Hostname: page-component-78c5997874-xbtfd Total loading time: 0 Render date: 2024-11-20T01:34:31.216Z Has data issue: false hasContentIssue false
  • English
  • Français

Publicity, punishment and protection: the role(s) of adverse publicity in consumer policy

Published online by Cambridge University Press:  02 January 2018

Peter Cartwright
Peter Cartwright*
Affiliation:
School of Law, University of Nottingham
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper argues that adverse publicity can fulfil two crucial roles in consumer protection law and policy. First, it can operate as an effective regulatory sanction in its own right; secondly it can play a vital role in helping consumers to exert market discipline by making informed choices about suppliers. However, there are significant risks to using adverse publicity to achieve these ends and it is imperative that any regulatory regime addresses these. Studying this topic now is particularly important for three main reasons. First, there has been widespread recognition that the regulatory offence, typically backed up with fines, is not the most effective form of sanction. More flexible, targeted and responsive options are required. Secondly, there is now ample evidence that regulated information, for example in the form of mandatory disclosure, frequently fails to help consumers to make fully informed choices. Finally, there are some highly significant very recent examples of enforcers using publicity in ways that can be viewed both as a sanction and as an information tool. The need to sanction responsively and to bolster consumer sovereignty demonstrates the potential for adverse publicity as a tool of consumer protection policy.

Type
Research Article
Information
Legal Studies , Volume 32 , Issue 2 , June 2012 , pp. 179 - 201
Copyright
Copyright © Society of Legal Scholars 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1. Seminal articles include: Beales, H, Craswell, R and Salop, S ‘the efficient regulation of consumer information’ (1981) 24 J Law and Econ 491 CrossRefGoogle Scholar; Whitford, WC ‘the functions of disclosure regulation in consumer transactions’ (1973) Wisc L Rev 400 Google Scholar; Hadfield, G, Howse, R and Trebilcock, MJ ‘Information-based principles for rethinking consumer protection policy’ (1998) 21 Journal of Consumer Policy 131 CrossRefGoogle Scholar. London Economics Consumer Detriment Under Conditions of Imperfect Information (OFT Research Paper 11, August 1997).

2. See Fried, C Contract as Promise: A Theory of Contractual Obligation (Cambridge: Harvard University Press 1981)Google Scholar and Atiyah, PS ‘The liberal theory of contract’ in PS Atiyah Essays on Contract (Oxford: Clarendon Press 1986) p 121 Google Scholar.

3. Note in particular the work in behavioural economics which attempts to reflect how consumers make decisions in practice. See below n 71.

4. Leff, AA ‘Unconscionability and the crowd – consumer and the common law tradition’ (1970) 31 University of Pittsburgh Law Review 349 at 356 Google Scholar.

5. See generally Cartwright, P Consumer Protection and the Criminal Law (Cambridge: Cambridge University Press 2001)CrossRefGoogle Scholar.

6. Note in particular the Regulatory Enforcement and Sanctions Act 2008 and the Civil Sanctions Pilot (LBRO/OFT Civil Sanctions Pilot (OFT 1296, December 2010)). The pilot is currently on hold. See http://oft.gov.uk/OFTwork/consultations/closed-awaiting-civil-sanctions/.

7. Weil et al use the term ‘regulatory transparency’ to mean ‘the mandatory disclosure of structured factual information by private or public institutions in order to achieve a clear regulatory goal’ ( Weil, D, Fung, A, Graham, M and Fagotto, E ‘the effectiveness of regulatory disclosure policies’ (2006) 25(1) Journal of Policy Analysis and Management 155 at 155 CrossRefGoogle Scholar). In the UK, much emphasis has been placed on the need for enforcement authorities to be transparent in their dealings with business. See eg Hampton, P Reducing Administrative Burdens (London: HM Treasury, March 2005)Google Scholar.

8. See in particular R Macrory Regulatory Justice: Making Sanctions Effective (Nov 2006).

9. Ibid.

10. See eg Warning! Too Much Information can Harm (London: Better Regulation Executive/National Consumer Council 2007).

11. Note in particular the publication of financial complaints data and the introduction of the National Food Hygiene Rating Scheme discussed below.

12. Although the distinction is an imperfect one. See K Yeung Is the Use of Informal Adverse Publicity a Legitimate Regulatory Compliance Technique? Australian Institute of Criminology Conference, Current Issues in Regulation: Enforcement and Compliance (Melbourne, 2002). The problems with informal publicity are also examined by Fisse, B and Braithwaite, J The Impact of Publicity on Corporate Offenders (Albany: State University of New York 1983)Google Scholar ch 20.

13. See eg Abbot, C ‘the regulatory enforcement of pollution control laws: the Australian experience’ (2005) 17(2) Journal of Environmental Law 161 CrossRefGoogle Scholar. The enforcers considered in this paper include local authorities as well as national bodies such as the Financial Services Authority and Office of Fair Trading.

14. Wells, C Corporations and Criminal Responsibility (New York: Oxford University Press, 2nd edn 2001) p 31 CrossRefGoogle Scholar. See also the symposium ‘Corporate crime: regulating corporate behavior through criminal sanctions’ (1979) 92 Harv L Rev 1227.

15. R Kagan and J Scholz ‘The “criminology of the corporation” and regulatory enforcement strategies’ in Hawkins, K and Thomas, J (eds) Enforcing Regulation (Dordrecht: Kluwer Nijhoff 1984)CrossRefGoogle Scholar.

16. See Becker, G ‘Crime and punishment: an economic approach’ (1968) 76 Jl Pol Econ 169 CrossRefGoogle Scholar; and Ogus, A Regulation: Legal Form and Economic Theory (Oxford: Clarendon Press 1994) p 91 Google Scholar.

17. AJ Reiss ‘Selecting strategies of social control over organisational life’ in Hawkins, K and Thomas, J (eds) Enforcing Regulation (Boston: Kluwer Nijhoff 1984) pp 23–24 CrossRefGoogle Scholar.

18. ‘Developments in the law: corporate crime’ (19781979) 92 Harvard LR 1227 at 1231. See also Braithwaite, J and Geis, G ‘on theory and action for corporate crime control’ (1982) 28 Crime and Delinquency 292 CrossRefGoogle Scholar.

19. This is in contrast to areas like health and safety law which are likely to be prioritised. See OFT Factors Affecting Compliance with Consumer Law and the Deterrent Effect of Consumer Enforcement (report by IFF Research) OFT 1228, June 2010 table 3.5.

20. Macrory, above n 8, para E7.

21. Ibid.

22. OFT Drivers of Compliance and Non-compliance with Consumer Law (report by Ipsos MORI) OFT 1225a, May 2010 para 1.9.

23. OFT, above n 19, para 1.19.

24. Ibid, para 1.21.

25. See in particular Alexander, C ‘on the nature of the reputational penalty for corporate crime: evidence’ (1999) 42 J Law and Econ 489 CrossRefGoogle Scholar.

26. Fisse and Braithwaite, above n 12, p 248.

27. Cowan, A ‘Scarlet letters for corporations? Punishment by publicity under the new sentencing guidelines’ (19911992) 65 S Cal LR 2387 at 2398 Google Scholar.

28. Ayres, I and Braithwaite, J Responsive Regulation: Transcending the Deregulation Debate (New York: Oxford University Press 1992) p 19 Google Scholar. See also Sunstein, C Free Markets and Social Justice (New York: Oxford University Press 1997)Google Scholar ch 2.

29. Ball, H and Friedman, L ‘Use of criminal sanctions in the enforcement of economic legislation: a sociological view’ (1965) 17 Stan L Rev 197 CrossRefGoogle Scholar at 216–217.

30. Rourke, F ‘Law enforcement through publicity’ (19561957) 24 U Chi L Rev 225 at 241 CrossRefGoogle Scholar.

31. Channon, C ‘Corporations and the politics of perception’ (1980) 60 Advertising Quarterly 12 at 13 Google Scholar. Cited in Cowan, above n 27, at 2399.

32. Fisse and Braithwaite, above n 12. Yeung correctly notes that the firms in questions endured media disasters and that any generalisation from the study should be undertaken with caution. Yeung, above n 12, at 12.

33. Rourke, above n 30, at 241–242.

34. Yeung, above n 12, at 12–14.

35. Wells, above, n 14, p 37. Of course, this desire may also result from the fear of losing business.

36. Kagan and Scholz, above n 15.

37. Baldwin, R ‘Why rules don't work’ (1990) 53 MLR 321 at 324 CrossRefGoogle Scholar.

38. Braithwaite, J Restorative Justice and Responsive Regulation (New York: Oxford University Press 2002) p 32 Google Scholar.

39. A Ashworth ‘Sentencing’ in Maguire, M, Morgan, R and Reiner, R (eds) The Oxford Handbook of Criminology (Oxford: OUP, 2nd edn 1994) pp 1096–1097 Google Scholar.

40. Dobbs, DD ‘Ending punishment in punitive damages: deterrence measured remedies’ (1989) ALA L Rev 831 at 844 Google Scholar.

41. Duff, RA and Garland, D A Reader on Punishment (Oxford: Oxford University Press 2005) p 12 CrossRefGoogle Scholar.

42. Galanter, M and Luban, D ‘Poetic justice: punitive damages and legal pluralism’ (1993) 42 Am U L Rev 1400 at 1444 Google Scholar.

43. Ashworth, above n 39, p 1098.

44. Duff and Garland, above n 41, p 24.

45. Fisse and Braithwaite, above n 12, pp 233–236.

46. Ashworth, above n 39, p 1100.

47. See for example Cafaggi, F and Micklitz, HW (eds) New Frontiers of Consumer Protection (Antwerp: Intersentia 2009)Google Scholar and van Boos, W and Loos, M Collective Enforcement of Consumer Law (Groningen: Europa Law Publishing 2007)Google Scholar.

48. Ashworth, above n 39, p 1100.

49. Curcio, AA ‘Painful publicity – an alternative punitive damage sanction’ (19951996) 45 DePaul L Rev 341 at 380 Google Scholar.

50. Ibid, at 382. See also Cowan, above n 27, at 2401 citing Fisse and Braithwaite, above n 12, pp 108–109.

51. Curcio, above n 49, at 383.

52. BERR Regulators Compliance Code (December 2007) para 1.2.

53. Ibid, at para 8.2. The Code states that the paragraph does not apply ‘where immediate action is required to prevent or respond to a serious breach or where to do so is likely to defeat the purpose of the proposed enforcement action.’

54. Reiss, above n 17, pp 23–24.

55. Macrory, above n 8, executive summary. The Compliance Code requires enforcement authorities to ensure that their sanctions and penalties policies are consistent with the Principles.

56. In championing its emphasis on ‘credible deterrence’, the FSA's Chief Executive famously declared that firms should be ‘very frightened’ of the FSA. See H Sants ‘Delivering intensive supervisions and credible deterrence’ Speech to Reuters Newsmakers, 12 March 2009.

57. Braithwaite, above n 38, p 42.

58. Regulatory Enforcement and Sanctions Act 2008 Pt 3.

59. Fisse and Braithwaite, above n 12, pp 261–262.

60. The FSA's consumer protection functions are to be carried out by a new financial conduct authority.

61. FSA Transparency as a Regulatory Tool (DP/03, May 2008) para 2.14.

62. Public censure includes a statement published under s 205 and a statement of misconduct published under s 66 of FSMA.

63. See http://www.fsa.gov.uk for details.

64. OFT Statement of Consumer Protection Enforcement Principles (OFT 964) December 2008, para 2.23.

65. Ibid.

66. OECD Report on the Effectiveness of Enforcement Regimes (Paris: OECD) at 43 Google Scholar.

67. Below, n 71.

68. See eg Cayne, DJ and Trebilcock, MJ ‘Market considerations in the formulation of consumer protection policy’ (1973) 23 Univ of Tor LJ 396 CrossRefGoogle Scholar.

69. The FSA, for example, has stated that ‘markets can fail and this provides the reason for regulation’ FSA Reasonable Expectations: Regulation in a Non-zero Failure World (FSA, September 2003) para 1.9 (emphasis added).

70. See eg Hadfield, G, Howse, R and Trebilcock, M ‘Information-based principles for rethinking consumer protection policy’ (1998) 21 Journal of Consumer Policy 131 CrossRefGoogle Scholar.

71. The literature is voluminous. See for example Jolls, C, Sunstein, CR and Thaler, R ‘a behavioural approach to law and economics’ (1998) Stan L Rev 1470 Google Scholar; Hansen, J and Kysar, D ‘Taking behaviouralism seriously: the problem of market manipulation’ (1999) 74 NYUL Rev 630 Google Scholar. The literature is skilfully summarised and discussed in Howells, G ‘the potential and limits of consumer empowerment by information’ (2005) 32(3) JLS 349 CrossRefGoogle Scholar.

72. For an excellent summary of these issues see Ramsay, I Consumer Law and Policy (Abingdon: Hart Publishing, 2nd edn 2007) pp 71–84 Google Scholar.

73. See London Economics, above n 1.

74. Ibid.

75. Brooker, S Regulation and Reputation (London: NCC 2006) p 7 Google Scholar.

76. Ibid, p 1.

77. Ibid, p 3.

78. These were: (1) animal rights in product testing; (2) the use of animal by-products; (3) product biodegradability; (4) products made from recyclables; (5) the provision of product safety information; (6) human rights; (7) packaging recyclability; (8) product disposability; (9) the payment of minimum wages; (10) whether unions are allowed; (11) whether minimum living conditions are met; (12) sexual orientation rights; (13) the guarantee of safe working conditions; (14) the use of child labour in production; (15) genetically modified material usage; and (16) gender, religious and racial rights. Devinney, T, Auger, P and Eckhardt, G The Myth of the Ethical Consumer (Cambridge: CUP 2010) pp 140–141 Google Scholar.

79. BRE/NCC, above n 10.

80. Ibid, p 11.

81. Devinney, Auger and Eckhart, above n 78, p 116.

82. Yeung, above n 12, at 18.

83. Macrory, above n 8, para 4.18. Macrory referred to the powers as enforceable undertakings in his report.

84. BERR Regulatory Enforcement and Sanctions Act 2008 Guidance to the Act (July 2008) para 60. See RES Act s 50.

85. RES Act s 42(3)(c).

86. Above n 6.

87. OFT, above n 22, para 1.22.

88. See Brooker, above n 75, p 16.

89. Rourke, above n 30, at 231.

90. van Erp, J ‘Effects of disclosure on business compliance: a framework for the analysis of disclosure regimes’ (2007) 5 European Food and Feed Law Review 255 Google Scholar.

91. A Fels ‘Australia's competition regulator and the media’ cited in Yeung, above n 12, at 3.

92. Brooker, above n 75, p 10.

93. Borrie argued that fines are sometimes viewed by traders as ‘tiresome pinpricks, minor inconveniences that are shrugged off and the fines put down as a business expense.’ Borrie, G The Development of Consumer Law and Policy – Bold Spirits and Timorous Souls (London: Stevens and Stevens 1984) p 56 Google Scholar.

94. See below.

95. Coffee, JC Jr ‘No soul to damn no body to kick: an unscandalized inquiry into the problem of corporate punishment’ (1981) 79 Mich L Rev 386 CrossRefGoogle Scholar at 427–428.

96. Whitman cited in Yeung, above n 12, at 40.

97. Better Regulation Task Force Avoiding Regulatory Creep (Cabinet Office, 2004).

98. Yeung, above n 12, at 41–42.

99. Van Erp, above n 90, at 259. The author illustrates this with the example of the several hundred employees and proprietors of Chinese restaurants in Rotterdam who protested against what they saw as disproportionate action by the Food Safety Authority.

100. See eg Painter, AA ‘Why prosecute?’ (1974) British Food Journal 38 Google Scholar.

101. Fisse and Braithwaite, above n 12, p 310.

102. The Economist ‘The blog in the corporate machine’ 9 February 2006. Cited in Brooker, above n 75, p 19. Note also the concern about websites such as Trip Advisor.

103. Brooker, above n 75, p 10.

104. Ibid, p 15.

105. Ibid.

106. Ibid, p 19 for discussion.

107. For example trading standards. See BERR A Guidance Note on Information Disclosure to Consumers and Intellectual Property Rights Holders for Civil Proceedings March 2008 URN 08/718.

108. Brooker, above n 75, pp 14–15.

109. BERR Regulatory Enforcement and Sanctions Act 2008 Guidance to the Act (July 2008) para 71.

110. The FSA defines a complaint as: ‘any oral or written expression of dissatisfaction, whether justified or not, about the firm's provision of (or failure to provide) a financial service which alleges that the customer has suffered (or may suffer) financial loss, material distress or material inconvenience.’ Firms are not obliged to report complaints that are resolved to the customer's satisfaction by the close of the business day after the complaint was made.

111. See http://www.fsa.gov.uk/Pages/Library/Other_publications/commentary/index.shtml.

112. For the background to the FSA's thinking on transparency see FSA, above n 61.

113. FSA Treating Customers Fairly: The Consumers' View (FSA Consumer Research 38, June 2005) p 37.

114. See eg P Cartwright ‘Conceptualising and understanding fairness: lessons for and from financial services’ in Kenny, M, Devenney, J and Fox O'Mahony, L (eds) Unconscionability in European Private Financial Transactions: Protecting the Vulnerable (Cambridge: Cambridge University Press 2010) pp 222–225 CrossRefGoogle Scholar. The FSA's Consumer Protection Strategy also seeks to ensure that consumers receive prompt and effective redress.

115. See eg ‘Complaints over PPI rise sharply’Guardian 10 February 2011, available at http://www.guardian.co.uk/money/2011/feb/10/consumer-complaints-financial-services-rise.

116. See http://www.food.gov.uk/news/newsarchive/2010/aug/fhrs.

117. Hampton, above n 7, recommendation 11.

118. FSA ‘National Food Hygiene scheme launched’ 30 November 2010.

119. Requiring businesses to disclose their ratings on the premises would require legislation.

120. Weil et al, above n 7, at 169. See also Fielding, JE, Aquirre, A, Spear, MA and Frias, LE ‘Making the grade: changing the incentives in retail food establishment inspection’ (1999) 17 American Journal of Preventative Medicine 243 Google Scholar.

121. See Jin, GZ and Leslie, P ‘the effect of information on product quality: evidence from restaurant hygiene grade cards’ (2003) 118 Quarterly Journal of Economics 409 CrossRefGoogle Scholar; and Simon, PA et al Impact of restaurant hygiene grade cards on foodborne disease hospitalizations in Los Angeles County’ (2005) 67(7) Journal of Environmental Health 32 Google Scholar.

122. Weil et al, above n 7, at 169.

123. Fisse and Braithwaite, above n 12, p 308.

124. Brooker, above n 75, p 13.