As part of this trend, groceries in many countries are becoming increasingly unaffordable. Yet, companies are not likely to bring down prices to help restrain inflation.
Increased cost of living, high inflation, and health redistribution that makes companies wealthier are only part of the big picture. Environmental degradation, growing inequality, obesity and alcohol consumption, and rising mental health problems are all linked to corporate power.
Worryingly, corporate power can corrupt the regulatory and rule-making processes, further disadvantaging the average person. To counter that, we need to take a closer look at how we protect consumers from exploitation and set the rules of the game.
Treatment v prevention
In their efforts to protect consumers, agencies monitor firms’ behaviour and take measures against unscrupulous sellers. Consumer organisations attempt to inform consumers about their legal rights and warn against dishonest firms and commercial practices. And dispute tribunals, class actions and litigation funding facilitate consumer access to the judicial system.
Such efforts – their limitations notwithstanding – may assist consumers who face troubles and seek redress. But in many walks of life – from diets to health, personal finance, and safety – avoiding a problem is superior to solving it. Could we prevent and tackle more problems by better shaping legal rules rather than attempting to solve problems once they materialise?
Political voice and participation
Whereas many laws attempt to protect and empower consumers, little attention is given to the preliminary stage in which policymakers and legislators design these rules. At this important stage, industry pressure, capture and lobbying can result in ineffective laws that benefit powerful industry forces and undermine the public’s interests.
In simple terms, the current political system does little to guarantee that consumers’ voice is properly heard. Consumers are numerous and diffused and lack the motivation and resources to influence policy-making processes. As a result, consumers are unlikely to be properly represented in rule-making processes.
At the same time, large businesses frequently represent strong and affluent interest groups. They are often well-funded and enjoy superior access to data, professionals, and the media. Wealthy businesses also have the financial incentive to coordinate and greatly influence rule-makers.
As a result, policymakers and legislators are likely to hear businesses but much less prone to listen to consumers and their interests. And where companies are active and well-represented, and the interests of consumers are insufficiently represented, political capture that disproportionately benefits wealthy businesses is more likely to occur.
Ill policy-making and weak protections
Given these realities of our rule-making processes, two unfortunate outcomes are likely. First, rule-makers will tend to bestow benefits on specific interest groups at the expense of adequately advancing the public’s (unrepresented) interests. Second, rule-makers are less likely to promote robust, effective laws representing and protecting consumers’ interests.
This unlevel and biased playing field consistently results in too few and ineffective publicly inclined consumer protection rules and laws. It also entails a disproportionate tendency to advance the interests of a specific, powerful group of businesses.
More holes than Swiss cheese
Take, for example, the protection of consumers from unfair contract terms, which New Zealand adopted a few years ago. The idea behind this legislation is straightforward: businesses draft consumer contracts and offer them on a take-or-leave-it basis, while consumers cannot and do not read these lengthy and complex legal documents. This creates the ideal environment for businesses to exploit consumers through one-sided terms. Protecting consumers who may unknowingly accept such terms makes perfect sense.
However, the legal framework that protects consumers is far from perfect. Most fundamentally, and unlike in Australia, Europe, and other countries (such as Israel), NZ consumers cannot litigate unfair contract terms. Even if a consumer is subject to an unfair contract term, they cannot bring their case before the court (or credibly threaten the firm to do so).
In fact, only the Commerce Commission can bring action against firms that employ unfair terms. But in the eight years since NZ adopted this law against unfair contract terms, the Commerce Commission brought only a handful of cases. Hence, it is of little surprise that firms keep incorporating unfair terms in their form contracts, subjecting numerous consumers to thousands of exploitative terms.
Consumers’ voice as access to justice
It is time to regard effective public and consumer participation in regulatory processes as an access to justice right. Consumers – read: the public – should have a seat at the table when the rules of the commercial game are drafted, designed, and formulated. Otherwise, we risk ineffective laws, full of loopholes, that give large corporations excessive powers, inadequately protect vulnerable consumers, and disservice the public’s interest.
A fair political and rule-making system is essential for a functioning democracy. But in a world dominated by corporate power and financial interests, access to justice that will secure fair, participatory, and balanced rule-making processes remains elusive.
A level playing field requires robust and effective laws that facilitate consumer voices and ensure rule-makers heed the public’s interest. Without such measures, we risk a detrimental cycle of deepening inequalities, distrust, and injustice.
This article was originally published on Stuff.co.nz.
Professor Samuel Becher is Associate Dean (Research) and a Professor within the School of Accounting and Commercial Law at Te Herenga Waka—Victoria University of Wellington.