The Importance of Consumer Defense
As the name suggests, consumer defense involves fighting for people’s right to be safe and healthy from products that are harmful or dangerous. This includes protecting consumers against unauthorized use of their personal information, unfair practices by businesses, and other illegal activities.
Governments are involved in consumer protection at the national or state level, and in some cases, even at the local level. Private organizations are also often involved in consumer protection, either through codes of conduct or active consumer assistance services that publicize and communicate with companies on consumers’ behalf. Businesses may even have internal consumer affairs departments.
The most significant source of international consumer law is the United Nations’ Guidelines on Consumer Protection (UNGCP). This set of guidelines is a fundamental tool for the development and application of consumer protection laws, as it defines the core consumer rights that all consumers should be able to enjoy. However, due to their nature as non-binding, the UN Guidelines have left a lot of autonomy to individual countries to design their consumer protection systems in line with their legal system, particular economic, social and political contexts, which is certainly a good thing.
There are three ways in which governments can protect consumers: market-reinforcing intervention, such as requiring disclosures from businesses; combating unlawful acts by businesses; and command-and-control intervention that restricts the prices, terms, or products that can be offered. Market-reinforcing interventions are likely to yield the best results. The most important of these is the regulation of product safety, which is a major concern in all sectors of the economy.
As a result, the earliest form of consumer defense was weights and measures. This included the establishment of standard sizes and weights of goods, as well as a system for certifying merchants in order to verify that they were selling according to the law. This was a necessary step because consumers needed to be able to trust the merchants that they were purchasing from. If a merchant sold stale or contaminated food, for example, a consumer could become seriously ill and possibly die from the transaction. This principle was the underlying idea behind the concept of “caveat emptor” or buyer beware.
Today, the most sophisticated forms of consumer defense involve global cooperation between consumer protection agencies. This is facilitated through the International Consumer Protection and Enforcement Network (ICPEN), a group of consumer protection officials from all over the world who work together to discuss issues, coordinate efforts and share experiences. This cooperation, especially with regard to law enforcement, is a better policy option than substantive harmonization of consumer protection laws, which would be difficult and costly to implement in practice, and which does not necessarily produce the desired confidence boost in consumers.
In general, stocks that are considered consumer defensive are good hedges against market volatility because of stable demand for their products regardless of the business cycle. These types of stocks include companies that make or distribute consumer staples, such as beverages, hygiene products, and some household items. In addition, many of these stocks pay dividends, which provide income during times of stock market turbulence.
