Author: Nadine Holewik, Jana Lichtschlag, Melina Richrath, August 31. 2024
1 Relevance
In today’s society, consumption is highly valued, to the extent that the term consumer society can be used.1 This is reinforced by the increase in international trade due to globalisation2 and the fact that consumption is increasingly digital and remote.3 In 2022, household final consumption expenditure in the EU represented 51.5% of the GDP.4 In addition to the importance of satisfied consumers for economic growth, all this means that consumers face a number of challenges. Besides the challenge of navigating an ever-increasing range of products, it is progressively difficult to compare products on various characteristics such as price and quality.5 Furthermore, today’s economy is disturbed by a variety of abuses, such as the market power of dominant distributors and monopoly positions. This can lead to consumers being inferior to traders and ultimately to a weakening of the consumer’s position.6 Contrarily, new digital technologies have the potential to promote consumer protection, for example through greater transparency, which in turn empowers consumer´s position.7Social inequality can also be highlighted in this context. Socially disadvantaged and vulnerable consumers are more often the victims of overcharging, for example, and therefore need special protection.8,9 These points underline the urgency and importance of fair and honest trade rather than free trade. With effective protection, consumers trust the market. Coupled with fair competition, this encourages innovation and consumer choice.10 Against that background, it is crucial to have a look at consumer protection. To take a closer look at consumer protection, it is first important to define the consumer.
1.1 Definitions
Definition Consumer
As can be seen from the table, there is no single definition of consumers. Rather, it varies from country to country. Many definitions within the EU have in common that a consumer is a natural person who is acting for the purposes which are not in connection with the person’s business, trade or profession. Because it describes what the consumer is not, it can be therefore seen as a negative definition of the consumer. In contrast, China’s definition of a consumer can be seen as a positive definition by limiting the scope to daily consumption purposes. In the US, there are relatively broad definitions of consumers in the laws. However, the Chinese and US definitions listed in the table are similar in that they both focus on whether the transaction is for private use and on the nature of the transaction.12 All definitions have in common that they define the consumer as a person who is not acting in the course of a professional or commercial activity, but for private purposes. They therefore make a clear distinction between the role of the consumer and that of the trader or professional.Having clarified what is meant by consumer, consumer protection is defined in the following paragraph.
Definition Consumer Protection
When looking at consumer protection it is necessary to separate consumer rights from it. Consumer rights refer to specific rights that consumers have to enforce their claims.14 They are designed to make sure that suppliers and other relevant participants comply with the laws in force.7 In contrast, consumer protection covers all the laws and organisations that aim to protect consumer rights. It refers to all laws and regulations that protect the economic and legal interests of consumers. This includes rules on consumer information, consumer health and safety, and ensuring special protection in certain legal transactions.15 The aim of consumer protection is the promotion of fair competition and the reduction of imbalances between the various parties. Consumer protection encourages suppliers to respect safety and quality standards, to have adequate recall systems, and to protect consumers from exploitation and fraud.7 From a broad perspective, consumer protection may involve a paternalistic view. Governments could be of the opinion that consumers are in need of protection. This may lead to prohibitions on some products such as drugs. At the same time, they may try to force consumers to consume products that are considered good for them, for example, compulsory vaccination. Finally, it might be necessary to protect consumers from dangerous products supplied as a result of suppliers’ ignorance or deliberate neglect.16
The instruments, the form, and the content of consumer protection are diverse.17 At the EU level for example, the European Parliament, the European Commission, European and national associations as well as individual Member States are responsible for strengthening European consumer protection, which is based on an increasingly comprehensive legal framework.18 The areas covered by consumer protection here are product safety, the digital market, financial services, food safety and labelling, energy, travel, and transport.19 While in contrast in some countries of the global South, consumer protection refers to the right to a safe place to live and to adequate and uncontaminated drinking water and food.17 That’s why many of the best practice examples in this Wiki come from the Global North.
1.2 Background
Looking at the historical background of consumer protection, the 1960s and 1970s can be seen as crucial decades in the global consumer protection movement as these decades have seen the greatest successes in improving consumer protection by introducing many consumer protection laws. In 1962, four basic consumer rights were established, which are the right to security, the right to information, the right to choice, and the right to hearing.20 On this basis, different consumer protection systems around the world have developed. Germany and Austria for example have introduced a more corporatist system of consumer-producer relations. In Japan, on the other hand, with a strong government and the existence of a large producer political power at the centre, the consumer had to adapt. In contrast, the US has been in favour of market-based solutions for consumer protection.1 Based on this background, consumer protection is currently a national and regional policy rather than a global or universal one. One exception is the 1985 UN Guidelines for Consumer Protection (UNGCP), with revisions in 1999 and 2015 distance.3
2 Analysis: Industry’s role as a driver of consumer protection
The following section begins by looking at how companies can contribute to the issue of consumer protection, both negatively and positively. Then the indicators for measuring firms’ sustainability performance with regard to consumer protection are presented.
2.1 Firms’ contribution to consumer protection
Through their actions, companies can have both a positive and a negative influence on the topic of consumer protection. In literature, mainly the negative aspects are discussed, as they create the basis for the necessity of consumer protection in the first place. Below several of these negative aspects or human problems arising from inadequate or incorrect action by companies are discussed.
Deception
First, one of the main reasons why consumer protection is so important is deception. On the one hand, this could be due to insufficient product information. For example, if the product description of bicycle brakes does not point out that they have a much lower braking force in the rain. On the other hand, misleading advertising is also considered deception. If, for instance, a person is lured into a store by advertising the extremely low price of a product, but is then dissuaded from buying that product and is instead steered towards a more expensive product, that would be considered fraud.21
Defective or unsafe products
Another reason why consumer protection is important is the sale of defective or unsafe products. Here, consumer protection prevents the customer from buying products that are hazardous to health or life.21 General Motors’ Ignition Switch Recall in 2014 is a well-known example of such a case. Defective ignition switches that had the potential to abruptly stop the engine, deactivating airbags, power steering, and brakes, were connected to many injuries and fatalities. As a result, General Motors had to recall the vehicles and settle death and injury claims.22
Unfair contract terms
Furthermore, consumer protection is based on fairness, which is why unfair contract terms are another problem caused by companies. A term could be deemed unfair for example, if it would: significantly unbalance the rights and responsibilities of the parties; not be substantially necessary to defend the business’s interests; or harm people. Therefore, transparency is an important aspect of a fair contract. A statement would be deemed “transparent” if it was made available in an understandable and accessible format, written in a straightforward manner, and available to the individual who would be impacted.23
Misuse of data and violation of privacy
Moreover, misuse of data and the violation of privacy are other problems that need to be solved or at least improved through consumer protection. Businesses are uniformly fighting for more data usage and fewer regulations since they typically have an interest in the private information of their customers. Nowadays, almost everyone leaves a digital trail behind them, be it by surfing the web, using apps on mobile devices, or visiting the doctor. In this context, it is important to protect consumers from possible misuse of their data which could ultimately lead to prejudicial treatment and discrimination. This also includes regulations to prevent data leaks.24
Price Discrimination
Price discrimination is another problem. It can take different forms. In principle, however, it exists when the prices of comparable products differ in relation to their marginal costs.25 Price discrimination based solely on nationality or country of residence, for example, is not permitted in the EU. Personalized pricing based on online surfing behavior is also possible. In the EU, however, consumers have the right to transparency, i.e. to know that the retailer uses algorithms to calculate prices.26
Abuse of dominant market positions
Lastly, this Wiki lists the abuse of dominant market positions as an aspect referred to in the literature regarding the need for consumer protection. This includes the formation of monopolies or cartels. The following is an example: Due to a long-standing custom, every property broker in the same neighborhood sets a flat commission of 7% of the sale price when selling a house. In this market, there are no options in terms of price for consumers.21
Corporate Social Responsibility (CSR)
Companies can generally have a positive influence on consumer protection if they can demonstrate particularly positive CSR credentials. As the concept of CSR means that corporations are required to refrain from abusing their political and knowledge power and are expected to use their clout and sway to solve societal problems, this automatically has a positive impact on the consumer. Therefore, leading by example can help to improve consumer protection.27
2.2 Indicators for measuring firms’ performance with regard to consumer protection
Key performance indicators (KPI) are the essential guidance instruments that managers use to determine whether their company is headed toward success or deviating off course. The appropriate metrics provide information on performance and draw attention to problem areas.28 In order to measure how well companies are performing in terms of consumer protection, it therefore makes sense to measure them against the following topic-specific indicators.
Consumer Complaints
Firstly, the number of consumer complaints. Both, consumer complaints and lawsuits, can in other words be interpreted as contract violations, misconceptions, or the outcome of dishonest and misleading company activities.29 The measure “consumer complaint” has two interpretations: product-related and customer-related. Product-related refers to returns or claims on purchased products, while customer-related involves complaints about something not done correctly. Both types of ratios are as follows:
The outcome of this ratio, in either version, is given as a percentage.
Typically, a complaint management system is used to gather the numerator data, while general sales statistics provide the denominator figures. The KPI is essential to complaint handling as its goal is to lower client discontent. However, there are some disadvantages. Although the ratio functions as a qualitative measure of customer contentment, it just considers concerns that have been reported, implying that the true degree of dissatisfaction might be greater. Furthermore, it does not go into specifics about the complaints’ causes. Overall, a low complaint ratio is the ideal situation. Nonetheless, additional complaints from customers may be voiced when complaints are handled well. Companies should assess their ratios internally over time and, if feasible, against industry norms as there does not exist a set ideal range for this KPI.30
Best Practice Example: Consumer Financial Protection Bureau (CFPB) Complaint Database
CFPB is a public platform where consumers in the US can submit complaints about financial products and services. The database was created to improve transparency, hold financial companies accountable, and empower consumers by providing them with a way to voice their concerns. Consumers submit complaints online or via phone. Each complaint includes details about the issue, the product or service involved, and the desired resolution. The CFPB forwards the complaint to the respective company. Then, companies provide responses, such as a resolution, an explanation, or a commitment to investigate further. Lastly, consumers can review the company’s response and provide feedback on whether they are satisfied with the resolution. Most complaints and company responses are published in the CFPB’s database which allows the public to view complaints, which are searchable by company, product, issue, and more. The advantages of this system are, that it provides transparency and since it is a public platform it is accessible to everyone. Moreover, it gives the opportunity to find out more about the reasons behind a complaint. Disadvantages of the platform and also of the indicator itself include the fact that consumer statements are subjective and the indicator could therefore be biased.31
Product safety and liability
The number of product recalls and safety warnings and their severity.32 In the EU and the US, for example, there are already approaches to this, such as the European Rapid Alert System for dangerous non-food products (RAPEX) and the U.S. Consumer Product Safety Commission (CPSC) Recalls.33,34 All recalls and safety warnings are posted on these platforms after they have undergone the review process by several institutions. The severity of the safety risk is also categorized there.33 In the literature, no classification could be found as to how many safety warnings or product recalls would indicate a company’s poor performance. An industry comparison might be a good approach here. Other helpful indicators for product safety can be: The degree to which companies adhere to safety regulations throughout the pre-market design phase, the degree to which they oversee their products once they go on sale and the degree to which companies have established protocols for product recalls. However, these indicators are not as clearly identifiable and there are no specific methods that can be used to collect the data.32
Privacy and data security
The quantity and seriousness of data breaches that have been reported (per million individuals) and concerns raised by consumers regarding data security and privacy.32
Best Practice Example: Privacy Rights Clearinghouse (PRC) Data Breach Database
The PRC Data Breach Database measures a firm’s performance with regard to the indicator “quantity and seriousness of data breaches”. It tracks data breaches reported across the US and it compiles detailed information on each breach, including the type of breach, the number of individuals affected, and the type of data compromised. This helps to understand the severity of each data breach.35
Information and transparency
Customer satisfaction with procedures regarding consumer information and disclosure, number of consumer safety concerns in media, and results of comparative testing organizations.32 When concerns in media are used as an indicator, they may be readily tracked online by searching print publications. It’s important to choose the search terms wisely since a disadvantage of this indicator is that based on the selection of media the outcome could be biased. Selective monitoring is necessary to prevent creating the misleading impression that consumer concerns or consumer groups are more important than they are. This is achieved by avoiding measuring an excessive number of reports that discuss the same topic. The number of various themes included in those publications should balance the number of press quotes to prevent this bias. Concerning the measure of comparative testing organisations it is suggested that only testing conducted by independent consumer groups and national government agencies be taken into account. It is also advised that the test results be limited to those that have been released to the public.36
Best Practice Example for comparative testing organisations: Consumer Reports
“Consumer Reports” is a nonprofit organization that evaluates and reviews a wide range of products and services to help consumers make informed purchasing decisions. The process used by Consumer Reports is rigorous and methodical, ensuring that their evaluations are reliable, objective, and comprehensive. Consumer Reports conducts market research to identify which products and services are of the most interest to consumers. The products are often purchased anonymously from retailers to ensure impartiality, avoiding any influence from manufacturers or vendors. Then in state-of-the-art labs hands-on testing of products is conducted. The organization uses standardized testing procedures to ensure consistency across evaluations. These tests are designed to simulate real-world usage and conditions, providing practical insights into how the product performs against specific criteria. Here are some commonly used criteria: Performance, durability, safety, ease of use, environmental impact, and pricing. Finally, the results are shown in a scoring system where products are rated on a scale.37,38
Economic interests
Concerns raised by consumers regarding price discrimination and individualized pricing.32
Best Practice Example: Federal Trade Commission (FTC)
A good example of a platform that collects concerns raised by consumers regarding price discrimination is the FTC. It is the primary US government agency responsible for protecting consumers and maintaining competition. It actively monitors markets for instances of illegal price discrimination under the Robinson-Patman Act, which prohibits unfair pricing practices that harm competition. Furthermore, it collects data on consumer complaints related to pricing practices, which can trigger investigations.39
In general, the advantages and disadvantages of quantitative data collection apply to all indicators that result in concrete figures and the respective advantages and disadvantages of qualitative data collection apply to the other indicators, such as concerns raised by consumers or consumer satisfaction. Quantitative indicators have the advantage that they can provide a swift and easily measurable overview of a situation. However, unlike quantitative indicators, they cannot give an in-depth insight into problems, they cannot give reasons for problems, for example. quantitative indicators, on the other hand, are somewhat vaguer and sometimes more difficult to interpret.40
3 Implementation
3.1 Recommendations for consumer protection
After a long campaign by consumer associations in many countries favoring the introduction of an international framework for consumer protection, the United Nations Guidelines for Consumer Protection (UNGCP) were first adopted by the General Assembly in 1985.41 The guidelines provide a set of principles for the establishment of effective consumer protection legislation, enforcement institutions, and redress systems and therefore serve as a global reference for consumer protection regulation. These principles are designed to assist member states in formulating and enforcing laws, rules, and regulations that are suited to their country-specific social, economic, and environmental circumstances.42
The UNGCP give six principles for the establishment of good business practices on the company level when executing offline and online commercial activities with customers.42 The principles are as follows:
Practical steps for applying the UNGCP as a business are given by Consumers International, a membership organization for consumer groups around the world.43 Consumers International advises businesses to undertake six steps to ideally benefit from the guidelines. The first step is to collaborate. Businesses should communicate with relevant stakeholders to share their ideas and experiences. Step two is the audit. In this step, it is recommended to review the effectiveness and coverage of existing consumer protection policies. After this is done, businesses should assess the guidelines to identify any gaps in their consumer protection policy and point out areas that can be improved. The fourth step is to create a comprehensive plan of action including clear and realistic timeframes which specifies responsible individuals and the way tasks should be carried out. The final step is to take action. Businesses should implement their plans, ideally working with other stakeholders for the best possible outcome.44
3.2 Practical steps for consumer protection at the company level
Warranties and Guarantees
A warranty can be defined as a manufacturer’s promise to a consumer that a product or service will meet the specifications set out in the representation. It may be conceptualised as a contractual agreement between the purchaser and the manufacturer when conducting the sale of a product or service. In essence, the purpose of a warranty is to establish liability between the two parties of the purchaser and manufacturer in the event of a product malfunction.45 Concrete warranty regulations vary between states. In the EU warranty rights are regulated in the “Consumer Sales Directive”. All member states therefore legally implement a two-year warranty.46 In the US, on the other hand, there is no specified duration for warranties under state laws, as regulated in the “Magnuson-Moss Warranty Act”.47 Looking at warranties more specifically from the consumer’s point of view the main role is protection. A warranty provides a means of complaint resolution in the event that the item, when used correctly, fails to perform as described. In particular, the warranty guarantees that the buyer will either receive a free or reduced-cost repair or replacement of the faulty item. Another role of warranties is informational as many consumers assume that products with a longer warranty period are more reliable and durable than those with a short warranty period.45
Besides warranties, there are also guarantees that companies can grant the customers. A guarantee is a voluntary service that is provided by a firm. The terms and the duration of a guarantee is at the discretion of the company. Since the effects of a warranty are limited, an additional guarantee can have benefits for consumers. Guarantees are beneficial if, for example, the duration of the guarantee is longer than the warranty period, if consumers can get a replacement during the repair, or if the guarantor is responsible for all costs associated with the product assessment, including any necessary repairs or replacements.46
Best Practice Example: Patagonia
A company that has a distinctive guarantee policy is Patagonia. The US-American outdoor producer offers a so-called ironclad guarantee.48 The uncompromised and lifelong guarantee applies to all offered products and includes the repair, replacement, and refund of the purchase price of a product. Customers are therefore able to return their damaged products to Patagonia where the product is tested for repairability. If a repair is possible the items are repaired free of charge, except for demanding repairs or damage due to wear and tear for which a small fee is charged. If a repair is not possible customers receive a new product or a refund.49
Product Labelling
Product labelling was originally a tool for consumer protection in the area of product safety. The goal of product labels is consumer protection by providing essential information about the characteristics of products and services and therefore equipping consumers with the information required to make informed buying choices. Over time, there were also more and more product labels that covered the environmental aspect of a product or service, so-called ecolabels.50 Ecolabels indicate the overall environmental performance of a product or service within a specific category.51 The presentation of this environmental information on products can be a spectrum ranging from simple symbols or color codes to other labels with general or detailed information on the environmental performance.52 Ecolabels offer advantages over conventional labels as they aim to provide consumers with reliable and detailed information to educate them about the environmental performance and benefits of the products. This information helps to develop consumers’ environmental awareness, enables them to make informed choices, and promotes the consumption of the most environmentally friendly products.50One example of an ecolabel is the ENERGY STAR label. The label, which was established in 1992, is a US government-supported label for energy efficiency and certifies, for instance, that electrical appliances fulfill the energy-saving criteria of the US Environmental Protection Agency (EPA) and the US Department of Energy. It provides unbiased, simple, and trustworthy information that consumers and companies can rely on to make informed choices.53
Best Practice Example: Hewlett Packard (HP)
A company that is especially acknowledged for its efforts by ENERGY STAR is HP, a US-American IT company that produces, for example, computers and printers.54 Since 2018, HP has been honored three times in a row as an ENERGY STAR Partner of the Year. Awardees are selected for surpassing ENERGY STAR standards, demonstrating efforts that exceed the minimum certification requirements. HP users therefore have access to more environmentally friendly devices. In line with the higher standards for energy consumption and emissions that apply to these products, consumers are protected as they receive transparent information on the environmental and quality performance and are able to save the operating costs of devices.55
Certification Standards
Certification standards are a tool to support basic consumer rights such as the right to safety and the right to information. A certification standard can be understood as a formal process, that is conducted by an external auditor, through which compliance with certain criteria can be confirmed. The process provides an independent assurance that an organisation’s practices are aligned with established requirements and are effective in enabling the organisation to achieve its objectives effectively.56 By that, they also support consumer protection as they contribute to increased levels of safety, quality, efficiency, interchangeability, and reliability of products and services. The advantage of certification standards therefore is that through these characteristics a uniform basis for national regulation can be provided. Moreover, certification programs can be considered best practices for business activities as they demonstrate the best way of handling certain issues.57 A well-established organisation for the development of standards is the International Organisation for Standardization (ISO). ISO as an independent and non-governmental international organisation develops standards in all kinds of sectors, such as quality, energy or environmental management standards, health and safety standards, food safety standards, or IT security standards.58
Best Practice Example: Lyreco
A company that sets a good example for the implementation of an ISO-standard is Lyreco. Lyreco is a market leader in Europe and the world’s third-largest distributor of workplace products and services in 2024.59 By applying the guidelines for sustainable procurement which are standardised in ISO 20400, Lyreco ensures that products and services are procured taking social and environmental aspects into account. That is done by the introduction of a new category called “Sustainable Selection” in Lyreco’s web shop. Consumers can now choose between three new selection criteria for sustainable products: “Planet”, “People at Work” and “Community”. Items and services with a lower environmental impact are available under “Planet”, those that enhance the well-being or quality of life of people in the workplace are found under “People at Work”, and those that contribute to the development of fair business practices are categorized under “Community”. With the new rating, Lyreco is giving their customers a choice in terms of social and environmental considerations, helps to protect consumers, and fulfills the customers’ growing need for sustainable products that are trustworthy.60
While ISO is an international organisation, there are also organisations for the development of standards at the national level. In Germany, it is the German Institute for Standardization (DIN) which sets out specific requirements for a product, process, or service. This therefore provides clarity and uniformity regarding their characteristics. The standards also serve the purpose of ensuring the safety of people and goods and to improve the quality of the society and the environment.61ISO and DIN cooperate and DIN represents German interests at the ISO level.62
Should a company wish to have its products and services certified to DIN or ISO standards, it may engage the services of the TÜV (Technischer Überwachungsverein) to conduct the certification process. The TÜV is an association of various private testing organisations in Germany, which certify technical devices and systems, large-scale projects, or operational processes in companies, for example.63
Corporate Social Responsibility
In light of the consumer’s growing interest in the social behaviour of companies and enhanced consumer awareness organisations are increasingly recognising the value of CSR.64 CSR is a concept which describes voluntary efforts of companies to resolve a range of social and environmental issues specific to their entrepreneurial activities.65 The responsibility of a company, which ultimately benefits the consumers, can be divided into different types. Economic responsibility describes offering high-quality goods and services at a reasonable price while legal responsibility refers to compliance with prevailing laws and regulations. Ethical responsibility is characterised by refraining from immoral practices and committing to ethical behaviour, and philanthropic responsibility is ultimately the expectation that companies give back positively to society. Responsible behaviour of companies therefore also protects consumers.66Consumer awareness in comparison can be defined as the individual consumer’s knowledge and understanding of their rights in regard to companies and their services and products.67 The awareness of consumers therefore plays a crucial role in the relationship between the company and consumers as it provides consumers with a stronger position from which they can make more informed purchase choices and even exert pressure on companies to meet their needs.68 Hence, companies should be transparent about their products and services to contribute to consumer awareness as it enables a balanced commercial relationship between the consumer and the company.69 As part of their CSR policy, firms can also attach particular importance to the privacy of their customers, exceeding legal requirements. Since companies have sensitive data, such as addresses, phone numbers, or bank accounts of their customers as part of their business activities, it is important to protect this data and therefore also the consumers. While the general aim of the economic activities of companies may be to create products and services that meet the consumer’s needs, firms can go even further and adopt a more proactive approach by promoting the consumption of products and services that are in line with the principles of sustainable development. These products can be characterised by an innovative and socially responsible character. Companies can also implement after-sales and other services with a responsible dimension in relation to their products and services as part of their CSR policy. While after-sales services can relate to warranties and customer support services, for instance, they can also be extended to consumer welfare and health protection or the reduction of the impact on the environment.70
Best Practice Example: Tesco
Tesco is a company that has implemented numerous elements of consumer protection in its CSR policy. To better protect customer privacy, the British supermarket chain has formed a Cyber Risk Committee, which deals with potential data risks and how to prevent, detect, and combat them. In addition, the IT system is constantly tested for security to prevent data leaks of customer data.71 In terms of product development Tesco regularly tries to develop innovative products and has implemented an improvement program to enhance the quality, health, helpfulness, and responsible sourcing of current products. Moreover, Tesco’s Nutrition Team, in collaboration with health experts, works on encouraging the food industry to enhance the quality of diets and promote public health as well as implementing health campaigns which are designed to provide customers and colleagues with accurate dietary information.72
Industry associations
Industry self-regulation (ISR) refers to associations of businesses within a certain industry or to industrial sectors as a whole that consent to operate in certain ways in accordance with a set of guidelines or standards. Businesses may be forced by law to participate in the organisations, however this is usually not the case. The organisations may accept full responsibility for creating the self-regulatory tools, keeping an eye on compliance, and guaranteeing enforcement, or they may cooperate with the government and other relevant parties in a co-regulatory role. The set standards can contribute to enhancing a company’s reputation. Firms can improve their image with consumers and/or governments, thereby fostering trust. Additionally, it provides businesses with greater opportunities to influence the standards that are set and how they are monitored and enforced, thus avoiding more direct government intervention and helping to enhance consumer protection. There can be several other reasons why self-regulation is sought after. When the government may be restricted in its capacity to solve some concerns by legal limits, it may be interested in improving such regulation. This is occasionally the case with regard to information disclosure concerns, when governments may not always be able to control how companies advertise because of the right to free speech. Furthermore, governments could discover that pursuing ISR options is more economical. Nevertheless, there are also some challenges to be considered. These include the potential high costs of establishing and operating self-regulatory schemes, which may ultimately be borne by the consumer. Moreover, the aspect of accountability, in terms of the evaluation and review of the self-regulation mechanisms, might be difficult to handle.73
Best Practice Example: Consumer Technology Association (CTA)
The CTA, which represents the US consumer technology industry, is recognized for its proactive efforts in promoting consumer protection through various initiatives and guidelines.74 One concrete example of this is the Consumer Technology Circularity campaign (CTCI), a voluntary industry campaign to minimize waste, encourage greater reuse, boost recycling, lessen climate impact, and see less disposal of consumer electronics, was introduced by the CTA in early 2024. The companies Lenovo, LG Electronics, Panasonic, Samsung, and Sony Electronics Inc. are founding partners of the innovative circularity project. By promoting a circular economy, aiming to reduce environmental effects, and providing solutions that improve the customer experience to live sustainably, CTA member firms improve the industry as a whole.75
4 Drivers and Barriers of firm action on consumer protection
In the following chapter, the focus will be on the drivers and barriers to consumer protection. In order to be able to analyse this in more detail, the internal and then external drivers and barriers of a firm are discussed. This was restricted to those considered particularly relevant in this context. Due to the broad scope of consumer protection, the focus below is on environmental sustainability for some areas and on social sustainability for others, in order to present the barriers and drivers in these areas as comprehensively as possible.
4.1 External Drivers and Barriers
Political/ Regulatory Sphere
In the political context, several factors have the potential to either impede or facilitate the sustainability of environmental protection in relation to consumer protection. One of the key drivers in general is that consumer legislation provides a more robust framework than environmental law for addressing sustainability issues because it offers protection and favourable procedural rules for consumers who have been defrauded, for example, by greenwashing claims. This can result in sanctions being imposed on companies involved in such activities. In comparison environmental law may not have the same level of enforcement.76 At the EU level, for example, the new Consumer Agenda 2020-2025 focuses on five priorities and one of them is the green transition. This includes ensuring that sustainable products are offered to consumers and that they have more information. Another is the promotion of more sustainable products, as well as repairs.77 A number of laws have also been introduced that explicitly address consumer protection in the context of sustainability. For instance, parts of the “Empowering Consumers in the Green Transition (EmpCo)” legislative package came into force in March 2024. This ensures that consumers have the right to receive information at the point of sale about the lifespan and repair of the products. Moreover, it strengthens consumer protection against unreliable or false environmental claims, thus counteracting intensive greenwashing.78 Another directive proposed by the EU in March 2023, which is now in the further legislative process and is aimed in particular at preventing greenwashing, is the “Green Claims Directive (GCD)”. EmpCo can be seen as a pre-stage to GCD.79 The aim of the GCD is to create clear and consistent standards for the use of environmental claims on products and services by imposing strict control and verification standards for environmental claims on companies so that consumers are not misled and can make informed and environmentally responsible choices.80 Countries outside the EU have also introduced regulations against greenwashing to protect consumers. In Australia, for example, the Australian Competition and Consumer Commission (ACCC) regulates companies that make environmental claims. If firms fail to provide consumers with clear information and use correct terminology about the environmental claims of their products or services and are found guilty, they could face significant fines of up to $2,500,000.81 In the US, the Federal Trade Commission has published Green Guides on how companies should make environmental claims about their products so as not to mislead consumers, which are very similar to the European laws listed above.82 In the Global South, such laws and regulations are still mostly lacking. However, it seems probable that they will adopt a regulatory approach to consumer protection that is similar to that of Europe.83 In general, a potential barrier to progress in this area is the currently limited policy recognition of the potential of sustainability in the context of consumer protection. Indeed, almost half of countries have no constitutional provision for consumers.84 Furthermore, the existing consumer protection legal framework only addresses environmental damage to a limited extent.76 Consumer protection systems are also very different and vary greatly from country to country and region to region.85
Social Sphere
Looking at society, it can be seen that consumers are becoming progressively aware of the importance of environmental issues and want to play an active role in protecting themselves. As a result, they are increasingly demanding information about the products they buy.86 Another reason for the rising expectations of products may be that consumers feel unprotected and lose confidence in companies to put their interests first.84 Companies might therefore have to adapt to higher requirements. Another factor to consider when talking about the social sphere in the context of consumer protection is vulnerable and socially disadvantaged consumers. At present, consumer protection laws and mechanisms are particularly weak in relation to this group. This also makes it difficult for companies to take them into account adequately.87 Another area of focus within the social sphere is the role of social movements and NGOs. They serve an important function as drivers of consumer protection, facilitating the formation of connections with governmental bodies, firms, and other relevant parties.84 They also offer companies non-binding voluntary commitments.88
Best Practice Example: VAUDE
One example of this is the German outdoor outfitter VAUDE, which has made a number of voluntary commitments. With the ‘Greenpeace Detox Commitment’, for instance, it has pledged to completely avoid harmful chemicals, demonstrate full transparency in the supply chain, and define a binding Manufacturing Restricted Substance List (MRSL).88
Economic/ Technological Sphere
In the context of consumer protection, the technological sphere can be identified as a significant driver because the growth of the internet and information technology markets raises the opportunity that consumer protection may be better served by innovation and competition than by regulation. In particular, they allow firms to offer a wider variety of products and services, increase the amount of information for consumers, and offer reputational feedback mechanisms for firms to improve the level of service they provide. All of this places new requirements on companies in terms of transparency, quality, and security, as well as competition with other companies that are often quicker than regulators to point out the poor performance of their competitors.89 Nevertheless, the obstacles that emerge in the technological field concerning consumer protection must not be overlooked. The potential issues associated with the utilisation of digital technologies in the context of consumer protection may include consumer privacy and data safety, manipulation of user feedback, and that technological progress is currently moving faster than the legislative process.90 For these reasons, the creation of new frameworks will be a key area of focus in the coming years.83 An emerging pattern can already be discerned. For example, the UK has enacted the Digital Markets, Competition and Consumers Act 2024, which will significantly strengthen consumer protection rights and reform the regulation of competition in digital markets.91 Another example is the Digital Markets Act, which was adopted by the EU in 2022. It aims to regulate the digital market and limit the market power of large technology companies, which will also benefit consumers.92 In the context of emerging technologies, the sharing economy is also becoming increasingly significant, with an expanding number of consumers making use of it due to its advantages in terms of quality, price, and convenience.93 It allows anyone with an internet connection to be a collaborator in the production of a service or product, using a range of technologies such as open data and crowd-sourcing, blurring the lines between professionals, freelancers, and amateurs.94 Nevertheless, the notion of the consumer is being transformed as a consequence, which is presenting new challenges for the protection of consumers. Questions arise for example about insurance coverage in the event of a potential injury in the new ‘manufacturing’ process. Concerning the sharing economy, it is also worth looking at the notion of the “prosumer”, a mix of consumer, producer, and professional. As shown in the definition of the consumer in 1.1, a consumer is a person who is not acting in the course of a professional or commercial activity, but for a private purpose. However, if a prosumer is both a producer and a consumer, it is more challenging to integrate the concept of the prosumer within the existing legal framework. At the same time, the classification of prosumers seems to remain very controversial, as the concept is difficult to define. As can be seen, there is still a lack of recognition in the regulation of new business modes.94
4.2 Internal Drivers and Barriers
Innovation/Technology
In the context of consumer protection, the first internal factor that requires detailed consideration is that of innovations in connection with technologies. As previously outlined in the context of technology, digital technologies are becoming increasingly important. The following section will examine the ways in which companies can leverage technology to enhance their efficiency in the context of consumer protection. New technologies are of great importance for firms’ consumer protection in terms of product safety and quality as well as protection against counterfeiting and should therefore be considered as a potential benefit for companies. Specific new technologies that are becoming increasingly important for firms in relation to consumer protection are conversational platforms and, in particular, blockchain (BC) technology. BC was first used as the foundation and mechanism for bitcoin but then became a platform for digital transactions. For example, BC can contribute to product security and anti-counterfeiting. It contributes to product security by using encryption and distributed information to protect against tampering. This creates new opportunities for product traceability, making it easier for firms to conduct product recalls and enabling product safety throughout the supply chain. BC technology can also be used to better protect against counterfeiting, as it can be used to trace the origin of products.90
Best Practice Example: Martine Jarlgaard
One example of using BC technology to give consumers more transparency and trust is the fashion label Martine Jarlgaard. Their products are given digital tokens so that consumers can verify the journey from raw material to finished product by using the item´s QR code for instance. Consumers will be able to see every step of the way, including labour standards and environmental impact, and will no longer have to rely solely on specific labels. Moreover, Jarlgaard believes that the technology will bring consumers closer to the complexity of the product’s creation process, thereby increasing product appreciation and counteracting the throwaway mentality.95
However, it should be noted that consumer protection technologies are still at an early stage and many applications are prototypes and require further evaluation. In addition, legal concerns that may arise from some consumer protection technologies should also be considered. For example, BC technology is based on the principle that information stored on the BC should not be erased. This principle, however, infringes the right to be forgotten.90
Collaborative Partnerships
Collaboration can help companies develop market offerings and business models that protect and empower consumers. In terms of market offerings, this means that companies can work with consumer organisations and other stakeholders to jointly establish one-stop shops that help both companies and consumers find accurate and verified information on, for example, green technologies. In addition, these one-stop shops can help identify what is available on the market and assess what incentives are needed to make the purchase of these products affordable for consumers, including socially disadvantaged people. In the energy sector, for example, business transformation means that utilities are evolving from energy suppliers to energy service providers, offering help to consumers who want to improve their energy efficiency. By providing comprehensive information on costs, benefits, and other factors, the principle is to sell ‘negawatts’ rather than ‘megawatts’.96
Self-regulation
As discussed in section 3.2 on implementation, voluntary adherence to self-regulatory standards is vital for businesses to protect consumers and foster trust. As an internal driver, the promotion of self-regulation is essential to achieve consumer protection. By adopting measures such as simplifying guarantees, improving quality standards, recognising companies’ responsibility to protect consumers’ health and safety, improving repair and service quality, monitoring fraud and deception internally, improving consumer information, and providing effective channels for consumer complaints.97 To do so companies can build consumer confidence, reduce regulatory risks, and gain a competitive edge. This proactive approach supports consumer protection while also enhancing the business’s long-term sustainability and reputation. 73
References
1 Hilton, M. The Death of a Consumer Society. Transactions of the Royal Historical Society 18, 211-236 (2008).
2 Marques, C. L. International Protection of Consumers as a Global or a Regional Policy. Journal of Consumer Policy 43, 57–75 (2019). https://doi.org/10.1007/s10603-019-09434-z
3 Micklitz, H.-W. & Saumier, G. Enforcement and Effectiveness of Consumer Law. Vol. 27 3–45 (2018).
4 Eurostat. Household consumption by purpose, <https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Household_consumption_by_purpose> (2023).
5 Hippel, E. v. Lead Users: A Source of Novel Product Concepts. Management Science 32, 773-907 (1986). https://doi.org/10.1287/mnsc.32.7.791
6 Steinbaum, M. & Stucke, M. E. The Effective Competition Standard: A New Standard for Antitrust. The University of Chicago Law Review 87, 595-623 (2020).
7 Thorun, C. & Diels, J. Consumer Protection Technologies: An Investigation Into the Potentials of New Digital Technologies for Consumer Policy. Journal of Consumer Policy 43, 177–191 (2020).
8 Mierzwinski, E. Colston E. Warne Lecture: Consumer Protection 2.0—Protecting Consumers in the 21st Century. the journal of consumer affairs 44, 578-597 (2010). https://doi.org/10.1111/j.1745-6606.2010.01185.x
9 Coyle, L. Income, Equality, and Consumer Protection. GPSolo 37, 34–37 (2020).
10 Consumers International. Who we are: What are Consumer Rights?, <https://www.consumersinternational.org/who-we-are/consumer-rights/> (
11 Schüller, B. The definition of consumers in EU consumer law. European Consumer Protection, 123-142 (2012).
12 Thomas, K. Analysing the Notion of ‘Consumer’ in China’s Consumer Protection Law. The Chinese Journal of Comparative Law 6, 294–318 (2018). https://doi.org/10.1093/cjcl/cxy010
13 Cornell Law School: Legal Information Institute. § 1-201. General Definitions, <https://www.law.cornell.edu/ucc/1/1-201> (
14 Gretchen Larsen, R. L. Consumer Rights: An Assessment of Justice. Journal of Business Ethics 112(2013). https://doi.org/10.1007/s10551-012-1275-9
15 Bundeszentrale für politische Bildung. Verbraucherschutz: Konsumentenschutz, <https://www.bpb.de/kurz-knapp/lexika/lexikon-der-wirtschaft/20971/verbraucherschutz/> (
16 Smith, R. L. When Competition is Not Enough: Consumer Protection. Australian Economic Papers 39, 408-425 (2002). https://doi.org/10.1111/1467-8454.00101
17 Wood, J. T. in Regulatory Theory: Foundations and applications (ed PETER DRAHOS) 633-652 (ANU Press, 2017).
18 Martinello, B. Verbraucherschutzmaßnahmen, <https://www.europarl.europa.eu/factsheets/de/sheet/47/verbraucherschutzma%C3%9Fnahmen> (2024).
19 Valant, J. Consumerprotection in the EU: Policy overview. (European Parliamentary Research Service, 2015).
20 Hilton, M. Consumers and the State since the Second World War. The Annals of the American Academy of Political and Social Science 611, 66–81 (2007).
21 Maynes, E. S. Consumer protection: The issues. Zeitschrift für Verbraucherpolitik 3, 97-109 (1979).
22 Ivory, D. G.M.’s Ignition Problem: Who Knew What When, <https://www.nytimes.com/interactive/2014/05/18/business/gms-ignition-problem-who-knew-what-when.html> (2014).
23 Beale, H. Unfair Contract Terms Act 1977. British Journal of Law and Society 5, 114-121 (1978). https://doi.org/10.2307/1409853
24 Vladeck, D. C. Consumer Protection in an Era of Big Data Analytics. Ohio Northern University Law Review 42, 3-9 (2023).
25 Stigler, G. J. Theory of Price. 209 (Macmillan Library Reference, 1966).
26 Europäische Union. Unlautere Preisbildung, <https://europa.eu/youreurope/citizens/consumers/unfair-treatment/unfair-pricing/index_de.htm> (2024).
27 O.K. Osuji, U. C. A. in Corporate Social Responsibility in Developing and Emerging Markets: Institutions, Actors and Sustainable Development Ch. 20, 395-437 (Cambridge University Press, 2019).
28 Marr, B. Key Performance Indicators (KPI): The 75 Measures Every Manager Needs To Know. (Financial Times Prent., 2012).
29 Steele, E. H. Fraud, Dispute, and the Consumer: Responding to Consumer Complaints. University of Pennsylvania Law Review 123, 1107-1186 (1975). https://doi.org/10.2307/3311528
30 Krause, H.U., Arora, D. Key Performance Indicators for Sustainable Management: A Compendium Based on the “Balanced Scorecard Approach”. (De Gruyter Oldenbourg, 2020).
31 Consumer Financial Protection Bureau. Consumer Complaint Database, <https://www.consumerfinance.gov/data-research/consumer-complaints/> (
32 Thorun, C., Vetter, M., Reisch, L. & Zimmer, A. K. Indicators of consumer protection and empowerment in the digital world: Results and recommendations of a feasibility study. 113 (ConPolicy Institute for Consumer Policy, 2017).
33 Commission, E. Safety Gate: the EU rapid alert system for dangerous non-food products, <https://ec.europa.eu/safety-gate-alerts/screen/webReport> (2024).
34 Commission’, U. S. C. P. S. Recalls, <https://www.cpsc.gov/Recalls> (2024).
35 PrivacyRights.org. Data Breach Chronology, <https://privacyrights.org/data-breaches> (2023).
36 ECCG. Report of the ECCG on monitoring indicators of the consumer movement. (2021).
37 Flamer, K. Best Eco-Friendly Clothes Dryers of 2023, <https://www.consumerreports.org/appliances/clothes-dryers/best-eco-friendly-clothes-dryers-a1017163449/> (2023).
38 Deutsches Institut für Produkt- und Marktbewertung GmbH. Quality Assurance, <https://dipmb.de/quality-assurance/> (
39 Hayes, A. Federal Trade Commission (FTC): What It Is and What It Does, <https://www.investopedia.com/terms/f/ftc.asp> (2022).
40 Streefkerk, R. Qualitative vs. Quantitative Research | Differences, Examples & Methods, <https://www.scribbr.com/methodology/qualitative-quantitative-research/> (2019).
41 Benöhr, I. The United Nations Guidelines for Consumer Protection: Legal Implications and New Frontiers. Journal of Consumer Policy 43, 105-124 (2020). https://doi.org/https://doi.org/10.1007/s10603-019-09443-y
42 United Nations. Guidelines for Consumer Protection, <https://unctad.org/topic/competition-and-consumer-protection/un-guidelines-for-consumer-protection> (2016).
43 Consumers International. Who we are, <https://www.consumersinternational.org/who-we-are/> (2024).
44 Consumers International. (Consumers International,, 2016).
45 Murthy, D. N. P. & Djamaludin, I. New product warranty: A literature review. International Journal of Production Economics 79, 231-260 (2002). https://doi.org/https://doi.org/10.1016/S0925-5273(02)00153-6.
46 European Consumer Centre Germany. Warranty and guarantee in the EU, <https://www.evz.de/en/shopping-internet/guarantees-and-warranties.html> (2022).
47 Federal Trade Commission. Businessperson’s Guide to Federal Warranty Law, <https://www.ftc.gov/business-guidance/resources/businesspersons-guide-federal-warranty-law> (2015).
48 Patagonia. Ironclad Guarantee, <https://help.patagonia.com/s/article/Ironclad-Guarantee> (2024).
49 Patagonia. Repair Process, <https://help.patagonia.com/s/article/Repair-Process> (2024).
50 Iraldo, F., Griesshammer, R. & Kahlenborn, W. The future of ecolabels. The International Journal of Life Cycle Assessment 25, 833–839 (2020).
51 Gertz, R. Eco-labelling—a case for deregulation? Law, Probability and Risk 4, 127–141 (2005). https://doi.org/https://doi.org/10.1093/lpr/mgi010
52 Borin, N., Cerf, D. C. & Krishnan, R. Consumer effects of environmental impact in product labeling. Journal of Consumer Marketing 28, 76-86 (2011). https://doi.org/10.1108/07363761111101976
53 ENERGY STAR. About energy star, <https://www.energystar.gov/about?s=footer> (2024).
54 HP. HP information, <https://www.hp.com/de-de/hp-information.html> (2024).
55 Pavlovic, D. What is ENERGY STAR and Why Does it Matter for HP Devices?, <https://www.hp.com/us-en/shop/tech-takes/what-is-hp-energy-star> (2021).
56 Gantz, S. D. Chapter 7 – IT Audit Drivers. The Basics of IT Audit: Purposes, Processes, and Practical Information, 129-148 (2014). https://doi.org/10.1016/B978-0-12-417159-6.00007-9
57 International Organization for Standardization. Consumers: Getting started: About ISO/COPOLCO. (2024).
58 International Organization for Standardization. ISO: Global standards for trusted goods and services, <https://www.iso.org/home.html> (2024).
59 Lyreco. A GREAT WORKING DAY. DELIVERED. Wer sind wir?, <https://www.lyreco.com/group/switzerland/de#:~:text=Lyreco%20ist%20Marktf%C3%BChrer%20in%20Europa,Dienstleistungen%20rund%20um%20den%20Arbeitsplatz> (2024).
60 Lyreco. ISO 20400 – ein Nachhaltigkeitsstandard als Grundlage für die «Sustainable Selection», <https://www.lyreco.com/group/switzerland/de/nachhaltigkeit/iso-20400-ein-nachhaltigkeitsstandard-als-grundlage-fuer-die-sustainable-selection> (2023).
61 DIN Deutsches Institut für Normung e.V. DIN – kurz erklärt, <https://www.din.de/de/ueber-normen-und-standards/basiswissen> (2024).
62 DIN Deutsches Institut für Normung e.V. Internationale Normung, <https://www.din.de/de/din-und-seine-partner/din-in-der-welt/internationale-normung> (2024).
63 TÜV-Verband e.V. TÜV FAQs, <https://www.tuev-verband.de/ueber-uns/tuev-faqs> (2024).
64 Carrigan, M. & Attalla, A. The myth of the ethical consumer – do ethics matter in purchase behaviour? Journal of Consumer Marketing 18, 560-578 (2001). https://doi.org/10.1108/07363760110410263
65 Campbell, J. L. Why would corporations behave in socially responsible ways? an institutional theory of corporate social responsibility. Academy of Management Review 32 (2007). https://doi.org/10.5465/amr.2007.25275684
66 Carroll, A. B. The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons 34, 39-48 (1991). https://doi.org/10.1016/0007-6813(91)90005-G
67 Bello, K. B., Jusoh, A. & Nor, K. M. Corporate Social Responsibility and Consumer Rights Awareness: A Research Agenda. Indian Journal of Science and Technology 9, 1-10 (2016). https://doi.org/10.17485/ijst/2016/v9i46/107134
68 Donoghue, S. & Klerk, H. M. D. The right to be heard and to be understood: a conceptual framework for consumer protection in emerging economies. International Journal of Consumer Studies 33, 456-467 (2009). https://doi.org/10.1111/j.1470-6431.2009.00773.x
69 Makanyeza, C. Consumer Awareness, Ethnocentrism and Loyalty: An Integrative Model. Journal of International Consumer Marketing 27, 167-183 (2015). https://doi.org/10.1080/08961530.2014.980927
70 Dragomir, V.-D. A. I., Elena Roxana. Social Responsibility Practices Regarding Facilities Granted to Employees and Consumer Protection in Selected European Companies. Amfiteatru Economic Journa13, 86-103 (2011).
71 Tesco. Cyber Security – protecting customer and colleague data, <https://www.tescoplc.com/sustainability/documents/policies/cyber-security-protecting-customer-and-colleague-data> (2021).
72 Tesco. Product Safety & Quality, <https://www.tescoplc.com/sustainability/documents/policies/product-safety-quality> (2023).
73 OECD. Industry Self Regulation: Role and Use in Supporting Consumer Interests. (OECD Digital Economy Papers, Paris, 2015).