The Importance of Consumer Defense
Consumer defense is a broad term that encompasses a wide range of legal and regulatory measures designed to protect consumers from unfair business practices. It includes both legal and non-legal means, including advertising regulation, labeling standards, safety regulations, and product liability laws (Durovic and Micklitz 2017, p. 2).
The first goal of consumer protection is to ensure that producers provide safe, quality goods and services at fair prices. This is often achieved through market-reinforcing interventions, such as disclosures of risks, enforcement of anti-discriminatory laws, and policing of business practices by the government.
Another approach is to enact statutory and regulatory reforms that increase consumer access to a wide variety of products and services. These reforms can include removing restrictions on trade, improving access to health care, and strengthening consumer rights to information.
These reforms may be voluntary, or they can be mandated. Either way, they must be tailored to the specific needs of the individual country or region.
This is particularly important with the rise of the Internet. The availability of an infinitely flexible global marketplace and the ability to move and trade goods and services has led to a growing demand for more comprehensive rules to protect consumers against unfair business practices.
One of the best ways to increase consumer protection is through contract law. Among other things, this allows consumers to pursue legally binding, contractually-enforceable claims against businesses for breach of contract.
However, there are some transactions where contract law does not apply. These include some consumer cyclicals (food, beverage, tobacco, personal products), and certain utility companies that produce or distribute essential goods and services during all phases of the business cycle.
Defensive stocks are typically good hedges against market volatility owing to their regular and predictable demand, even during economic downturns. These companies are typically food, beverages, household goods, healthcare providers and utility companies, which generate steady cash flow and earnings from regular consumption of these essential products and services regardless of the economic environment.
They are a great asset for investors looking to build their portfolios, and they make it easier for them to diversify their stock holdings across the market.
In the United States, for example, consumer cyclicals, such as those in the grocery sector, perform better during weak economic conditions than nondefensive stocks that sell discretionary items and are more prone to market volatility. The reason is that these companies provide essential services to consumers, such as gasoline, electricity, and water, which help maintain a relatively stable level of demand during cyclical downturns.
