Table of Contents
As presented by Julie Brill (2011) in The Intersection of Consumer Protection and Competition in the New World of Privacy, the author deliberates on the complex relationship between three critical issues; consumer protection, competition, and privacy. Brill discusses the emerging concerns in both competition and privacy that has been brought forth by technological advancement, and how they are likely to affect the current consumer protection regime.
The author looks into the U.S. Federal Trade Commission (FTC) basic mandate in governing these three named issues and attempting to institute a balance to ensure optimal results. Furthermore, the article explains the current evolutionary development of privacy laws and its effect on consumer protection. Equally, the article discusses the convergence of some critical consumer protections ideals and those that govern commercial competition in the wake of ever-changing privacy protection.
Consumer protection and competition are distinct from each other, and the only common concept is that both are concerned with consumer protection. Ideally, they protect consumers by eliminating market distortions. Consumer protection legal regime concerns itself with potential insulating consumers from unethical commercial practices such as misleading conduct like deceptive advertising.
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Competition law protects consumers from unscrupulous conduct perpetrated by suppliers who are keen on distorting the market by tampering with the supply by creating artificial shortages. Unlike, consumer protection which directly protects consumers through a series of regulatory frameworks, competition may do so indirectly by regulating the conduct between supplies. Consumer protection concerns itself with distortions on the demand side while competition law focuses on the supply side.
Despite having a common objective in regard to protecting the ultimate consumer protection and competition laws sometimes conflict therefore negating the positive intention of the other. For instance, as speculated in the case of California Dental Association v. FTC, 526 U.S. 756 (1999), where competition concerns ended up superseding justifiable consumer protection concerns. In this case, FTC brought an action against the dental association in regard to the fees charged citing that it amounted to the misleading advertisement.
The dental association in response stated that it was not feasible to disclose all variables that affected the ultimate pricing of such services. Ideally, the Supreme Court in siding with the FTC concluded that before competition principles can supersede consumer protection, it must demonstrate that there is a legitimate reason which must not only be identified but extensively analyzed to determine its true competitive harm.
In light of this court decision, the author proceeded to dig deeply in the concept of self-regulation adopted by some industries. Brill acknowledged that the self-regulatory scheme is one of the most efficient ways industry can address concerns such as privacy, consumer protection, and competition. This is made possible by the fact that members of a certain professional body are by themselves competing against each other, which motivates them to police one another. Although this is what is often expected, Brill states that the method can be ineffective if there is collusion for collective benefit. Illustratively, service providers engaged in behavioral marketing are often reluctant to address privacy issues.
There is a concern that stringent consumer protection regulatory regime may inevitably stifle competition in a particular market. In situations where maintaining a high quality of goods and services are critical to consumer protection; many undertakings that possess limited resources or expertise to achieve and maintain such standards may find it difficult to break free in such markets. Entry barriers can take the form of substantiation, endorsement and testimonial guides, which often works negatively on new entrants with limited reputation and resources.
Crucial to this article is the issue of consumer privacy which is also one of the primary endeavors of FTC. As articulated by Brill, privacy concerns are one of the most controversial issues between consumer protection and competition. Ideally, the exponential changes in technological advances have made it viable for consumer data to be collected, stored, transferred, sold and analyzed in ways that were not deemed possible. Commercial undertakings are currently able to target potential consumers with surgical precision therefore saving significant amounts of advertising resources.
However, FTC regulatory models seem archaic and ineffective in a current context. For instance, the “notice and choice model,” which is commonly used places the significant burden to consumers of who are incapacitated due to the design of the notice. The “harm-based model,” is also incomprehensive in addressing foreseeable harm which in reality keeps on changing. Another concern is that technological advance has made it possible for businesses to obtain personally identifiable information without notice and consent of consumers.
The article focuses on the intricate relationship between consumer protection and competition laws with regard to protecting consumer privacy. As mentioned above both consumer protection and competition are distinct in nature with specific objectives. However, despite these glaring differences both of them are inclined to protect the consumer both directly and indirectly.
This stipulates that a balance can be created between consumer protection and competition in regard to the protection of privacy. However, this position is inherently disputable as the courts are inclined to favor consumer protection over competition concerns as indicated in California Dental Association v. FTC. The assumption of this position is that there is some asymmetry between businesses and consumers.
Rationally, Brill proposes various forms of strategies to strike a balance between consumer protection and competition in regard to privacy. One of the strategies Brill proposes is the deployment of a self-regulatory framework. This acts on the premise that competitors in a certain field are inclined to police each other and foster competitive tendencies. However, this strategy seems to fail if the same competitors are able to collude in order to benefit collectively.
Collusion is possible in industries where they rely on behavioral marketing in which copious amount of consumer data is availed to businesses. Currently, the regulatory strategies deployed by FTC such as, notice and choice, together with harm model, places an enormous burden on the consumer who in most instances incapacitated on such matters. As a remedy, FTC has proposed a do not track mechanism which in itself is deemed counterproductive by stakeholders. However, Brill identifies that the do not track mechanism can be beneficial to both consumers and businesses if it is approached on a self-regulatory context.
Julie Brill discusses principle viewpoints while addressing challenges and how they can be alleviated. She seems to be a supporter of self-regulatory schemes; a favorable channel for addressing privacy concerns between consumer protection and competition. I differ with her on the premise that consumer protection and competition on the issue of privacy should be primarily placed on regulatory bodies such as FTC. The position is the fact that commercial undertakings are incentivized in scheming in this instance, than competing. In a similar fashion, obtaining, analyzing and transferring consumer data has been greatly simplified making it easy for firms to even trade with this information.
The strategies proposed seem to be ignorant of the current position of technology today. Initially, FTC had favored both notice and choice model together with the harm model. On this one, I concur with Brill as they are realistically ineffective. However, using the do not track model is also disputable as computers are designed to communicate with each other, and they have to identify the source of information making the temptation of tracking difficult to resist. It is even more difficult to do it if it is left in the hands of businesses of whom will conspire to jeopardize the intended objective of protecting consumer privacy.
Although privacy is a fundamental right articulated under the Fourth Amendment of the United States Constitution, it has received considerable challenges, especially with advancement in technology. Qualitative nature of data is critical when devising regulatory framework. Maybe a scenario could work where it would be acceptable for businesses to track consumers as long as there is a reasonable justification. In this context, the reasonable justification is a convenience in which consumers are often happy to trade with privacy.
Legal Bibliography
- Brill, J. (2011). The intersection of consumer protection and competition in the new world of privacy. Competition Policy International, 7(1), 7-23.
- California Dental Assn. v. FTC, 526 U.S. 756 (1999). (n.d.). Retrieved from https://supreme.justia.com/cases/federal/us/526/756/
