FTC Chairman Timothy J. Muris today presented the FTC's new Five-Point Plan for attacking cross-border fraud and highlighted the complementarities of consumer protection and competition policies. Speaking before the Fordham Corporate Law Institute's Twenty-Ninth Annual Conference on International Antitrust Law and Policy in New York, Muris outlined that under the Five-Point Plan, the FTC will:
Before introducing the specifics of the FTC's new cross-border fraud initiative, Muris began his remarks by proposing that multinational convergence on consumer protection emulate the ongoing convergence in competition policy. Building on concepts contained in a July 23, 2002 speech to the European Foreign Affairs Review in Brussels, available at http://www.ftc.gov/speeches/muris/020723brussels.htm. Muris suggested that efforts to promote cooperation and convergence in consumer protection could draw upon the international hard core cartel enforcement experience, and that the convergence process could begin with a concerted attack on international consumer fraud.
Whereas competition, Muris observed, promotes consumer welfare by pressing producers to offer the most attractive array of price and quality options, consumer protection policy complements that goal by ensuring that consumers can make well-informed decisions about these choices and that sellers will fulfill their promises about the products they offer. If sellers make a habit of lying about their products, a pernicious atmosphere of consumer distrust may well develop, which can lead consumers to doubt the integrity of an entire industry or to distrust markets generally. "By striving to keep sellers honest, therefore, consumer protection policy does more than safeguard the interests of the individual consumer - it serves the interest of consumers generally and facilitates competition," said Muris. "Well-conceived competition policy and consumer protection policy take complementary paths to the destination of promoting consumer welfare."
Muris also noted that there are synergies to be gained from combining both functions in a single public institution. While performance of consumer protection functions provides useful insights about the appropriate approach to competition policy - for example, by heightening sensitivity to quality of care issues in health care antitrust cases - combining these functions also serves as a continuing reminder to consumer protection officials of the benefits of competition. A consumer protection program uninformed by competition principles may impose controls that ultimately diminish the very competition that increases consumer choice. Some consumer protection measures - even those motivated by the best of intentions - also can create barriers to entry that limit the freedom of sellers to provide what consumers demand.
Muris then turned to the history of international antitrust cooperation as a possible blueprint for the future of international consumer protection. The environment of international antitrust has evolved from conflict to cooperation, and now is moving in the direction of convergence through vehicles such as the EC/U.S. mergers working group and the International Competition Network.
Just as globalization has changed the landscape in antitrust, said Muris, it is changing the landscape in consumer protection cooperation. Technology, especially the Internet, has made the development of transnational marketing more prevalent, and marketing now is taking on an international dimension, just as mergers and acquisitions have for some time. One risk of having different jurisdictions apply different standards is that the most restrictive jurisdiction could set worldwide marketing rules; another risk is that the least restrictive jurisdiction could become a haven for fraudsters to the extent that the conduct cannot be addressed by the country in which the effects are felt. "We cannot avoid considering global consumer protection issues," Muris said.
While taking note of the solid groundwork for cooperation that already has been laid in international consumer protection, Muris noted that much remains to be done, especially in the areas of e-commerce, distance selling, and consumer fraud. "I see at least two important questions before us," he said. "First, can we find vehicles for practical cooperation that will lay a foundation for further convergence, just as cartel enforcement has done in the antitrust area? Second, how can we ensure that economic analysis adequately informs consumer protection enforcement and complements our antitrust enforcement efforts?"
Experience with inter-jurisdictional law enforcement cooperation, both nationally and internationally, shows that successful cooperation and convergence begin by focusing on core areas of agreement. Enforcement concerning the core areas becomes a prototype for broader cooperation over time. Muris noted that there is now widespread agreement among competition policy agencies that hard-core cartels represent a serious threat to the market system. Muris suggested that experience in creating international strategies for attacking cartels provides insights about how countries can build effective international cooperation in consumer protection. He proposed to begin by envisioning fraud as consumer protection's equivalent of supplier cartels in competition policy and to develop a common view of what constitutes fraud. "I am confident," said Muris, "that consumer protection agencies worldwide would agree that certain types of seller deceit warrant categorical condemnation."
Muris took special note of the shared view of the United States and Canada towards consumer protection issues. Canada and the U.S. jointly have learned much about combating cross-border telemarketing fraud. Muris noted that he and Canadian Competition Commissioner Konrad von Finckenstein will endeavor to raise the level of cooperation in consumer protection to the same level that now exists for antitrust.
Muris concluded his remarks by encouraging conference participants to apply the model of cooperation and convergence employed in antitrust policy to their efforts toward achieving further cooperation in consumer protection policy.
The text of Muris' speech is available at <http://www.ftc.gov/speeches/muris/021031fordham.pdf> [PDF 93K].