the end producers and consumers can still go about their business buying and selling potentially dangerous or unsuitable products.
  3. Banning:  This is where we run into real trouble.  When is government justified in saying that even a fully informed consumer should not be allowed to purchase something?  In principle such a draconian measure should apply only to products whose use can have significant external public costs.  Leaded gasoline and weaponizable biotoxins come to mind.  But what about these other banned items:  Unpasteurized milk.  Toilets that use more than 1.6 gallons per flush.  Food containing trans-fat.  Medical devices or substances that haven’t passed the FDA’s tortuous approval process.  Clearly government is out of line with these bans.  A legally mandated warning would be sufficient in each of these cases: “This dairy product is not pasteurized and therefore may contain harmful bacteria.”  “This toilet uses 2 gallons per flush.  Your government prefers you buy toilets that use no more than 1.6 gallons per flush.”  “This food contains trans-fats, which increase your risk for heart disease.”  “This drug has not been approved by the FDA.  Your government assumes it is toxic and has no redeeming properties.  It could very well be more hurtful to your body than alcohol and tobacco.  Frankly, we would prefer you buy alcohol and tobacco since we have such high excise taxes on those drugs.”

I bring this up because a new law called the  Consumer Product Safety Improvement Act (CPSIA) is going into effect shortly and it includes a ban not only on toys that contain lead or phthalates, but also on toys that have not been independently verified to be in compliance with the ban.  The Handmade Toy Alliance has pointed out that craftsmen turning out small batches of handmade or custom toys cannot afford the thousands of dollars it costs to secure a third-party certification.  CafeMom explains the implications of the ban and points out that the law covers not just “toys” but anything that might by used by children.  Given the success we have had with voluntary ratings and mandatory warnings, is it necessary to shut down artisanal markets with bans?



1. Rushil - October 20, 2010


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