International Perspective of Consumerism

INTERNATIONAL PERSPECTIVE OF CONSUMERISM*

Prof. J. S. Patil·

 

 

I. INTRODUCTION

 

Constructing a consumer society has always been a radical enterprise. The ‘birth’ of consumer society in eighteenth-century western Europe was accompanied by an emerging middle class, eager to assert its political and economic rights to freedom of contract and to be unleashed from the restraints of aristocratic clientage. Consumption not only offered material gain for the individual producer but it represented an aim for political economy which, it was ultimately hoped, would bring prosperity for all. Notwithstanding the continued unease over luxury and excess which has persisted over the last two centuries, liberals, socialists and co-operators have all attended to the dynamics of consumption and have sought means to ensure everybody has access to the good life. In the twentieth century, the construction of consumer society has become a fundamental dimension of the modern state. Following the world economic depression of the 1930s and the ravages of the Second World War, building a society structured around consumption seemed to offer both the basis for a new world order and an escape from the political ideologies and extremities which had seemingly destroyed the consuming ambitions of much of the world’s population. Consequently, the Marshall Plan brought productivity missions from the American government, while European social democratic ideals aimed to place the consumer at the heart of the affluent society. Moreover, in the institutions of the global architecture of peace, a system of liberal rights was established entirely in accord with the goals of bringing plenty to the people.[1]

 

            The EC fined Microsoft 497196304 Euros, and ordered it to sell Windows without a determination of liability.The Decision provides that "Microsoft Corporation shall, within 90 days of the date of notification of this Decision, offer a full-functioning version of the Windows Client PC Operating System which does not incorporate Windows Media Player". It also provides that Microsoft shall, within 120 days, "make the Interoperability Information available to any undertaking having an interest in developing and distributing work group server operating system products and shall, on reasonable and non-discriminatory terms, allow the use of the Interoperability Information by such undertakings for the purpose of developing and distributing work group server operating system products".[2] Over 3 million BL-5C version batteries of Nokia cell phones were found to be defective.[3] This figure is only of India. The global figure is alarming.

 

               The brainwashing of consumers in the U.S. and this wanton violence against the consumers in Hong Kong andMalaysia (and probably elsewhere) has been perpetrated by the Mobil corporation-one of the largest multinationals in the world. This type of behavior by multinationals is not new. What is new is the ability of consumers, continents apart, to respond to such actions. Over 100 consumer groups from 50 countries are now exchanging information and working together through the International Organization of Consumers' Unions, a non-profit, non-commercial public interest foundation based in the Hague, Netherlands.[4]

 

            LPG–Liberalization, Privatization and Globalization-has changed the international scenario in every aspect and the consumer protection is not an exception to it. The consumer policy is no longer to be viewed solely at the national level. Since the world economy has become so inter-dependant, national consumer protection policies have now acquired international dimensions.[5] This is mostly due to the international character of business practices with the greater participation of transnational & multinational corporations.[6] IT revolution has added complexity to the existing problem of consumerism. Venezuelan President Hugo Chavez said at the World Social Forum, “the benefits of having International Consumerism are super. International Consumerism will allow you a competitive edge and a peace of mind.”[7] IT & IPR related consumption has grown on exponential scale. All these new developments are required to be addressed at the international level.

 

II. CHANGING SCENARIO OF CONSUMERISM

 

            In the earlier times, the consumer used to buy goods directly by visiting the vendor and chances of he being cheated were minimum. Due to IT revolution, international online consumer transaction is taking place. In these transactions the customer and vendor are in different countries and leads to considerable hardships to the consumer in getting his grievances redressed. According to OECD survey of online consumers, one of the most significant impediments to engage in an ICT is consumer concern about the lack of consumer protection, specifically “trust concerns/concerned about receiving and returning goods.”[8] The issues are the nature of wrap and standard form of contract, whether such contracts are enforceable and use of such contracts by the vendor to dictate jurisdiction, choice of law or any other terms, to a consumer.

 

            Online contracts into which the consumers are pulled into are known as “Shrink-wrap”, “Click-wrap” and “Browse-wrap”.[9] It is pertinent to know the conceptual meaning of these terms.

 

1.     “Shrink-wrap” Contract:

 

            A shrink-wrap contract may be described as one where a consumer purchases goods which have been completely physically sealed inside “shrink-wrap” – thin protective see-through plastic used to contain all components of the package of goods just purchased (for example, computer software on disks plus user manuals) – and which contains inside the package some sort of notice that using the goods inside the package signifies the consumer’s assent to the terms of use clauses also contained within the package (e.g. license terms). There is a direct similarity then, between shrink-wrap issues and the “tickets’ cases involving car parks and public transport.[10] In these contracts enforceability will turn on whether sufficient notice has been given of the matter the seller is seeking to bind the purchaser. The law is evolving in this area. Recent cases have begun to recognize the practical importance of allowing terms to be made known later in some situations.[11] In McRobertson Miller Airline Services v Commissioner of State Taxation[12]it was recognized that the contract may not come into existence after the purchase of an air ticket but before the flight “when the passenger had had a reasonable chance to object to the conditions. In Hill v Gateway[13]the Court held that a contract came into existence thirty days after purchase of goods where the package contained a notice that the customer was taken to agree to contract terms if they did not return the goods within thirty days of purchase.

 

2.     Click-wrap contract:

 

            Click-wrap contracts are those where an online purchaser indicates their willingness to make an offer to buy goods by clicking an “I agree” button or similar.[14] The issue here is whether the vendor’s screen, containing invitations to treat regarding consumer goods, was designed in such a way as to amount to reasonable notice of the vendor’s terms and conditions applicable to the ICT. If yes, then the contract will be valid on the face of it.[15] There appears nothing that might impede redress for consumers engaged in ICTs so long as sufficient effort is made to bring notice to the consumer.

 

3.     Browse-wrap contract:

 

            Browse-wrap contracts are those where the user can obtain the goods without giving unambiguous consent to the terms of the offer.[16] This is apparently similar to a “free trial offer” type of situation. In these contracts, the goods mentioned refer to downloadable software or similar material.

 

4.     Standard form contracts

 

            In respect of standard form contracts of ICTs, they are presented to consumers on a take it or leave it basis, yet they do have the advantage of reducing transaction costs by standardising like-transaction terms. Consumers despite being the weaker of the unequal bargaining partners are arguably no better off otherwise with the doctrine of freedom of contract, where the consumer would theoretically be free to negotiate all the terms of a contract relating to a low-value ICT. Standard form contracts may thus represent a trade off of competing policy arguments, and may not necessarily impede redress for consumers engaged in ICTs.

 

            Ultimate point about wrap and standard form of contracts is that they can be used by vendors to dictate jurisdiction, choice of law and other terms to consumers. Such contracts may contain any manner of terms suitable to vendors. The consumer would probably be better protected by insisting on their right to negotiate contractual terms or by examining the terms of wrap or standard form contract concerned. This is beyond the sophistication of the average consumer calling for some kind of reform.

 

III. UN GUIDELINES FOR CONSUMER PROTECTION

 

Consumer activism and consumer protest offers an insight into the dynamics of consumer society, into the politics of participation and into questions of rights, choice and access in the marketplace. While the institutions established at Bretton Woods have overseen the development of consumer society, consumers themselves have often sought to challenge the shape of this society and to offer important engagements with the various equations of the consumer and the citizen that have often taken place. ‘Consumer society’ has been the project of a system of global governance which has enshrined the consumer at the heart of capitalist development, yet the definition of this consumer has not been set in stone and waves of consumer protest have brought out these tensions.[17]

 

            United Nations Organisation is a body established after the end of Second World War for saving the succeeding generations of peoples of the world from the scourge of war. Over the period of time the UNO has expanded its activities into other important spheres of international concern. In view of the growing concern expressed by the international community for evolving international standards for protecting the interests of consumers, the General Assembly of the UNO unanimously evolved guidelines for consumer protection.[18] It is intended to provide a framework for Governments in the development of law for the protection and promotion of consumers’ interests. The guidelines are also intended to encourage international co-operation in the area. Origin of the guidelines can be traced to late 1970s, when ECOSOC recognised it as important for socio-economic development of the societies especially the developing countries. In 1977 the Secretary-General asked to make a survey of laws & institutions in various countries and report to the Council. In 1979 Council asked for a comprehensive report from the Secretary-General in the matter. Further, in 1981 it asked the Secretary-General to continue consultation with the countries and submit the report. In 1983 the Secretary-General submitted the draft guidelines. After extensive consultation among Governments in the following two years the guidelines were ultimately adopted and the Governments were asked to implement the Guidelines. The Secretary-General of the UN was asked to continue to promote their implementation and assist Governments especially the developed countries in implementing them.[19]

 

            The main objectives of the guidelines are as follows:

 

1.     To assist countries in achieving or maintaining adequate protection for their population as consumers;

2.     To facilitate production and distribution patterns responsive to the needs and desires of consumers;

3.     To encourage high levels of ethical conduct for those engaged in the production and distribution of goods and services to consumers;

4.     To assist countries in curbing abusive business practice by all enterprises at the national and international levels which adversely affect consumers;

5.     To facilitate the development of independent consumer groups;

6.     To further international co-operation in the field of consumer protection;

7.     To encourage the development of market conditions which provide consumers with greater choice at lower prices.

 

Legitimate needs to be met by the guidelines are as under:

 

1.     The protection of consumers from hazards to their health and safety;

2.     The promotion and protection of the economic interests of consumers;

3.     Access of consumers to adequate information to enable them to make informed choices according to individual wishes and needs;

4.     Consumer education;

5.     Availability of effective consumer redress;

6.     Freedom to form consumer and other relevant groups or organisations and the opportunity of such organisations to present their views in decision-making process affecting them.

 

Areas relating to the consumers’ interests covered under the guidelines are as follows:

 

1.     Physical safety

2.     Promotion and protection of consumers’ economic interests

3.     Standards for the safety and quality of consumer goods and services

4.     Distribution facilities for essential consumer goods and services

5.     Measures enabling consumers to obtain redress

6.     Education and information programmes

7.     Measures relating to specific areas: food, water, pharmaceuticals

 

International Co-operation sought under the guidelines from the countries are as follows:

 

1.     Governments are to develop, review, maintain or strengthen, as appropriate, mechanisms for the exchange of information on national policies and measures in the field of consumer protection;

 

2.     Co-operate or encourage co-operation in the implementation of consumer protection policies to achieve greater results within existing resources – joint use of common testing facilities, common testing procedures, exchange of consumer information and education programmes, joint training programmes, joint elaboration of regulations;

 

3.     Co-operate to improve the conditions under which essential goods are offered to consumers, giving due regard to both price and quality – joint procurement of essential goods, exchange of information on different procurement possibilities and agreements on regional product specifications.

 

            Other Important Developments include the 1981 WHO International Code of Marketing of breast-milk substitutes;[20] the 1985 FAO International Code of Conduct on the Distribution and use of Pesticides; the work in the area of Food of the FAD/WHO Codex Alimentarius Commission; and the UN General Assembly resolution of December 17, 1982 on protection against products whose consumption and use have been banned, withdrawn, severely restricted or not approved by governments.[21]

 

               With all these guidelines and conventions evolved at the international level, the tension between consumers and producers of goods and services is continuing. Before a United Nations committee in 1973, the IOCU staked out its position on the inherent contradictions between ' the global interests of multinationals and those of consumers. Peter Goldman, then-IOCU President, told the UN's "Group of Eminent Persons" that "from the consumer viewpoint, marked concentrations of economic power and severe imperfections of competition are always danger signals. Multinational companies in consumer goods industries have readily distinguishable features. These include high profits and strong emphasis on marketing techniques and production differentiation as alternative forms of competition."[22]

 

IV. LAWS OF MAJOR PLAYERS

 

1. U. S. A.

 

            In the twentieth century, the construction of consumer society has become a fundamental dimension of the modern state. Following the world economic depression of the 1930s and the ravages of the Second World War, building a society structured around consumption seemed to offer both the basis for a new world order and an escape from the political ideologies and extremities which had seemingly destroyed the consuming ambitions of much of the world’s population. Consequently, the Marshall Plan brought productivity missions from the American government. This was much more than the usurpation of national government agendas by the interests of business or the vision of mass marketers. It was also a genuine commitment to building a society in which all would share in the material benefits of affluence. It culminated in the notorious ‘kitchen debate’ between the US Vice-President Richard Nixon and the Soviet Premier, Nikita Khrushchev, at the Moscow Trade Fair in 1959, when the two leaders debated the relative merits of communism and capitalism in improving the standards of living of the mass of the people. As other scholars have pointed out, ultimately the American model prevailed, presenting a legacy of a particular vision of consumer society.[23]

 

            Sherman Act, 1890 declared ‘every contract, combination in the form of trust or otherwise or conspiracy in restraint of trade or commerce to be illegal.’ The Federal Trade Commission Act, 1914 authorised the Federal Trade Commission to correct unfair methods of competition. In its implementation, the Commission moved to protect consumers as an objective in and for itself, rather than as an incident that would further competition. 1938 amendment by Wheeler-Lea Act extended the scope of the Act to cover ‘unfair or deceptive acts or practices’ as well as ‘unfair methods of competition’. 1975 Magnuson-Moss Warranty-Federal Trade Commission Improvement Act further strengthened the Commission’s rule making and other authority over ‘unfair and deceptive acts and practices’. Federal Trade Commission: It consists of the Bureau of Consumer Protection and the Bureau of Competition. Bureau of Consumer Protection is having the responsibility of monitoring advertising, labeling and deceptive practices.

 

            Other Legislation of USA relating to the consumer interests include: Consumer Credit Protection Act – requires certain disclosures in consumer credit sales and loan; Consumer Leasing Act: deals with consumer leases; Fair Credit Billing Act: contains provisions relating credit billing practices; Fair Packaging & Labeling Act; Consumer Product Safety Act; Federal Hazardous Substances Act; Poison Prevention Packaging Act; Consumer-Patient Radiation Health & Safety Act; and the Uniform Civil Code: attempts to protect purchaser of goods through a requirement of ‘good faith’ & prohibition of ‘ unconscionable’ practice.[24]

 

            The U. S. consumerism is often put to critical test. Mr. Chavez, Venezuelan President, warned that increased energy consumption in wealthy countries such as the United States was reaching unsustainable levels. It is an irresponsible and also contaminating waste, which is dangerous for ecological balance and rhythm of life.[25] According to OECD data[26], e-commerce sales in the US as a share of total retail sales, increased to 1.2% in late 2001, being valued in excess of US$ 10 billion. It is likely though, that because of general trust concerns on the part of consumers, and such growth has in fact been significantly retarded – relative to what it could have been without trust concerns.

 

2. U. K.

 

            There are quite a few laws in the United Kingdom to protect the interest of consumers.[27]The Fair Trading Act, 1973 is a legislation enacted for protecting the interests of the consumers. The Act aimed at the following:

 

1.     Protects consumers from consumer trade practices & unfair practices;

2.     Encourages competition which is fair as between one business & another, & fair towards to the consumer;

3.     Ensures improved trading standards;

4.     Unfair trading practices are stopped or changed. Ex: abuses of monopoly position, oppressive practices and inequitable practices[28]

 

The Competition Act, 1980 make provisions for the control of anti-competitive practices in supply & acquisition of goods & supply & securing of services; provides for the investigation of prices & charges by DG of Fair Trading; and makes some amendments with respect to the Fair Trading Act, 1973 & the Restrictive Trade Practices Act, 1976.

            

The Consumer Protection Act, 1987 is a wide-ranging piece of legislation creating both civil & criminal liability. Its philosophy is that the best form of consumer protection is to promote competition. Supplying unsafe goods or misleading consumers about the price is described as an unfair competition. The Act deals with three main aspects:

 

1.     Product liability: strict liability

2.     Unsafe goods

3.     Misleading price indications

 

3. Australia

 

            Australian Industries Preservation Act, 1906 was passed on the influence of Sherman Act of the US. It was amended in 1911 to overcome some difficulties; but not with much success.[29] Another law, the Trade Practices Act, 1965, was based on the UK Act, but it was replaced by the Trade Practices Act, 1974. Major amendment to it was brought about in 1977. Part V deals with consumer protection and includes the following:

 

1.     Aimed at eliminating unfair trade competition in trade and commerce;

2.     Strengthening the position of consumers;

3.     Prohibits false or misleading representation or advertisement;

4.     Offering of gifts, prizes or other free items with the intention of not providing them;

5.     Bait advertising, referal selling;

6.     Corporation is prohibited to supply goods which do not comply with the prescribed consumer products safety standard.

 

From the mid1990s there has been an exponential world-wide growth in the volume of international online consumer transactions. According to Australian Government, data, on an average, approximately one million Australians aged 14 years and above made a purchase online in any given week of 2002-03. This represented an increase of 85% since 2000-02.[30] This is consistent with international trends. Solutions for the ICTs can be found in the application of rules of private international law.

 

V. CONCLUSION

 

The international consumer movement moves into the 1980's, with a new confidence and muscle in dealing with multinational corporations. The infant formula campaign, the worldwide concern about dumping, IOCU "Consumer Interpol," the increased research and action capability of third world consumer groups all indicate that the international consumer movement is alive and well. There is increasing public concern over consumer protection issues all over the world.

 

Following conclusions can be drawn on the basis of the foregoing analysis:

 

1.     International consumer community demands that there should be well founded international guidelines for the protection from hazards to health and safety.

2.     The guidelines should provide for effective promotion and protection of economic interests of the consumers.

3.     There should be full access to adequate information relating to consumer goods and services at a global level.

4.     There should a control on misleading advertisements and deceptive representation of goods and services.

5.     Adequate consumer education should be provided especially in the developing and underdeveloped countries.

6.     There should be effective consumer redress mechanism established at national and international levels.

7.     There should be a comprehensive regulatory framework for the international online consumer transactions to protect the interests of consumers against multinational vendors.

 

If these demands of the global consumer community are met, it will go a long way in establishing healthy civilized societies across the globe. We need to strengthen our links and build new networks, to bring those who believe in value for money closer to the view that value for people is even more important. Above all, we must make it clear that it is not enough to talk about the cost of living, when it is the cost of survival that is the problem for most. Anchor    


 


* Abstract of the paper presented at the National Workshop on Consumerism & Consumer Welfare organized by G. K. Law College, Hubli in association with KILPAR, Bangalore on October 6, 2007

· Professor & Special Officer, Karnataka State Law University, Hubli

[1] Matthew Hilton, “International Consumerism: The Life and Death of Consumer Society in the Modern World”, http//www.history.bham.ac.uk updated August 2007, logged on 21-9-2007. p.1.

[2] www.techlawjournal.com/alert/2004/06/08.

[3] www.techshout.com/.../2007/14/nokia

[4] Anwar Fazal, “The Third Force: Consumers in the World Economy,” Consumer Movement, October 1980 Vol.1, No.9

[5] Economic and Social Council – International Co-operation and Co-ordination within the United Nations System – Consumer Protection – Report of the Secretary-General, (27-5—1983), p.5.

[6] Agarwal V. K., Consumer Protection Law and Practice, 4th ed., 2000, p.4.

[7] http://www.buyacountry.us/pers-AVTS/marketing/Advertising-advertisement.html

[8] OECD (2002). Update of official statistics on internet consumer transactions, OECD

[9] Quirk, p. & F. J., Electronic Commerce and Law, Milton, Australia, John Wiley 7 Sons, 2003, p.76.

[10] Daril Gawith, Litigation for International Online Consumer Transactions is not Cost Effective – A case for reform?

[11] Quirk, p. & F. J., Op. Cit., p.72.

[12] CLR, HCA 133; 125.  This is a case where an airline ticket issued by the appellant to an intending passenger, was allegedly dutiable as “a memorandum of a completed agreement”. The airline operator which issued the ticket argued that the ticket was not itself an agreement or a memorandum of an agreement. Its principal ground was that to proffer the ticket was to make an offer which was to be verbally accepted by its recipient.

[13] 2000 Inc. F.3d. 7th Cir. 105: 1147. in this case Hill purchased a computer from Gateway. A clause in the contract gave Hill 30 days to accept the goods or else the contractual terms would be triggered.

[14] Quirk, p. & F. J., Op. Cit., p.73.

[15] Hotmail Corporation v Van$ Money Pie Inc. (1998) WL, USPQ 2d ND Cal. 47: 38839. In this case Hotm,ail Corporation provided a free email service. In order to access this service, the defendant had to become a subscriber which required the defendant to assent to the terms of a service agreement. The terms of service presented in the form of a click-wrap agreement. The defendant was a spammer. Hotmail was inundated with hundredws of thousands of misdirected responses. Hotmail sought an injunction which was granted as the click-wrap terms had been presented with sufficient notice.

[16] Ibid, p.76.

[17] Matthew Hilton, Op. Cit., p. 2.

[18] GA Res. 39/248 of 9 April 1985

[19] David Harland, Implementing the Principles of the United Nations Guidelines for Consumer Protection (1991) 33 JILI 189

[20] No major issue demonstrates better the muscle of the international consumer movement than the campaign against the promotion of infant formulae. One of the highlights of the campaign was the public agreement in October 1979 made at the World Health Organization/UNICEF meeting on infant and young child feeding by representatives of governments, the U.N., safe infant formula groups, and the infant food industry to stop promotional advertising practices. A recent study compiled by the International Baby Food Action Network, however, found that six months later these multinationals were still engaged in direct consumer advertising and virtually ignoring all of the WHO/UNICEF proposals. Anwar Fazal, Op. Cit., p.3.

[21] D. J. Harland, Some International Dimensions of Consumer Law and Policy (1987) 29 JILI 451.

[22] Anwar Fazal, Op. Cit., p. 2.

[23] Matthew Hilton, Op. Cit., p. 1 & 2.

[24] The provisions of the Code have been widely incorporated in subsequent Uniform and Model consumer protection statutes. E.g., Uniform Consumer Credit Code; Uniform Consumer Sales Practices Act; Uniform Residential Landlord and Tenant Act; Uniform Land Transactions Act; Uniform Simplification of Land Transfers Act; Uniform Condominium Act; Model Real Estate Time-share Act; Uniform Planned Community Act; model Real Estate Co-operative Act; and Uniform Common Interest Ownership Act.

[25] http://www.buyacountry.us/pers-AVTS/marketing/Advertising-advertisement.html

[26] OECD (2002). Update of official statistics on internet consumer transactions, OECD

[27] Important laws are the Consumer Credit Act, 1974; Consumer Safety Act, 1978; Food and Drugs Act, 1955; Poisons Act, 1972; Trade Description Acts 1968 & 1972; Weights & Measures Acts, 1963, 1976 & 1979; Supply of Goods Act (Implied Terms) Act, 1973; Unfair Contract Terms Act, 1977; Prices Act, 1974; Price Commission Act, 1977; etc.

[28] Office of Fair Trading, The First Report, November 1973-December 1974;

[29] Taperelle G. O., Vermeesch R. B. & Harland D. J., Trade Practices and Consumer Protection, 3rd ed., 1983, p.123.

[30] Treasury, A. G.  (2005). The Internet and B2C E-commerce

 

 

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