An institutional analysis of consumer law.

• Author: Overby, A. Brooke
• Position: US and European Union

ABSTRACT

This Article explores the revival of interest in consumer protection in the United States, and the impact of this revival on the consumer movement. The Author examines the influence that political organizations and institutions have upon the final shape and content of consumer law in the United States and European Union. The Article begins with a general introduction to institutional theory across academic disciplines and to the institutional environment and arrangements in which consumer lawmaking proceeds in the United States and Europe. Next, the Article assesses consumer initiatives in the United States and the European Union, focusing on deceptive advertising, unfair contract terms, consumer credit, and consumer access to justice problems. The Author's assessment illuminates the institutional factors that shape consumer protection initiatives. Finally, the Article discusses the limits of traditional United States perspectives on consumer law. The Article concludes that an institutional approach provides a better and more accurate framework for analyzing consumer issues.

1. INTRODUCTION

   The growth in the consumer economy, globalization, innovations in technology and communications, and efforts to modernize U.S. uniform commercial laws all have contributed to renewed concerns over legal regulation of consumer transactions. In the United States, this revival of interest in consumer protection seeks to build upon and perhaps to reinterpret issues raised and initially resolved decades earlier, a time during which consumer issues were at the forefront of legal attention domestically. (1) It was during the 1960s and 1970s that many of the principal consumer protection statutes were enacted. (2) The renewed attention to consumer protection issues suggests that the consumer movement may be undergoing a new transformation.

   Many areas of legal doctrine and social policy are beginning to converge in recent debates. For U.S. lawyers and scholars, perhaps the most important development involves the Uniform Commercial Code (the UCC or the Code), which is in the final stages of a substantial revision project. (3) Throughout this lengthy project, the revisions have served as the central stage on which a battle has been taking place over consumer protection issues in the areas covered by the UCC. The revisions have provoked critical analysis not only of the substance of revisions to the Code but also of its sponsors, the National Conference of Commissioners on Uniform State Laws (the NCCUSL) and the American Law Institute (the ALI). (4) Consumer issues also have had a significant impact on the NCCUSL and ALI approval process and on the consideration of approved Official Drafts by state legislatures. (5) Related to this development, a growing body of literature employs positive political theory or economic analysis to evaluate the role of private lawmaking entities such as the NCCUSL and the ALI to assess their susceptibility to special interest group influences and to analyze the impact that such influences might have on NCCUSL and ALI products. (6) Thus, significant questions of institutional design and legislative methodology (7) have arisen out of the UCC experience.

   The uniform laws debate raises a much broader structural issue regarding the proper allocation of governmental authority in regulating consumer transactions. While other parts of the world, such as the European Union, are moving more toward more centralized forms of government, the United States has experienced a movement away from federal regulation toward state and local government regulation. (8) This trend is antithetical to the strongly federalized ideology that supported much of the earlier consumer law initiatives. Moreover, somewhat paradoxically, the experience with the UCC suggests the possibility that more vigorous federal involvement in the area of consumer transactions may be warranted, if not necessary. (9) The new consumer debate therefore will not only involve issues of private legislatures and consumer values, but will raise federalism concerns as well. Federalism concerns are not isolated solely to the UCC and its treatment of consumer issues. Even foundational issues such as the validity of electronic signatures--which recently was addressed by Congress through The Electronic Signatures in Global and National Commerce Act (10)--now invoke substantial questions concerning the proper roles of international, federal, and state bodies in regulating commercial transactions. (11)

   Finally, the view that consumer law is a domestic and internal matter is being called into question. (12) Consumer law has acquired an increasing transnational and international dimension as a result of economic integration and technological developments such as e-commerce. This suggests that the traditional roles played by legal organizations in consumer lawmaking perhaps ought to be questioned in light of increasing globalization. The impact of globalization on domestic U.S. contract law is often overlooked or de-emphasized. U.S. law reform efforts all too frequently proceed without serious reflection on the manner in which other jurisdictions have addressed and resolved similar issues. The new consumer debate, at least in the United States, often seems to continue the disturbing practice of avoidance, although the parochialism of the NCCUSL and ALI in the drafting of the UCC is a long-observed phenomenon. (13) Whether consumer protection issues ultimately will become global, rather than local, matters is, of course, a debatable question. Nonetheless, the shift in emphasis from the local to the global generally in the last decade merits consideration when evaluating U.S. perspectives on consumer law.

   Consumer law in the future most likely will play out on a field vastly different from that which showcased the liberal, rights-oriented consumer debate decades ago. The reassessment of the NCCUSL and the ALI, the reordering of federal and state priorities in the United States, increasing internationalization, and the potential transformation of consumer issues from matters of local concern to matters of some global import all indicate that a radical reinterpretation of consumer law may eventually emerge. In the United States, this reinterpretation will raise broad issues regarding the state uniform laws process, consumer rights, and economic justice--which provide the source for much of the argument to date--but also much more subtle questions of institutional design, organizational competence, federalism, law and technology, and the global economy.

   This Article addresses these issues by examining the influence that political organizations and institutions apart from consumer values and ideology potentially have on the final shape and content of consumer law in the United States and European Union. The Article advances and employs a comparative and institutional approach toward analysis rather than a more traditional "consumer values" approach. To evaluate the impact that organizational and institutional constraints play in the creation of consumer law, the Article contrasts consumer protection issues being addressed in the emerging dual system of the European Union with similar initiatives in the United States. While the European Union's characterization as a federal state, in a comprehensive and unitary sense, is in and of itself a provocative and much debated question beyond the scope of this Article, (14) the structures of the EU establish a layer of centralizing legal bodies (15) that makes an analogy to the United States federal system useful. These contrasting parallel developments suggest that institutional, organizational, and social constraints apart from consumer ideology play a significant role in shaping consumer law. Thus, the traditional focus on consumer values not only inaccurately describes legislative action, but is also inadequate for guiding the future development of consumer law.

   The Article begins with a general introduction to institutional theory across academic disciplines, including legal theory, and to the institutional environment and arrangements (16) in which consumer lawmaking proceeds in the United States and Europe. (17) The Article continues with an assessment of consumer initiatives in the United States and the European Union in the areas of deceptive advertising, unfair contract terms, consumer credit, and consumer access to justice problems. (18) Such an assessment illuminates the institutional factors that act to shape consumer protection initiatives. The Article then discusses the limits of traditional U.S. perspectives on consumer law and concludes that an institutional approach provides a better and more accurate framework for analyzing consumer issues. (19)

2. INSTITUTIONS, ORGANIZATIONS, AND VALUES IN CONSUMER PROTECTION

   The issue concerning why consumer transactions ought to be regulated at all, or at least treated differently from other types of contracts, provides the customary departure point for an inquiry into consumer protection issues. Under a traditional framework for analysis of consumer protection law, particular legal provisions or acts--for example, court opinions or statutes--are assessed in the context of how effectively they advance the values or goals that justified intervention in the first place. Alternative approaches can be compared or contrasted by critical evaluation of their efficacy in furthering established or held goals of consumer policy. From the prescriptive side, the traditional framework seeks to guide law reform efforts by advancing specific proposals for reform that would further such held goals. When competing or contradictory goals exist, the focus shifts to the normative and descriptive power of each goal. (20)

   This traditional framework nonetheless provides a picture of consumer law and lawmaking that is, at best, incomplete. It has two weaknesses, each of which...