Importance of consumer protection

The essentials

A consumer is a person who buys goods or hires services for a price, including users with the buyer's approval. Consumer protection means protecting consumers against unfair practices such as adulteration, defective goods, overcharging, false advertising and deficient services. It is needed because sellers often have more information and power than individual buyers.

Key points

• Importance from the consumers' point of view: consumer ignorance (many consumers do not know their rights and remedies), unorganised consumers (individuals are weak compared with large businesses), and widespread exploitation (through adulteration, short weights, hoarding, black-marketing and misleading advertisements).
• Importance from the business point of view: long-term interest of business (satisfied customers bring repeat sales), business uses society's resources and must serve society, social responsibility towards consumers, moral justification (it is ethically right to treat consumers fairly), and avoiding government intervention (unfair practices invite strict regulation).
• Ways of protecting consumers: self-regulation by business, business associations (such as industry chambers framing codes of conduct), consumer awareness, consumer organisations, and the government (through laws).

Exam tips

• If a case shows a firm taking care of customers because satisfied customers return, the reason is the long-term interest of business.
• Remember the three consumer-side reasons: ignorance, unorganised consumers and exploitation.

Common mistakes

• Thinking consumer protection is only the government's job. Businesses, associations and consumers themselves also play roles.
• Thinking consumer protection harms business. It supports long-term business success.