Academic journal article
By Wright, Joshua D.
The Yale Law Journal , Vol. 121, No. 8
ESSAY CONTENTS INTRODUCTION I. CONSUMER LAW AND ITS INSTITUTIONS A. Consumer Protection Law B. Antitrust Law II. THE ANTITRUST/CONSUMER PROTECTION PARADOX A. Example 1: Entry and the Introduction of New Products B. Example 2: Above-Cost Price Discounting C. Example 3: Product Bundling III. THE PERSISTENCE OF THE PARADOX: A COMPARATIVE INSTITUTIONAL ANALYSIS A. The Economic Institutions of Consumer Law: Price Theory and Behavioral Economics B. The Legal Institutions of Consumer Law: Common Law and the CFPB C. The Political Institutions of Consumer Law: The Last Hope for Convergence? CONCLUSION
The intellectual soul of American consumer law is up for grabs as a battle emerges between its two pillars--conventional consumer protection law and antitrust law. The former focuses on ameliorating the deleterious effects of market failures associated with consumers' imperfect or incomplete information; the latter provides the institutional framework for protecting consumers from losses associated with the creation and acquisition of monopoly power. As both share the common goal of protecting consumer welfare, it is unsurprising that legal scholars, economists, and regulators envision a fully integrated "consumer law"--a term I use hereafter to refer jointly to antitrust and consumer protection.
The potential complementarities between antitrust and consumer protection are well known. (1) Both consumer law institutions seek to maximize consumer welfare, with antitrust policy focusing on market failures associated with the creation of market power and consumer protection emphasizing instances in which, despite ample competition, consumer welfare is threatened by information asymmetries and deception. (2) A simple price-theoretic, rational choice model of complementary operation of antitrust and consumer protection institutions might therefore envision consumer protection institutions allocating resources aimed toward improving disclosures, filling information gaps, and protecting against fraud and deception, with antitrust limited to preventing the unlawful creation or acquisition of market power and failures of the competitive process. While the consumer welfare paradigm would discipline both consumer law institutions under this complementary view, lines would clearly be drawn between them so as to minimize conflict. (3) Indeed, the global trend is toward integration of consumer law institutions. (4) Despite these substantial economic and legal complementarities, the Dodd-Frank Wall Street Reform and Consumer Protection Act portends a deep rift in the intellectual infrastructure of consumer law that threatens the development of both bodies of law, as well as consumer welfare and economic growth. This Feature identifies the intellectual and institutional origins of that rift and describes the emerging paradox it has created: a body of consumer law at war with itself.
Dodd-Frank heralded a revolution in consumer protection law and enforcement. It created the Consumer Financial Protection Bureau (CFPB) and granted it unprecedented regulatory powers in the consumer law context, including the exclusive rulemaking and primary enforcement authority over consumer financial protection, (5) while divesting consumer financial protection functions from the Federal Trade Commission (FTC) and other federal regulators. (6) In addition to the authority to prohibit unfair or deceptive practices in consumer financial product markets, (7) a statutory grant of power otherwise identical to that granted to the FTC, (8) the CFPB is charged with eliminating "abusive" practices (9) in the consumer financial services business and ensuring that consumer disclosures are "fully, accurately, and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with the product or service. …