Category: Consumer Protection

Introduction

In practice, consumer protection laws are designed to protect both the consumer and the business against fraud and unfair competition. However, the proposed one-way contract favors the business against contractual liabilities leaving out the customer. The purpose of this article is to investigate the regime of one-way contracts between the customer and the business, which binds the consumers to the business and not the other way (Ben-Shahar, 2012). The study has revealed that existing contracts are disguised as one and not two-way contracts (Harris Jr, 2006). Redesigning the consumer protection laws for better contracts is possible.

Summary

Ben-Shahar (2010) provides a detailed review of one-way contracts that are enforceable against the customer and not the business. Ben-Shahar (2010) notes that consumer-to business contracts are characteristically designed with bad pro-business and difficult to enforce and expensive pro-consumer terms. The existing gaps eventually end up as deterrence to criminal law. Consumer Protection Acts (CPA) do not guarantee direct compensation to consumers but guarantee a significant level of protection through private attorneys.

CPAs have proved to be effective as well as being the source of diverse and frivolous suits. Perceptions of one-way contracts that are enforceable by one party emerge. Ben-Shahar (2010) argues that consumer-oriented contract remedies do not apply in this case, but a business can resort to legal remedies if the customer fails to honor the contract. Consumer-oriented contracts allow both parties to rewrite and redesign the laws and terms of engagement between them.

Literature review

Ben-Shahar (2010) accurately depicts a situation where businesses are not subject to legal liabilities when a breach of contract between the customer and the business occurs. A one-way contract enforceable only against the consumers defines the paradigm which Ben-Shahar (2010) proposes to be a better way of protecting the customers. According to Ben-Shahar and Logue (2012), the traditional reasons for establishing a binding contract between the customer and the business are to protect both parties.

However, Wang (2008) notes that disputes arise if businesses craft contracts that fail to account for the rights because they lack legal backing. According to Wright (2012), contract laws are designed to protect consumers based on a fair relationship between both contracting both parties. Wright (2012) provides the basic definition of fair treatment from the perspective of the areas of marketing such as product policy, pricing, marketing communication, distribution, and privacy issues.

Wright (2012) argues that traditional contracts are designed to ensure consumer protection due to product flaws such as hidden defects, excessive pricing, consumer irrationality, standardization, safety issues, and negative externalities. This is a widely accepted and applied approach to consumer protection based on the general principles of consumer protections established under the law in many countries including the USA and China (Harris Jr, 2006).

However, Ben-Shahar and Logue (2012) dismiss the veracity argument on the consumer protection law by asserting that laws fail because of inherent weaknesses that enable businesses to exploit customers and evade liability. However, the discourse fails to show how emphasis can be placed on consumer-oriented contract remedies, which in practice can be achieved by invoking criminal or tort laws to protect the consumer. Here, the critical aspect is to distinctly define the points of demarcation between the customer and the business to enforce a state of fairness.

References

Ben-Shahar, O., & Logue, K. D. (2012). Outsourcing Regulation: How Insurance Reduces Moral Hazard. Michigan Law Review, 1(1), 197-248.

Ben-Shahar, O. (2010). One-Way Contracts: Consumer Protection without Law. European Review of Contract Law, 6(3), 221-249.

Harris Jr, H. S. (2006). Making of an Antitrust Law: The Pending Anti-Monopoly Law of the Peoples Republic of China, The. Chi. J. Intl L., 7 (1), 169.

Wang, X. (2008). Highlights of Chinas new anti-monopoly law. Antitrust Law Journal, 75(1), 133-150.

Wright, J. D. (2012). The Antitrust/Consumer Protection Paradox: Two Policies at War with Each Other. Yale Law Journal, Forthcoming, 1(1), 12-45.

Executive Summary

The Saudi Arabian development of consumer protection laws is of great significance because of various reasons. To begin with, Saudi Arabia has various attributes that differentiates it from other GCC members. For instance, its wealth and economy, and strict adherence to Islamic. Secondly, consumer protection in the context of Saudi has not been able to attract much of the researchers attention. In this country, little has been written down with regards to protection of consumers. This is with reference to Islamic communities. In these communities, discussions have been diverted to consumer credit, financial markets and monopoly. This paper analyses Islamic law (Sheridan) as the foundation for regulating the affairs of the consumer. A comparison between the Sheridan law and the advanced Western legal systems will be made with reference to consumer outcomes. In addition to that, the advertising content will be analyzed and also the ministries responsible for protecting the consumers. Furthermore, the paper will highlight Saudi Arabian government priorities when it comes to protecting of the consumer.

Introduction

Numerous cross-national comparisons and national studies have diverted most of their attention to consumerism and consumer protection statutory regulations. Whereas much focus has been directed to consumer protection issues in various countries, there exist fundamental distinction in the consumer protection philosophies between the worlds developing and developed countries. In the industrialized world, consumers are provided with alternative choices. In addition to that, governments have greater faith in the ability of the market to deliver gains to consumers, thus increasing market mechanisms reliance rather than the regulations set up by the government (Asher, 1998, p.185). Nevertheless, the situation is quite different in underdeveloped and developing economies, where consumerism is still maturing and consumers depends on the intervention government model for protection. Given these circumstances, there is need for research to be carried out on regulations that impacts on consumer protection issues in countries that are developing such as Saudi Arabia.

Saudi Arabia plays a significant role in the Arabic/ Islamic common market and in the Gulf-Corporation Council (GCC). The GCC is constituted of countries such as Kuwait, Qatar, United Arab Emirates, Oman, Saudi Arabia and Bahrain. These countries are developing a common trade and consumer policy with an aim of ensuring economic integration. The formation of these laws will enhance multinational marketing opportunities. Given the fact that Saudi Arabia is the economically strongest and largest GCC member, it will significantly shape the legal regulations meant to control all commercial activities advertising included among the GCC member states. The understanding of regulations related to advertising is an essential ingredient for those marketers interested in GCC regions (So hail & Al-Grande, 2007, p.75).

Advertising Influences

Various factors influence advertising regulation. They focus on advertising strategies global standardization or specific regulations and their content effect. Standardization proponents argue that, universal appeals are highly feasible because of their ability to converge customer preferences resulting from consumer mobility, exposure to international media and technology. On the other hand, critics put emphasis on a tailored approach whereby, they argue that environmental factors create a significant distinction amongst international consumers. Similarly, some writers points out that, standardization boundaries should be determined using decision criteria such as product type, media availability and the extent of market homogeneity. The most influential areas are such as socio-economic conditions, religion, ecological attributes, consumer orientation, media infrastructure and government regulatory structure and control. All these factors are present in Saudi Arabia but two are dominant. To begin with, religion surpasses all cultures. In this context cultures refers to local traditions and customs. From an advertising view point, it is vital if countries are grouped into three groups: religious dominant including Iran and Saudi Arabia, culture dominant, where religion among other factors impacting on culture such as Korea and Japan and finally we have the non-partisan countries where religion and culture have less influence, for instance Australia and Sweden(Yeas, 1988, p.35).

Another predominant factor is the Saudi government control over large sectors of the media infrastructure, ecology and economy. Developmental priorities and public sectors impact significantly on advertising and business activities. In Saudi Arabia, factors such as the socio-economic environment, legal environment and government priority affects advertising content and regulation. Thus, the purpose of this research paper is to document consumer protection laws in Gulf States with reference to Saudi Arabia laws.

With reference to this research paper, Saudi Arabia has been identified as a country for consumer protection law study. In the Kingdom of Saudi Arabia, consumer protection is and still one of the vital issues in the country. The interest in consumer protection has focus on the establishment of organizations that will help in ensuring that consumers are adequately protected. As a matter of fact, Saudi Arabia has obtained World Trade Organization (WTO) membership thus making it imperative for the country to have a trade regime that is more accommodating. The Saudi Arabian leadership has embarked on the restructuring on the restructuring of its entire economy. As a result, numerous policy and economic reforms are in the progress and will enhance a climate that is conducive for foreign investments. Consumer protection regulations are an area that is under review and focus. The Saudi Arabian government development plans whether social or economic has based its focus on its people protection and welfare. This is evidenced from the formation of the Consumer Protection Department in 1954 under the jurisdiction of Ministry of Commerce and Industry. With the great increase of work scope, there was creation of the General Administration of Quality Control with an objective of protecting the interest of the consumers. Other departments that are also playing a significant role in the protection of consumers are such as the General Department of Environmental Health, the Saudi Arabian Standards Organizations (SASO), Saudi Chamber of Commerce and Department of Customs.

Literature Review

Academicians and business practitioners have continuously investigated the levels of consumer satisfaction with the practices of the marketers since the passing of the Bill of Consumer Right in 1962 in USA. Since that day, the phrase consumerism has been utilized routinely in marketing terminology. However, it has been perceived in ways that are different (Swagger, 1994, p.350). According to Kilter et al. (1998), consumerism is an organized movement of consumers whose aim is to improve the rights and powers of buyers in relation to sellers. A couple of studies have examined the consumerism influence on marketing decisions. According to conclusions made, consumerism is a significant issue that shapes managerial decisions (Ede and Calcich, 1999; Day & Aaker, 1997; Turner, 1995; Adam, 1995).

Consumer dissatisfaction and subsequent move towards the consumer interest protection have been dominant for various reasons. The carried out studies in developed country settings indicated that the consumers in USA were discounted because of the following two reasons: High lifestyle expectations characterized by high-income levels and sociological changes and the business and government negligence to protect consumers (Jones & Gardner, 2002, p.45). Another study conducted found out that, consumer discontent was as a result of multiple factors including marketers incompetence, marketers reluctance to resolve consumer complaints and the perception of consumers that the government is pro-business and fails to protect their interests effectively (Andreasen & Best, 1997, p.320). The longitudinal study conducted recently in New Zealand, claims that there is a significant shift in terms of consumer perception between the year 1986 and 2001. The reached conclusion was that, consumers had become less negative with regards to consumerism and marketing issues since the year 1986(Lysonski et al., 2003, p.400).

Consumerism studies issues have not been restricted to nations that are developed, but have extended to less developing and developing nations as well. In 1979, Onah extended the consumerism idea to countries in the third world with an aim of studying the efforts of the government, consumers, and protection agencies to safeguard consumers interest from business activities that are unscrupulous. From a developing country perspective, there exist various reasons for consumer protection regulation. It was observed by Kaynak(1982, p.325) that policies and consumerism against some developing country marketing practices expressed itself more in enforcement and legislation by the government. The primary reason behind this is the existence of numerous violations in the market environments that are tasked with products distribution. Some of the elements that are undesirable are such as the practice of deceit and fraud, efforts to a create monopoly, product offerings that are of low quality, lack of product label information with reference to product expiry date and issues that are related to product contents and pricing(Dabes, 1997, p.22).

In most of countries that are developing, consumers are less concerned when it comes to airing complains to the governing bodies. These may be as a result of lack of awareness with regards to their basic rights or due to lack of safety concerns. Besides, consumers in developing and less developed countries might not have the knowledge of the regulatory bodies where they can complain as well as the rules and regulations that take charge of sales. Another major problem is that, regulatory serving officials do not have adequate skills for dealing with consumers complaints. In addition to that, these countries are overwhelmed with bureaucratic procedures when it comes to dealing with procedures and complainants. In these countries, consumerism is in its evolutionary stage. Kaynak(1985, p.63) developed a model that positioned countries at Consumerism life cycle distinct stages on a hypothetical basis. This was based on the extent of the protection legislation and consumer information, Initial and government supported legislation and government consumer agencies. The model identifies four different stages of consumerism activity development. The stages are such as organization, crystallization, conceptualization and crystallization.

Saudi Arabias position can be analyzed using the model. In Saudi Arabia, consumerism is said to be in its crystallization stage. This stage is characterized by lack of an organized consumer movement. As such, there exist infrequent attempts by various semi-government and government agencies to protect consumer rights on a gradual basis. Even though a number of previous studies have indicated either limited (Varadarajan & Thirunarayana, 1990; Varadarajan et al., 1991, 1994) or no evidence empirically (Barker, 1987; Barksdale et al., 1982) in support of consumerism life cycle, some empirical supports are in favor of the Kaynaks model basic underlying assumption (Quazi, 2002, p.38).

Saudi Arabia Consumer Protection

Consumer protection in Saudi Arabia is characterized by an increased consumer durables import, increased competitions in industries dealing with consumer goods and the private sector increased activities for purposes of meeting the needs of the consumer. The Saudi government is increasing diverting its resources to the expansion of distinct developmental projects and machinery administrative improvements. The resulting consequences are the emergence of monopoly and harmful competition. As a result, Harmful products are seen in the market and there is increased rate of inflationary situation as a result of increased demand. As a result of this menace, the government showed concern for taking care of the consumers interest. It saw the need to come up with specialized agencies that will protect the interest of the consumers. The consumer interest protection was achieved via prices control, trademark protection and development of laboratories to check and control the quality of products sold to consumers. Numerous agencies resurfaced in order to accomplish the above named purposes as shown in table 1 below.

Saudi Arabian Consumer Protection Agencies

Data source: Al-Ghamdi & Sohail (2007, p.73).

The consumer protection Association of Saudi Arabia advocates for the reduction in the prices of various commodities. The reduction in products and services prices applies to both wholesalers and retailers. With reference to global conditions, the agency has requested the government to coerce merchants into lowering products and services prices. The association pointed out that, since merchants have been saying that the rise in prices was in line with global conditions, then, it is logical for prices to decline now in line with the same global conditions.

Saudi Arabia Previous studies Conducted on consumer Protection

With reference to Saudi Arabia, limited research has been conducted in the area of consumer protection. Consumer protection early studies were only limited to Egypt (Afify & Munster, 1981, p.3). The initial studies conducted revealed the risks consumers were exposed to in the developing countries while buying products that dealt with services (Boairah, 1980, p.57). Hence, concluding the need for the government to establish agencies whose main aim is to protect consumers from exploitation. Another study conducted by Arafa (1987, p.63), brought into the limelight the role of Islam as a religion in consumer protection. Another study conducted by (Riyad, 1994), based its focus on issues related to consumer protection against industrial and commercial fraud. Through the review of Egypt regulations pertaining to consumer protection, the study highlighted some measures that would enhance the tightening of government controls on channels of distribution, law modification to ensure compliance to quality, supporting and developing of censorship agencies and most significantly the creation of consumer protection agency. Being conceptual in nature, the literature reviews indicates that previously a number of limited surveys had been conducted.

From the survey conducted in the City of Jeddah, Saudi Arabia, Hadi(1983, p.18) reported the survey findings. From the survey of four hundred (400) consumers and thirty (30) traders, it was concluded that, unreasonable and high prices were among the major concerns among the Saudi Arabian Consumers. From the feedback of the surveyed respondents, it was clear that Saudi Arabian consumer protection agencies did not possess the ability of providing the needed protection to the consumers. In 1991, Al-Qahtan focused his study on the operations of consumer protection agencies. In this study, three hundred and eighty four respondents were interviewed. From the survey results, two thirds of the respondents indicated that agencies tasked with consumer protection did not carry out their functions effectively.

The respondents highlighted various areas of concern. For instance, the consumer protection agencies did not have adequate knowledge of what was happening in the market, the laws pertaining to protection of consumers were ambiguous and there existed conflicts in the capacity of the existing agencies. Another study conducted by Al-Hamad ( 1993) concluded that Saudi Arabian consumers were not used to approaching consumer protection agencies even if they were dissatisfied with the quality of the products. This act was triggered by various reasons. For instance, they believe that taking their complaints to respective agencies consumes a lot of their effort and time. In addition to that, they are not sure of the authorities and agencies concerned with their well being. Bhuian et al.(2001, p.220), in a recent study on business education and its effects on consumerism, found out that, young adults in Saudi Arabia who were equipped with business knowledge were highly disposed towards consumerism and marketing issues in comparison to those with non-business background. Generally, all Saudi Arabian young adults have positive attitudes towards price controls and government regulations that are consumer related.

Saudi Arabia Government Priorities

Saudi Arabian government through royal decrees promulgates new legislations. The king is viewed as the protector of the countrys laws and the nation. The government commitment to issues that are specific has influenced the advertising areas and the legal system. The areas covered are such as ecological and consumer protection and business domestication. Two pieces of legislation are applied under consumer ecological protection. These pieces of legislations are enforced strictly suggesting consumer protection trends. The first piece of legislation outlines that no car should be sold to a consumer without passing through a computerized and sophisticated safety check on forty essential items. This is performed with the intention of protecting the consumers from extreme defects in lighting systems, tires and brakes. The second piece of legislation is responsible for imposing penalties on individuals selling spoiled or contaminated food stuffs. Continuous complaints by consumers as a result of being issued with grocery items that are outdated have resulted to the dismissal of employees that are irresponsible. The protection of consumers is being given more attention, to be precise in extremely sensitive areas such as health, possible deception or safety. These attitudes are present in Saudi regulators and courts while examining advertising practices for infractions.

Consumer protection is also reflected in advertising restrictions where a product is conceived to be harmful to the society. For instance, the ministry of Health has banned the promotion of cigarette. Medicine advertising is also prohibited. This is done with an aim of protecting the illiterate consumers from possible misuse of the medicine. The government has also channeled a lot of its resources to ecological protection. The theme of various government campaigns is to Keep the environment beautiful. The regulations and rules put in place include heavy penalties on people and business organizations if they have been found to be damaging the environment. The current utilization of outdoor advertising such as the guardrails, bill boards, bust stop shelters and lamp posts have been assailed by critics as they view them as visual pollution. In terms of business domestication, much effort are in progress in order to enable the participation of Saudi in all business aspects.

All organizations whether local or foreign, are needed to increase their local labor content, ownership, production and management. Coupled with the rapid growing nationalism, this process is changing the advertising content. For example, there is the utilization of Saudi models and more emphasis has been directed to Arabic language, heritage and cultural traditions. Previously, in Saudi Arabia, all advertisements were done in English, perhaps because the utilization of standardized costs was low or partly because the ads were targeting the western-elites. With continued domestication, there is need for localization of ads. Some advertising agencies are already embracing this idea as some of them have already created a copy of bilingual ads for their clients. This requires Arabic creative copywriting, art, calligraphy and design. Some of the companies in Saudi are utilizing a combination of advocacy and image advertising to inform the government and the public of their desire to support domestication. In summary, advertisements in Saudi Arabia are designed with an aim of them being compatible with socio-economic environment, religious standards and priorities of the government.

Saudi Arabia Legal Environment

The legal system in Saudi Arabia is very unique. For instance, the laws are derived from the command of one and only, God, the Almighty. All legislation, the proposed and existing are founded within the Islamic law also referred to as sharia. The sharia governs the morals, the duties and all Muslim behaviors both collectively and individually in all aspects of life, commerce included. The primary source of the Sharia law is the Holy Book or Quran, and the Hadith. All these books are founded on the saying, practices and life of Muhammad the prophet. For the sake of advertising regulation, the Quran has three sets of messages that are significant. To begin with, there are taboos (Haraam) which are very strict such as gambling, alcohol, idol worship, cheating, adultery, immodest exposure and usury. Being viewed as both damaging to the society and an individual, these acts affect the advertising control and legitimacy. For instance, the banning of products that are alcoholic. There exists no foreign print media and local advertisements on alcoholic products. In addition to that, the foreign print media are allowed into the country only after all alcoholic beverages advertisements have been censored.

Gambling is prohibited. Advertisers are warned against the use of messages that might be perceived as deceptive with regards to religious standards. From the Islamic point of view, fraud can result when a buyer fails to provide everything promised in the advert. In that case, advisers are required to make use of factual appeals. A second set of message governs the Muslim duties including praying five times in a single day, observing the month of Ramadham through fasting, helping the needy and caring and respecting for the disadvantaged and parents. As a result, the advertisers have to ensure that these obligations are not hindered. For instance, products should not be promoted on TV or Radio while people are in prayers, retail shops should be closed and not performing of any commercial or official transactions during the five times of prayer. The final set of the Quranic injunctions reminds the Gods faithful to be grateful for His blessings such as peace of mind, good health, water, children and food. The advertisers are permitted to use Quranic words to introduce their messages. For example In the Name of Allah, the Most Gracious, the Most Merciful,  By the Grace of God;  God is Great( Allah-o-Akbar).

The table below illustrates the harmonizing of Western-Oriented Advertisement to Saudi Audiences.

Data source: Luqmani et al (1988, p.35).

The consumer and the Islamic law

Throughout history, government studies documents that basic principles moral and ethical values are adopted from religion (Islam, Christianity and Judaism). The principal values are written down continuously into the consequent legislative process. Historically, law is a religious intertwined aspect (Al Thobaity, 1995, p.225). The Islamic law derives its inspiration from God via religious teachings and beliefs. The Islamic legislation main purpose on commerce and economics is to secure individual rights and maintain the society solidarity by introducing high levels of morality to the business world and enforcing god laws in the enterprise environment.

Many societies in the past, never documented their laws but they memorized and passed down from generation to generation. As such, all aspects of domestic, political and social life were permeated. Within Islam in Saudi Arabia, the religion and legislation are united. Furthermore, the primary source of legislative and religious practice is the Quran. The government legislative power lies in the foundation of the legislative assembly. The legislative assembly is responsible for making rules and designing regulations within the Quran scope and domain. These rules and regulations comprise of the Shariah. Ideally, the Quran sets down rulings from which the criminal and civil laws are founded. This is what makes the Saudi Law in which the consumer protection regulations are defined. For instance, any deal in business involving cheating, exploitation or injustice is cancellable and strictly prohibited by law even if it has been concluded. Similarly, under present Saudi Law, traders are forbidden to supply consumer with goods that can inflict or result to physical harm (Sorrel & Henry, 1994). For instance, if an individual has been harmed through fire, the fire and police officer will analyze the incident and produce a report. The report is then presented to the Saudi Arabian Standards Organization (SASO) officer. The officer eventually examines the background of the case and tests the materials involved in the fire outbreak. This is performed with an aim of assessing whether or not the product materials met the SASO set standards. This helps in determining where the responsibility lies (Moussa, 1983, p.95).

In cases involving defective or expired products, consumers are permitted to call the Trade Ministry. The Trade Ministry have hot mails where they receive consumer complains. The Ministry of Trade then responds by visiting the retailer responsible and carries out an inspection on all the available products in the shop by checking their expiry dates and proof complain consistency. In scenarios where consumption of ill-kept or expired food stuffs affects the consumer, the Ministry of Trade has a special committee who analyzes the contents of the case and come up with a judgment. The judgment gives the way forward on the amount of penalty or punishment to be imposed on the errant retailer. The ministries of Health and Agriculture, Trade are involved closely in the establishment of regulations that impacts on retailing standards and consumer rights. In addition to that, the ministries encourage traders to portray high moral and ethical standards as this form the major component of worshiping Allah (Chapra, 1992, p.680).

Islam establishes ethical and moral basis for its trade. In that case, the trade regulations are based on the Islamic values (Rice, 1999, p.353; Rodson,1995,p 14). One major attribute of these values is being honest. When it comes to protection of consumers, these extends to both the sellers, consumers and manufacturers and all parties in the supply chain such as the supplier of materials and end users. In summary, the basic tenet prescribed by Islam concerning commerce and trade are based on honesty, reliability and straightforwardness (Mannan, 1982, p.250). Similarly, the Islamic economic philosophy moral and ethical imperative are to integrate political, economic and social need but confined within the Islamic morality and faith imperatives (Reich,1992, p.280). Islam put emphasis on duties rather than individuals rights. This forms the key counterpoint to many approaches used in the Western communities regarding consumer regulation which focuses on catalogues of rights or consumer characters.

The reason behind the Islamic approach is that if each and every member of the public fulfills their duties then the pursuit of blind self-interest will be held within limits and all peoples right will be protected (Rice, 1999, p.353). The Islamic law advocates for individuals to say the truth according to Prophet Mohammed words Whosoever deceives is not one of us.. Thus, all parties in a contract are expected to trade ethically and fairly. The Islamic law principals are valid and fixed for all times. On the contrary, the interpretation of these principles is detailed in the Shariah law. Shariah law can evolve to deal with contemporary issues as it provides a room for humans to reason. The Shariah laws are derived from four main sources. At the top is the Quran. The Quran is divine as each and every word comes from Allah. Various verses in the Quran deal with trade. For instance,  woe to those who deal in fraud, those who, when they have to receive by measure from men exact full measure, but when they have to give measure or weight to men gives less than due. Do they not think that they will be called to account on a mighty day, a day when (all) mankind will stand before the Lord of the Worlds?(Quran, Sura, Lxxxiii: Verses 1-6 ). Make your utterances straight forward(Quran, 33:70).

The second source is the Sunnah. Sunnah is a collection of actions (Hadith) and sayings of Mohammed the prophet as narrated and written down by his companions and followers respectively. Ijma is the third source. It forms the structure for code of conduct and moral principles as elaborated from the sayings of the prophet. Ijma development began when Mohammed died and it continues up to today. The last source is the Ijtihad. It involves the consideration of the new challenges arising in the modern societies with regards to the Islamic law. It is expected to provide the Muslim community with laws that reflects the ever changing circumstances. For instance, the law governing the use of soft drugs is referred to as Qiya. The soft drugs are such as marijuana. Given the fact that alcohol is banned by the Quran, so is the use of soft drugs as both results to family and health damage. The main purpose of the Shariah law is to secure the rights of the individual and maintain solidarity of the society, to introduce high morality to the world of business. As such, all markets are supposed to be transparent and open. In addition to that, they should not sell defect products to the consumers irrespective of being in possession of a valid contract. Lastly, honesty should be adhered to in all transactions being performed.

Shariah and western law: a comparison

There are considerable significant differences between the sharia commercial laws and western commercial laws. Some of the major differences includes the highlighted below. For starter, the sharia laws are divine thus not subject to change. However, different people apply these laws differently in the contemporary commercial world. Secondly, the sharia law subject matter is not purely based on human being relationship regulations. It as well incorporates other believers behaviors and practices such as fasting and prayers. Devotion acts are also separated from everyone common activities and acts. On the other hand, punishment for disobeying the sharia is done both hereafter as a well as in life after death. However, the punishment of violation of manmade laws such as customer protection laws in done here on earth but not in life after death. Moreover, manmade business laws and regulation covers fraud, business cheating as well as similar violations which may occur against the laid down business principles and decencies. In the situation of such an offence, the responsibility is placed upon an individual who have made the harm irrespective of whether the offender was an intentional businessman or a local business man. On the other hand, the harm perpetrators must provide an assurance of financial damage in compensation exercise (Carsky, Dickinson and Canedy 1998, p.133). Additionally, waiving of any damage is always compared to righteous in sheria law.

The development of commercial law

Despite of the inflexibility of sharia law, the Islamic leaders have understood the relevance of introducing a special law to address trade and commerce issues both in Saudi Arabia and in other Islamic and non Islamic countries. However, the commercial and trades laws ought to be in line with the requirement of Shariah laws. Any law that contradicts the Shariah requirements is assumed to have deviated from Islamic beliefs and trade ideologies therefore not acceptable in Saudi Arabia. The commercial Islamic law has its origin from the common ottoman law which is based on French commercial law. The ottoman commercial court which was founded in 1931comprises of more than six hundred articles that includes land trade, sea trade as well as all commercial transaction which took place in the early 1930s.

Some of the main pressures that led to the introduction of commercial laws in Saudi Arabia includes raising separation in control and ownership of Saudi Arabia companies, increase in complexity nature in international business operation, the necessity to minimize the liabilities to encourage more investors, commercial liberalization, globalization, advanced technology as well as the growth and development international joint venture companies and franchises. Since time in memorial, the Islamic community has always been in the forefront in international trade. However, due to modern technological development, the Saudi Arabia commerce has become more integrated and infiltrated by international market thus forcing it to develop new commercial laws. The introduction of new commercial laws to incorporate other businessmen from non Muslim community has resulted to significant economic development in Saudi Arabia for the last less than forty years. The Saudi Arabia commercial law is based on well planned incorporation of social, economic, managerial, cultural, and legislative laws. The law has also facilitated in the significant investments on major economic infrastructures as well as increase in the number and size of private and public companies. Due to the introduction of significant laws in Saudi, a considerable number of international traders have focused the investments in Saudi Arabia.

Other factors that were responsible for the introduction of the new commercial laws in Saudi Arabia are highlighted below. To start with, the country was made aware of rapid economic transformation as well as traditional values that necessitate random economic transformation. However, despite transformation in commercial law, the government was more focused on maintaining the Islamic and cultural values. Due to the cultural and religion pressure, the government acknowledged the importance of including international organization and agencies in harmonizing international trade activities. The desire to take up international standards and policies forced the Saudi Arabia government to adopt domestic customer protection legislation in 1963. The 1963 metrication law included packaged regulation measures specifically on imported goods. In 1965, the government created a new system which oversaw the regulation of business activities such as fraud inters alia, as well as trademarks. In 1961, the government passed a commercial fraud laws which retaliated on the importance of labeling, advertisement labeling and trustworthiness. In 1984, the government updated the legal position in international trade which prohibited fraudulent in the country import and export. Some of these laws formed the basic guiding principle towards the development of the modern commercial law in Saudi Arabia.

Saudi Arabia development plans

In the late twentieth and early twenty first century, the Saudi Arabia country protected its customers through the introduction of five years development plans. The plans aimed at improving the quality of the products and services consumed by the customers. It also aimed at stimulating the advancement of local industries and agriculture through the use of some measures such as the introduction of tariffs, rise of in the import duties, introducing restrictions on imported goods as well as offering of subsidies to local entrepreneurs. However, to facilitate adequate preparedness, the government recognized and acknowledged the potential shortfalls and conflicts in the new policies. The method applied in solving any potential conflict was intended to favor the country costumers. As a result of the government initiative to protect the country customers from potential exploitative traders, some of the developed polices led to the emergence of frequent conflict between the producers in the agricultural sector and policy makers. To address the conflict of interests between local producers and customers, the ministry of agriculture and commerce developed various policies which included the following. For starter, the government introduced The Second plan (1975-1980).

The policy was reluctant on the issues of customer protection. In this policy, the government used quality mark and development standards as the main aids to facilitate national economic development. The policy led to significant development in the countrys economy. This policy was followed by The Third Plan (1980-1985) which emphasized on the importance of the Second Plan. It talked about the significant of improving the quality in standards of the local products to promote local products in international market. Among the over four hundred standards measures that were in place at that particular time, only less than ten among them concentrated on the field of customer protection and industrial safety. The fourth plan (1985-19910) portrayed the two standard policies as the core strategies of advancing technology as well as in the development the required standards for products, services and utilization of local products. However, this policy was silent on the issues of customer protection. The firth policy (1990-1995) recognized and acknowledged the importance and significant of the countrys customers in advancing the country economic development (Reich 2002, p.259). According to the policy, economic development does not solely represent the country economic development. The country economic development is naturally linked with the countrys institutional requirement and the entire society needs.

Therefore, the introduction of specification and standards was extremely crucial to both the countys producers and customers. The Fifth policy also talked about the relationship between private sectors and public sectors in international market. The Sixth plan (1995-2000) main agenda was to promote economic development. It emphasized on the important of increasing contribution in the economic development. The plan also talked about the significant of quality standards in service delivery. It emphasized on the significance of improving the quality of domestic products and services to counter increased and unfair competition in the country from high quality imported goods. Saudi Arabia has also promoted and advertised SASO in United States of America and United Kingdom. The Seventh plans covered the years between 2000- 2005. The policy concentrated on the importance of economic production. However, the policy did not offer any protection measures on customers. The policy embarked on infrastructural development in virtual, physical, and human domains. Although all these policies were intended to address customers needs, most of them concentrated on dealing with unfair competition in Saudi Arabia market (Bhuian, Abdul-Muhmin, and Kim 2001, p.227).

Chambers of commerce

The core role of chambers of commerce in Saudi Arabia was to assist small scale businesses in establishing a place both in local and international market. Chamber of commerce introduced measures to ensure concrete financial and market assistance to the country local small business owners. The chamber provides a guideline on the most appropriate practices in local commerce and trade. The chamber has a responsibility of offering certification to the country local suppliers and retailers. Additionally, the chambers of commerce conduct regular review and advancement of regulations, guidelines and practices to lime with the adjustment made by the ministry of trade and commerce. The chamber has the mandate of offering guidelines on the products quality and safety. Through the existing regulations in the country, the chambers of commerce have the responsibility and power of detecting the products which are below the required standards. After detection, the chamber of commerce has a role of informing the general public on any substandard product in the market. Due to its advanced customers protection responsibilities, the chambers of commerce in Saudi Arabia offer a platform for providing the required customers protection in the market. Due to its mandate in the countrys economy, the chamber of commerce is highly respected and a very powerful local force. It plays a very significant role in addressing any commercial dispute in the country (Sorell and Hendry2004, p. 89).

The Saudi Arabia customer

Currently, there exist very limited literatures on Saudi Arabian customers behaviors. However, the available limited information offers a very distinctive pattern of customers behaviors in Saudi Arabia which demands customers protection. According to the available literature, very limited customers in Saudi Arabia will return a product to the seller due to its low quality. This explains the need for adequate measures that will protect customers interests. Their behavior is related to the rapid transformation in the country economy. The reluctance nature of Saudi Arabia customers have as a result made it easy for business people in Arabia to exploit them by selling low quality products in the market places. In most cases, customers in the country do not evaluate the cost of the products with the quality of the product in the market (Mannan 2007, p.89).

The unfavorable practices by the department of customers protection in Saudi Arabia have as well played a very crucial role in promoting negative sellers responses. Referring to the available literatures, customers affairs official has a will of assisting customers in changing their attitudes. However, their efforts are strongly hindered by poor policies and regulations put in place to address the customers needs. On the other hand, customers in Saudi Arabia are ignorance towards the Islamic edicts relating to customers protection. However, despite of the customers ignorance, others players such as employers and sellers are also blamed of ignorance of the existing laws and regulations. On the other hand, despite being aware of their basic rights, most customers do not exercise their basic customers protection rights. The available literature has also expounded on the relationship between education and customers. The uneducated Saudi Arabian customers tend to be possibly fatalistic, more apathetic and are less likely to complain on the quality of the product in the market as compared with the educated section of the population. On the other hand, low income earners are less likely to complain on the quality of a product in the market compared to wealth section of the population. Additionally, poor and uneducated people in the society do not complain a lot on the quality of the product sold in the marketplace. By comparing the Saudi Arabia customers with western countries customers, the western customers are more aggressive on their right more than Saudi Arabia population (Tuncalp 2008, p. 21).

Government Intervention with regards to consumer protection

The Saudi Arabian Ministry of commerce is responsible for the supervision of the countrys goods and services. Moreover, it has to make sure that there is availability of basic needs in the market at prices that are reasonable and equitable. The ministry is also responsible for sustaining contact with merchants. Furthermore, the ministry is required to brief these merchants about the situation in the market arena such as what is expected from them by the government, the future requirements and the current supply situation in the market. The ministry also encourages marketers to supply the market with adequate quantities of goods in order to meet the increasing demand of the local markets. Apart from encouraging them to increase in the amount of supplies, the ministry directs and guides suppliers in providing the consumers with the best imports and appropriate rules and procedures that guarantees their rights.

In the light of the above, the ministry also fixes the prices of principle goods in special cases and also specifies the acceptable margins of profit. In addition to that, the ministry also specifies the requirements that need to be met before the distribution of any products and services. For instance, the fixing of labels and price tags on commodities, and storing of specific documents and invoices. Through its agencies that are competent, the ministry supervises merchants. The agencies are such as the Department for Consumer Protection which guarantees rules and instruction enforcement and putting a stop to exaggeration and excessiveness in prices. With the collaboration of various information media, the ministry strives to improve consumer awareness amongst its populations. To discourage hoarding and establish stable consumption, the ministry through the information media raises consciousness among the general public. The merchants are also advised by the ministry not to exploit consumers and exaggerate prices by cooperating with citizens and competent authorities.

Consumer protection location in the government structure

One of the main objectives of the Saudi government is to advance in both the social and economic development. This has been achieved by the development of economic infrastructure to enhance the participation of the public in the development of the economy (Kingdom of Saudi Arabia, 1980). The government of Saudi Arabia has also established numerous agencies entirely financed by the state. The efforts made by the government to protect the consumers began by the establishment of a consumer protection general department.

The General Department of Consumer Protection objectives are such as:

• To shield consumers from commercial frauds
• To guarantee government agencies specifications and regulations conformity
• To guarantee manufactured and imported goods conformity. These goods need to meet the import specifications
• To carry out various tests of metals that are precious such as platinum, gold and silver. In addition to that, it aids in satisfying their true value and also regulating the trading of such metals.
• To develop the utilization of metric standards in volumes, lengths and weights with an aim of unifying the utilization of the aforementioned standards
• To support various government agencies while they are purchasing goods and products. In addition to that, it aims to advise on the inherent guarantees in the goods technical specification and offer the needed technical advice to the traders and the public.

Consumer voice development in Saudi Arabia

In Saudi Arabia, various factors have hindered the development of the voice of consumers. These are such as, the absence of consumers interest promotion by government agencies, lack or absence of standards and publicity in various areas making it extremely difficult for consumers to create up case of product poor performance, the consumer regulations symmetric enforcement absence and the reluctance by Saudi Consumers to air their complaints to respective agencies when they are dissatisfied with a product. Besides the above limitations, various developments are in progress to enhance the voice of the consumer (Jefri, 2000). For instance, the citizens are now making use of the claim court system. Through this court, they are able to pursue their complaints. In this court, individuals are not charged any fee and parties involved represent themselves as they are governed by the Shariah law. In addition to that, the Arabic daily newspaper has a column where consumers can publish their complains

The future of Saudi Arabia Consumer Protection Policy

As a result of the continued expansion of commercial activities and diverse products and commodities to meet the needs of the consumer, the Ministry of Commerce and other government departments in collaboration with the SOS( Saudi Standard Organization) have embarked on a thorough study in order to come up with measures and ways that will enhance consumer protection. In addition to that, the government plans to create consumer awareness through information media. The consumption awareness will be based on the Saudi Islamic Values and the societys traditions. The ministry together with various departments seeks to rationalize consumption and guard the consumers from deception, trickery, cheating, counterfeiting and fraud (Al Dabbagh & David, p.11).

Apart from what has been mentioned above, the consumer role remains a crucial factor when it comes to protecting through attention and awareness creation to assure the quality, validity, and safety of the consumed or purchased products. In addition to that, the consumers are warned against hesitating on advertising of practices that are illegal or harmful so that the bodies concerned can implement rules and regulations content against perpetrators of laid down regulations. The government aims to incorporate the voice of the consumer in the process of policy development and economic planning.

Summary

Generally, in Saudi Arabia, the Shariah law provides a practical and philosophical basis for consumer protection and consumer legislation activities. Each and every trader has an obligation to trade fairly and take care of the consumers. Various factors tend to limit the development of consumer protection in developing and under developing countries. The Saudi Arabian government has put in place a commercial law that is within the Shariah tenets. This helps in regulating business and trade activity in a rapid and open developing economy. Less research has been conducted in Saudi Arabia regarding the protection of consumer. Accordingly, the Saudi government has developed a supply policy whose main aim is to support the private sector in handling the foreign and domestic trade. The ministry of commerce checks basic items prices and there general supply in the market.

The supply policy

The supply policy objective is to achieve the below named goals: to continuously procure vital commodities in order to make them adequate for all markets, to supply basic commodities at reasonable prices and quantities, to expand the choice of the consumer, reinforce a competition that is fair among suppliers, encourage the creation of distribution chains and consequently upgrading the intensity of commercial services and finally, to promote effective corporation and understanding between the government and private commercial sector.

Objectives and Functions of Consumer Protection Laws

The law enhances awareness among the general population. Awareness creation main purpose is to protect the general public from any form of fraud and limiting the incidents of monopoly. In addition to that, the law also promotes the living standards of the Saudi Population and also checks on the prices to ensure that people are not exploited by traders. Furthermore, the law maintains the quality of both locally manufactured and imported products by ensuring that they meet the specified standards. These should be in line with those adopted by Saudi Arabian Standards Organization or international standards. In addition to that, it checks if the manufactured and distributed products conform to the Islam religious requirements. The consumer protection law major functions are such as controlling the price and product, quality and also hall marking and standardization. With the adherence of all this functions and objectives, then the Saudi consumers will be adequately protected from being sold harmful and below standards products (Supply and Consumer Protection, N.D).

Conclusion

Over the last few decades, Saudi Arabia economic development has undergone tremendous transformation. The transformation ranges from development of effective strategies to advance economic development to the implementation of customers protection policies. Currently, Saudi Arabia is among the country which has highest foreign investment in the world. Its high population accompanied by relaxed policies and regulations on international trades has forced many investors to consider instigating their investment in the country. However, the need to understand the pattern of customers protection in Saudi Arabia is brought about by various unique reasons. To start with, the current Saudi Arabia development stage, economic size, wealth as well as concrete Islamic trade perception has forced many scholars to invest a lot in trying to understand the Saudi Arabia customer protection trend. On the other hand, there is very limited demand and literature available concerning the Saudi Arabian customer culture. The research is also motivated by the need to understand how the prevailing Islamic teachings are incorporated into the international customers protection regulations. On the other hand, the Saudi Arabian government has come up with various governmental regulation agencies to address customers issues.

The Saudi Arabia chamber of commerce is mandated with the responsibility of ensuring quality service delivery to customers. It also has the mandate of ensuring that all businesses meet the required standard before transacting any business in the country. However, despite of all the effort made to protect the customers right in the country, the Saudi Arabia customers require adequate civic education to sensitize them on their rights. On the other hand, the government ought to come up with concrete and severe measures to address customers exploitation in the country. There is also dire need to develop string bodies to execute the existing policies and regulations.

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Introduction

There were, and still are, many experts and non-experts of law and the financial sector that wonder if its redundant to transform into legislation regulations that are like copy-paste of already imposed rules by banking institutions?!! Anyway, regardless this interrogative point in the minds of many, the newly minted Credit Card Accountability, Responsibility, and Disclosure Act of 2009 was introduced in Congress the beginning of this year.

But, as with any other piece of legislation, in order to better understand this law, why it was necessary and what will its effects be, it is the case to take a look at the circumstances that influenced in its making.

Many agree upon the fact that it was the financial crisis that was the primary factor that led to the necessity of this new legislation. The subprime crisis and the credit crunch made it quite clear that the existing regulations were simply ineffective and with a lot of so called “open spaces” for speculators to profit take advantage from the good faith of others (Cap, 1).

But other scholars and intellectuals do not completely agree with this. They go on in stating that it is not the credit crunch or the subprime meltdown crisis that developed out of the reach of the law and thus made it necessary for it to be changed and updated. For them it is the system which in itself includes these negative phenomena such as the different crisis on the financial sector we have been having the last two decades of the twentieth century and the first decade of this new millennia.

In this respect the previous law played a considerable role in constructing such system, or environment, which in itself includes the advent of these negative situations. We will discuss below about the considerations that are being made for the Credit Card Act of 2009 by the same people on the effects that it will have on our economy and society.

Anyway both parties agree on the fact that the previous regulations were not sufficiently protective of the consumers. Furthermore, there were much (maybe even to much) space allowances for speculations by part of the Wall Street with “Main Street” bearing the most of the consequences (Houston, 2). But the situation created during 2008 had its specific attributes that were considered unlikely from many experts during the prior years to it. Almost every prediction showed a brilliant future for the credit sector and credit card industry in particular. During the years from 2004 to 2006 it even had a boom on credit card applications. The law and other regulations in place seem to function perfectly. Anyone, almost anyone, thought that the market seemed to have been regulated as it should be these rules and laws (Bonner & Wiggin, 4).

And here the next big question is how came to be that the existing regulations and laws led to this situation and at the end of 2008 almost “crashed”?? If the existing laws and regulations were functioning so well, then why did they not include in themselves the necessary tools to prevent these types of crisis from unfolding?!! Many have found the answer to these interrogative points to the fast and unprecedented development of consumer culture that drove our economy at a point beyond regulation.

As Canclini expresses in his work the situation “just went wild and no rule or law could restrain it from developing in what it become” (2008, 16). At this passage the author is talking about the booming housing mortgage market and the subsequent subprime crisis that unfolded because of it. He also refers to the general consuming behavior that the American people have been accustomed to the last decades. And the credit market was the one that was at forefront of this booming of American economy. The credit card industry was expanding at a tremendous rate the last 6 to 7 years before 2008. Everyone seemed to want to get a credit or a debit card in order to take a loan to buy some goods.

According to the neoliberal view, the law should not create impediments between the transaction parties, the credit card issuer and its holder, the consumer. Instead, the law should merely restrict itself in creating the necessary environment that these transactions take place freely. As to whether the conditions and the agreement between the parties in the transaction, for neoliberals the law, and the government in general, should not be permitted to interfere. These were the guiding principles under which the Federal Reserve Board and the United States Government constructed the rules for the credit card industry. The supporters of this strategy prided themselves that this situation has enhanced the credit flow in the economy and by thus enhancing the overall well-being of the every one of the American people (Wiggin & Bonner, 36).

There seemed to be no place for disagreement of this situation and up until the second part of 2008 no one raised the doubts that the rules and regulations for credit cards should be reviewed and changed. It had become a sort of common sense that this was the right way to go forward.

Yet, this was the proof that common sense does not coincide with good sense in all the cases. As Cancilni states:

“How can one make sense of families who squander their Christmas bonuses on parties and presents when they don’t have enough to eat and dress themselves throughout the year? Don’t these media addicts know that newscasters lie and that telenovelas distort real life?” (37)

This paper intends to make an analysis of the Credit Card Act of 2009 just passed a few months ago from the United States Congress. First, in the next section there will be displayed the actions of the Consumer Protection Board of the state of New York which preceded the action in Congress. The actions of the Board and those of the New York State Governor Office became an example to follow nationwide. They served to build up the necessary pressure for federal action. Next, we will discuss the arguments brought forward by the supporters of the bill. This will be done by pointing out the key provisions of this bill and the arguments why they are going to have a positive impact. The other section will be dedicated to the detractors of the bill and their arguments that this law could have negative consequences for the public. The third section will be dedicated to the debate held in Congress for this bill and the final one will be the concluding section.

In this section we will try to reach our conclusions by making a comparative analysis with the Senate Bill 5665A passed June of 2006 which was the previous regulations for the credit card market.

The Credit Card Act to Congress

The New York State Consumer Protection Board and its actions

At the end of the last year, 2008 and the beginning of this year, different voices that asked change in the existing laws and regulation began to emerge. Many public and political figures expressed in favor of radical changes in legislation and a more consumer-protection focused rules.

Among these voices the New York State Consumer Protection Board was one of the most active not only in public speech and consumer alert notifications but in practical actions too. In this consumer-protection campaign they were joined by Governor David A. Paterson. At the end of 2008 the New York State passed a new Consumer Bill of Rights in an attempt to respond quickly to the financial crisis that had emerged. This New York Sate Act was designed to increase consumer protection in the paid income tax preparer

industry and impose disclosure requirements on them (“Consumer Bill of Rights”, 1). After the passing of this bill the office of the Governor also announced that soon the State Senate will be introduction with more new legislation in protection of the citizens and consumers. This new regulations will have the duty to assure that New Yorkers earning less than $60,000 annually will be “eligible for the federal and State EITC which can range from $569 for an income-eligible individual with no children, to more than $6,000 for families with two or more children. The notice from employers, in conjunction with W2 forms, can be sent via mail, e-mail or by in-hand delivery” (“Press Release”, 1).

Anyway, it should be noted that many sections of the bill along with new regulations would take effect on January 1, 2010. It will be a gradual enactment of the law to ensure that no immediate shock happens to the market and by doing so, negatively affecting the public. It is the case to mention that Governor David A. Paterson and his aides have been trying is identifying methods of addressing the national economic crisis, which was beginning to heavily affect New Yorkers since September last year. The Consumer Protection Board also began contributing with new and innovative resources which were deployed under the form of different programs.

One program to mention is the “Banking on Our Children” program. This program is directed to K-12 based children and aims in developing a new sense of savings in them, something that the consumer culture had almost buried for the last decades. For this purpose a couple of movies were filmed and aired at the public.

The Consumer Protection Board made this videos free accessible and downloadable through their website. These videos were accompanied by hundreds of figured sheets designed for home or classroom usage with the purpose of reinforcing the movies’ messages.

The other video, “The Mystery of the Missing Piggy Bank”, had a more direct message. In it, the child heroine learns the value of saving money when she loses her bank and follows clues to find it. The message of this film is fulfilled by “A Sense of Saving,” where children receive an important lesson on spending beyond their means. Ben Franklin informs them that “a penny saved is a penny earned.” The premiere of the films was held at the NYS Museum, and since that day the videos have received great reviews from the public which showed more interest that it was expected (“Current Features”, 1). The message to these children and their parents was clear: nowadays Ney Yorkers, and all Americans, need to be savvier than ever.

But the Consumer Protection Board had to respond to new phenomena occurring into the “adult world” also. During these hard financial times scammers continued to find innovative ways to capitalize and benefit on consumer hardship. One “sort of scams” was the foreclosure scams which drain the equity in people’s homes.

The Consumer Protection Board had to go on red alert because more than 55,000 New Yorkers called the CPB last year for assistance and information (“Current Features”, 2).

The Board also had to take action to try to protect your online privacy, as information brokers heavily used consumer data to achieve targeted advertising and online marketing. But there was a bigger threat to consumers from the development of information technology, identity theft.

The Consumer Protection Board had to respond quickly to this one as it came out to be the fastest growing crime in America, with New York ranked 6^th nationwide (“Identity theft”, 1). It was found that victims of domestic violence can be more vulnerable to identity theft. Thus they were advised to take a few precaution measures to be more protected against abusers.

The risk was that these abusers may use the personal information they have access to as a means of control or even blackmail (“Identity theft”, 2).

The Consumer Protection Board along with the New York State Office for Prevention of Domestic Violence undertook an awareness raising campaign to inform the public of the tactics scammers employ to open new credit cards in the victim’s names or even open various lines of credit in the names of their children. They can use this information then to withdraw money from ATM’s, purchase items online, etc. These scams are on the increase and, in addition to harming individual consumers, are adversely affecting businesses. The case of McDonald’s is the perfect example.

The Board coordinated efforts with McDonald’s USA to inform and alert consumers of a scam that fraudulently used the company’s name and brand loyalty to “Phish” for their personal information. Both the Consumer Protection Board and McDonald’s had been contacted by concerned customers who had received an e-mail containing a fraudulent offer to credit their bank account with $75 or $80 in exchange for participation in a survey which required disclosure of personal identifiable information (Rausch, 1).

In these cases, the end result is that victims loose their funds their credit rating is destroyed so they find it difficult to take a loan or make any other credit related transaction. There is also the possibility for them of being accused of crimes committed by the abuser which the victims never commit or intended to commit. For the above mentioned reasons:

“The CPB advises victims to respond to identity theft by:

• Checking and closing compromised accounts.
• Filing police and/or Federal Trade Commission affidavits with credit bureaus and others.
• Placing a security freeze and fraud alert on credit reports.
• Checking free credit reports regularly for errors.” (“Identity Theft”, 3)

All of these efforts from the CPB of New York had a nationwide impact. Many other governors began to act similarly and the stage was gradually set for an action to be taken at the federal level. Many congressmen and senators of the United States Congress expressed their public support for the actions of the New York State Governor. This increased the pressure on President Obama and all the other legislative branches to undertake a nationwide federal action.

The purpose and supporters of the bill: Key provisions

Gradually, politicians become more active regarding the credit card industry. The sponsors of the bill were Senator Robert Menendez and Representative Carolyn Maloney. Congresswoman Maloney has been in contact with the Consumer Protection Board of New York systematically for the last years, being a representative of the state of New York herself. Senator Robert Menendez is a politician from the neighboring state of New Jersey. He is an old fellow of Governor Paterson and both have been active members of the Democratic Party the last election in their respective states.

On February 6, 2009, Senator Menendez introduced at the Senate Committee on Banking, Housing and Urban Affairs his proposition for the Credit Card Reform Act of 2009.

This Act “amends the Fair Credit Reporting Act to permit a consumer reporting agency to furnish a consumer report in connection with any credit or insurance transaction that is not initiated by the consumer only if the report indicates that the consumer is age 21 or older” (“Bill s.392”, 1).

But what is more important is the statement of purpose made by Senator Robert Menendez himself when he presented the bill before the Committee. According to him this was:

“A bill to protect consumers, and especially young consumers, from skyrocketing credit card debt, unfair credit card practices, and deceptive credit offers”. (“Bill s.392”, 1)

Many democrats in the Senate supported the bill immediately. They so it as part of their agenda of renewing many of the rules and regulations left from the previous administration. The same did most of the House members of the Democratic Party. This bill even had the support of many congressmen, but the majority of them were, at least, skeptic about it. We will discuss this on a separate section below.

On May 22, 2009, President Barack Obama signed into law the Credit Card Accountability Responsibility and Disclosure Act of 2009 (commonly known as the Credit CARD Act). After signing he declared that:

“So we’re here to put a change to all that. With this bill, we’re putting in place some common-sense reforms designed to protect consumers like Janet.

I want to be clear about this: Credit card companies provide a valuable service; we don’t begrudge them turning a profit. We just want to make sure that they do so while upholding basic standards of fairness, transparency, and accountability. Just as we demand credit card users to act responsibly, we demand that credit card companies act responsibly, too. And that’s not too much to ask.

And that’s why, because of this new law, statements will be required to tell credit card holders how long it will take to pay off a balance and what it will cost in interest if they only make the minimum monthly payments. We also put a stop to retroactive rate hikes that appear on a bill suddenly with no rhyme or reason.” (Lee, 1)

Many of the supporters pretend that this new Credit Card bill expands the prohibition against different practices (to be exact five practices) that the OTS and other governmental agencies found to be unfair during last and this year’s inspections. In their concluding reports many of these agencies required that “consumers receive a reasonable amount of time to make their credit card payments, prohibited payment allocation methods that unfairly maximize interest charges and, in the subprime credit card market, limited fees that reduce the credit available to consumers” (“Unfair and Deceptive Practices and Rules”, p. 1).

But this new Credit Card legislation goes further in juridical intervening because it codifies several amendments of the “Truth in Lending” rules that are issued by the Federal Reserve Board of Chairman’s and also imposes some new restrictions on additional practices.

To be more specific, the Credit Card Act will become effective in different periods of time in a phase to phase transition type period. The enactment of the bill through these different phases will help, according to the promoters, to impact the financial and social ambient as positively as it can. The first two provisions will become effective on August 20, 2009, 90 days after the legislation was enacted.

Another additional rule they imposed from the agencies is that they prohibited issuers from raising the interest rate on an existing credit card balance when a consumer is paying credit card bills on time (“Unfair and Deceptive Practices and Rules”, p.4). We will discuss below in details about this.

These provisions contain the requirement that issuers provide 21 days for consumers to pay their credit card bills, and the requirement that issuers provide 45 day notice of changes in the terms and conditions (“H.R. 627 of the One Hundred Eleventh Congress of the United States”, p. 1).

However, most of the legislation will come to effect on February 22, 2010, almost nine months after it was approved by the Congress and signed into law by the President.

The main question remains, as pointed out from the detractors of the bill, if it has the capabilities and tools necessary to fulfill what it was designed for. In order to evaluate ourselves we need to make a text critical analysis of the Act. One of the major sections of the bill is entitled “Customer Protection”, in accordance with the purpose that its sponsor and supporters had. To further our analysis let see in details the major provisions this new Act brings.

In the very first sentences of the Credit Card Act of 2009 we find that it:

“Amends the Truth in Lending Act (TILA), with respect to credit card accounts under an open end consumer credit plan, to require a creditor to provide written notice not later than 45 days prior to the effective date of:

1. any increase in an annual percentage rate (APR); and
2. any significant change, as determined by rule of the Federal Reserve Board, in the terms of the cardholder agreement (including an increase in fees or finance charges).” (H.R 627, Section 101)

As we have explained above, the booming of the credit market in general, and credit card industry in particular, led to more power for the issuers of the cards. The companies and banks made different changes in their fee structure during the year, time after time. The problem was that consumers were “constraint” to accept these changes because of the high development of this sector. If you wanted to buy something, or finance something at all, you had to go through the banks and credit card companies. Not accepting the changes and taking actions against the banks, or credit card companies, would bring ultimately more damage to the consumer than to these banks or credit card companies. A certain form of unconscious, silently agreed, “common sense” was created among the public. This situation was more in favor of the business world than the consumers. As long as the credit card had not unfolded many people were unconscious about the negative situation there were already in. a wide usage of the credit cards means being more exposed to financial shocks.

In the second part of 2008, many people began to feel the effects of the financial crisis. They found themselves into a “locked in” situation where they had to pay significant amount of fees all at once. These fees combined together came up to be an unbearable weight for the month budget of many American families. This is why one of the key provisions of this new credit card act is to oblige card issuer to inform in advance their clients of any change in terms of the cardholders’ agreement. This way the consumer will have the opportunity to decide whether to agree or find other solutions.

But it not only obliges issuer to inform their client but also imposes certain limits for the increase of interest rates and other related finance fees on a credit card account before its renewal date. The only permitted increase in an annual percentage rate is in the form of a penalty.

This penalty is only for “specific, material contract violations of a consumer directly related to the account that are specified in the contract as grounds for an increase” (“Bill s.392”, 6). Furthermore the credit card act of 2009 completely bans and declares illegal retroactive rate increases by the part of the issuers.

Another key provision of this act is that it prohibits a credit card issuer from changing the terms of a credit card agreement with a customer:

1. “before the scheduled contract expiration or renewal date; and
2. until the issuer has published all contract changes in any mandatory disclosures.” (“Bill s.392”, 4)

This provision is related to the previous one regarding information action that issuer should take in case of changing their fees.

Another provision that was lacking in previous regulations is that now a cardholder has the right to repay all existing balances on an expired credit card account according to the terms of agreement that was effective before the expiration of the card. This had become a nationwide problem for many Americans. During last year many people were late to repay their credit card balances and, when they had the possibility to repay, they had to do so with new rates. These meant that they had to pay more than what they owned the companies the moment their credit card account had expired (John, 1).

Yet another very important provision that this bill makes is that on personal privacy and information scamming. Many supporting figures of the bill emphasize this fact (Faircloth, 2).

This bill makes it a requirement to the credit card issuer to verify when the account is opened that the client is, and will be, able to make the necessary payments, and in accordance with the time limits agreed upon.

The same verifications should be made if the balance is increased by part of the customer. This evaluation process from the credit card companies should be based on the consideration of current and expected income of the client, his/her current obligations, and employment status (Lee, 2).

All of the above mentioned provisions are considered to be very strong arguments by part of the supporters of the bill that this law was not only necessary, but it will also better regulate the relations between companies and customers for the future. According to them this new Credit Card Act will act as a shield for the consumers in future financial shocks of the market.

The expected consequences and the critique of the bill

This bill has shown to have so many provisions and new tools in help of the needy. But still remains the question whether it will positively affect the social and economic structures of society on the long term. The main critique for this law is not about the law itself but about the principles behind it. Many opinion makers, politicians and scholars have argued that this sort of regulations promote shunning individual responsibility. They enhance the role of governments as “saviors” and by doing so demotivate people to step up personal responsibility. The critiques state that this bill will effectively become a sort of individual “bail out”.

The problem is that the part of the population that is financially more literate and straight will have to back up the rest that has problems. It is a sort of taxation to that part of the population that have not “abused” with their credit card in order to “save” others. First of all it is a moral problem, if it is good or bad to help people which have chosen themselves to be in that particular situation. Second of all, it is a justice-juridical problem. Is it right to make it a law that particular groups of the population will be allowed what other cannot?

Does this mean that anyone can behave as wishes financially because he will be backed up by others anyway? One example that the detractors of the bill give is that of the claim that this bill, among others, will benefit students.

As a reader in a financial website points out:

“You really have to wonder if college does much for students. Maybe degrees are over-rated. They are spending upwards of $40,000 for a college education (at a state school), but they can’t figure out that eventually they have to pay for that pizza they just bought with a credit card. Ignorance isn’t an excuse. This isn’t a hard concept to grasp, especially for someone at an institute of higher learning.” (Patrick, 1)

Thus the law will further enhance this general attitude that is the cause of the problem in first place. Some other critics dismiss this law as just another form of “vote pandering” by part of the government. One must not forget that it was the government and Congress, when both parties had majority, which backed the banks and other financial institutions by giving them billions of taxpayers’ money. And the same people that rushed to save them now are accusing these institutions of unfair and deceptive practices. This situation will just make companies to find alternative ways to impose their fees. The risk is that they will extra charge that part of their clients that are correct in their payments.

Yet another concern is that raised by some small business groups which have opposed the move of the government. Raymond J. Keating, chief economist at the Small Business and Entrepreneurship Council, says that:

“These regulations risk choking off an already-tight credit market. If you step in with legislation like this, where it’s tougher on companies to price risk into the equation, the real risk is they’re going to pull in on credit.” (Faircloth, 4)

This situation can decrease and slow down the credit flow throughout the economy. But credit flow is vital for small businesses who want to expand. If it slows then the business world will slow down with it ultimately having a negative impact on individual consumers.

The debate in Congress

On April 30, 2009 the House of Representatives of the United States Congress passed the Credit Card Act bill by roll call vote. The totals were 357 Ayes, 70 Nays, 7 Present/Not Voting. Following, on May 19, 2009 the bill passed in the Senate also by roll call vote. The totals were 90 Ayes, 5 Nays, 4 Present/Not Voting (“H. R. 627”, 1).

As the numbers show, this was a bipartisan, strongly supported Act. Both parties worked together on it. In fact, since it was referred at the Committee there were 89 amendments proposed, most of which were bipartisan amendments. But this does not mean that there was no debate regarding this bill. The floor was opened by one of the co-sponsors of the bill, Congresswoman Maloney.

“We held numerous hearings and meetings, and came forward with a set of gold principles that many issuers have voluntarily followed. Today’s bill is another step forward towards making these protections permanent, and importantly, we expand upon them in a number of key areas to provide consumers with additional protections.” (“General Debate”, 1)

After reviewing the principles behind this bill she pointed out that:

“This is not a bill that takes away consumer choice or that infringes on anyone’s rights. It simply says it is not right to be deceptive, to be unfair or to engage in anticompetitive practices.” (“General Debate”, 1)

She wanted to emphasize this fact because of the many critiques received during the preparation of the bill that ultimately it was going to harm the people by limiting their individual freedom. Rep. Spencer Bachus took the first stance from the detractors of the bill.

“We’re in the midst of a severe economic downturn. Unemployment is up. Hardworking Americans are facing unparalleled difficulties. Now, if a credit card company doesn’t treat them right, they just add to those difficulties. But if we over-restrict these offers of credit, put too many conditions on it, we’ve been told that the credit limits are going to come down… yes, there will be people, if this bill passes, that will receive a lower interest rate or their interest rates won’t go as high. But there are other people, I think a far greater universe, where the interest rates will go up on people that pay on time, people that have better credit, and that this is sort of a leveling, and I think you’re going to see that interest rates are going to go up from 10 to 12 percent.” (General Debate, 2)

His stance shows the basic principles of critique that many people had against this law; the fear that this Act could have a sort of backlash-boomerang effect. Instead of helping people it will ultimately end up harming them on the long term. as mentioned above there are also critiques that see this bill as limiting and unfavorable for the small business world. There was a general sense of “fear” that this law could disrupt the market balance among the detractors of the bill. Rep. Jeb Hensarling expresses his concern that:

“… ultimately what is unfair, what is unfair, Mr. Chairman, is in a time of a credit contraction to reach into people’s wallets and take their credit cards away. Ultimately, that is what this legislation will do.”

And this because:

“People are counting on these credit cards. Risk-based pricing. You are taking tools away from those who use it and you are leading to two consequences. Either, number one, half of America is paying their bill on time and you are going to force them through this legislation to bail out the portion of America that doesn’t; and for those who are struggling, you are going to deny them credit card options… in a free market, people ought to have consumer choice and they ought to be able even with a checkered credit past to get credit.” (“General Debate”, 5)

These are interesting concerns that the market will get out of balance, but as Rep. William Pascrell points out:

“There has to be a balance, and I would agree. The question is we’ve gone out of balance, and no one can deny looking at the data of the past 20 years that we have reduced our standards, there have been financial products that nobody has overseen, and I place the blame on both political parties.” (“General Debate”, 6)

As we can see from the debate that took place in Congress, both parties agree on the fact that consumers wellbeing is on the line here. Their difference is whether this law addresses correctly this problem or it will just make it worse. If we carefully study the stances of both parties we will find that both have reasonable arguments that stand. It is difficult to point out any unreasonable claim from both sides.

Thus the problem becomes more complicated: if they both are right on what are saying, then how is this law going to impact the social public world, the society?

Conclusions: Likelihood of success

Still to this day the debate over the effects of the Credit card act of 2009 continues to be part of the agenda of the media, national or local. Either is the case, this debate will continue at least until the full implementation of the bill in mid-2010. But there is one point that both parties, the supporters and detractors, do agree: this bill was a response to the financial crisis that unfolded in 2008. Another point that they agree is that this crisis had to have a response by the federal government. It is the form of the response that they disagree upon.

So the question remains: is this new credit card act going to be successful or will it be just another legislative and political tentative to convince the public that something is being done? This question can only be fully answered in the next year, 2010. Meanwhile, all we can do is an analysis of the present situation and discuss on future expectations. Many of the future expectations have been mentioned above. The supporters make the claim that this bill is going to change the focus from profit to the consumers. The biggest positive expectation is that the bill will oblige the credit card issuing companies to be more customer-care oriented. On the other hand in provides people with the guarantee that the law provides them with support and coverage from the ill intentions of scams or fraudulent companies. This way everyone can be sure that the government will exert its legal power upon every company that tries to yield unfair profit from individuals and families by raising fees without notice or consent, for example.

But that is the problem for the detractors of the bill. And mainly it is a problem of principles. By ensuring people that the government will “look their back” this law will increase their level of irresponsibility. This way people’s personal responsibility will decrease because they would feel more “secure” in the hands of the government. The creation of this situation could be dangerous because it can harm individual liberties. Now the government can have more power to manage the transactions of people in the market. The individual liberty of having an agreement with a company for a credit card will not be bi-partisan anymore, between you and the company. Now the government will be, sort of, part of this agreement.

Another expectation is that the law will become de facto unfair to different categories of society. The fear is that part of society which is correct in its payments and has no problems with its financial balances will have to bear the fiscal weight of the rest which are financially unsound. But why should one bear the weight of the errors of the other??

There have been previous tentative to safeguard the consumers. To be notes is the one by the state legislation of New York in 2009, the Senate Bill 5665A. One of the provisions of that local bill was that it outlawed the use of universal default, a commonly used and relatively unknown practice by credit card companies. This practice was used to increase credit card rates based on a card holder’s unrelated financial activity. New York is the first state in the nation to provide such a protection against this deceptive practice (John, 5). This is similar to the credit card act of 2009 we are discussing. Just this time this Act of Congress makes it a nationwide law.

In simple words, the “universal default” was a breach of contract by part of the card issuing companies that allowed them to change the terms of agreements with consumers at will. This comprised the increasing of fees. Similarly, the new Credit Card Act of 2009 obliges the issuing companies to inform their clients, at least, 45 days prior to any change and not change the fees above certain limits. But the main similarity between the two bills remains that they take the focus to customer protection.

References

Canclini, N. G. Consumers and Citizens. University of Minnesota Press: Minnesota, 2007.

Sassatelli, R. Consumer Culture: History, theory and politics. Sage Publications: New York, 2007.

Bonner, W. Wiggin, A. Empire: the rise of an epical financial crisis. John Willie & Sons Inc.: U.S.A, 2006.

Aydinonat, E. The invisible hand in economics. Routledge: London and New York, 2008.

Unfair and Deceptive Practices and Rules. 74 Federal Register 5498, 2009. Web.

H. R. 627 of the One Hundred Eleventh Congress of the United States. United States Congress Office of Information, 2009.

Cap, B. Breakdown: The Credit CARD Act of 2009. The Stop-to-Buying-Crap Website, 2009. Web.

Houston, Ch. Credit card crisis: resolved? Mays business online. 2009. Web.

Kropp, R. President Obama signs the Credit Card Act. Social Funds Foundation. 2009. Web.

Consumer Bill of Rights. The New York State Information Office. 2008. Web.

Press Release. The New York State Office of the Governor. 2009.

Current Features. The New York Consumer Protection Board. 2009. Web.

Identity theft and domestic violence. The New York Consumer Protection Board. 2009. Web.

Rausch, D. S. Consumers deserve true credit card reforms. New York Consumer Protection Board Press Release. 2009. Web.

Bill s. 392: The Credit Card Reform Act of 2009. OpenCongress of the 111^th Congress of the United States. 2009.

Lee, J. A New Era for Credit Cards. The White House Official Website & Blog. 2009. Web.

John, A. New Credit Card Rules Coming in 2010: a consumer view. The Consumer-Report Blog. 2009.Web.

Carter, C. Renuart, E. Saunders, M. Wu, Ch. Ch. The Credit Card Market and Regulations: in Need of Repair. HeinOnline: The North Carolina Banking Institute, 2006.

Faircloth, K. New Credit Card Regulations Good for Small Business? Inc.com, 2009.

General Debate. CREDIT CARDHOLDERS’ BILL OF RIGHTS ACT OF 2009. Government Tract Website, 2009. Web.

Patrick, E. Why the Credit CARD Act of 2009 is Harmful. CashMoneyLife.com, 2009.

Introduction to the cases

This paper will focus on two case examples that will explain the basics of contract law. The first case involves Kathy who works as a human rights public speaker in Brisbane Australia and one day, she is invited to give a keynote address at a conference in Ballarat for two days. The title of the speech is supposed to be interplay between human rights and economic development. The organisers of the conference had promised Kathy that she would be accommodated and given a return ticket from the city hosting the conference to her home city in Melbourne.

According to the contract, Kathy was responsible for her travel to and from Melbourne airport which takes one hour and fifteen minutes by road. Kathy arrives in Balarat and delivers a keynote speech titled Generation Y and economic development and this speech deeply moves the participants, especially Mark and Laura, who are students of fundamental law at the University of Balarat. After the speech, Mark and Laura Join Kathy during the conference lunch and share their views about her moving speech. The two also offer to escort Kathy to the airport when she is returning home. Relying on Mike and Laura, Kathy makes no other travel arrangements. However, neither Mark nor Laura turns up to take her to the airport and she had to take a shuttle bus to the airport and subsequently missed her flight. She had to buy a new ticket to travel back home and this cost her considerably. During the day of departure, Mark and Laura had to submit a paper on fundamental law and that’s why they could not keep their promise. Mark and Laura later sent her a letter of apology but Kathy is seeking compensation for the losses she incurred due to non performance of Mark and Laura.

The second case scenario involves Nonaka and her spouse Namiko who have come from Tokyo to a place called Cairn to see the Great Barrier Reef and they are checked into a hotel called the Happy Stay Hotel. After completing all the paperwork and paying, they sign a terms and conditions form that stipulates the conditions of their stay. The couple was tired from their long journey and were not good in English so they signed the terms and conditions form without reading it and on the second day of their stay, Nonakas expensive camera went missing from their room. When the couple approached the hotel manager, they were referred to the terms and conditions form they had signed as they checked in and one of the terms and conditions read that the hotel will take utmost care of the guests residing within the hotel but the hotel wont take responsibility for any loss of goods belonging to the guests within the premises of that hotel.

Analysis of case 1

The first case pitting Kathy and the organisers of the conference can be tackled by a section of contract law called offer and acceptance. The most important aspect in a contract is offering and accepting and this is what is legally referred to as the concurrence of wills (Cunningham, 1984).Offers and acceptances are not necessarily expressed in writing because they can be oral or implied. An implied contract is a contract that has not been expressed using words and the best example is that of a patient who goes to a doctor and fails to pay. The patient has breached a contract though it has not been written anywhere because the existence of an agreement between the parties is expressed clearly. There is an indication by the person making the offer of the that they are willing to be bound by certain terms which are usually accompanied by an assent to the offer by the person accepting and this means that the offer indicates the intention of the person giving the offer to be bound by terms that have been set out without any further negotiation (Bush, 2002). It is distinguished from an invitation to treat because it involves further negotiations that entail formation of a contract.

An offer is liable to the person who accepts it before it is withdrawn and it includes persons who have not been ascertained but an offer is not effective if it has not been communicated by the person offering or a third party representing the person offering. An acceptance of the offer creates a binding contract and acceptance always corresponds with the offer unequivocally. The second element of a contract is called the consideration and any promise can only be enforced by a law if it is supported by a consideration. A consideration can range from monetary promises or even promises to do or not to do something (Estelle, 2000). In this context, consideration means that a promise is given in return for a promise received and this leads to something called contractual capacity which refers to the ability of a party to enter into a contract that is legally binding, meaning that the person giving the offer is reasonable enough to make engage in a contract. In the case pitting Kathy and the organisers of the conference, there existed a contract though the contract was not written. The organisers had contracted Kathy to fly to their university to give a speech on a legal subject and one of the terms stipulated in the contract is that Kathy would be given a return ticket to her home city after the conference. However, she would cater for her own travel costs from the airport to the university. The organisers kept their word and gave Kathy a return ticket but the contract that the two parties enter into is altered by the offers that Mike and Laura make during the luncheon. The initial contract had stipulated that Kathy would make her own travel arrangements from the airport and to the airport after the conference but Mike and Laura offer to give her a ride to the airport. This offer cancels the conditions laid out in the initial contract because the two have committed themselves to take Kathy to the airport.

However, the two do not turn up on the appointed day to keep their promise and this makes Kathy to incur losses because she waits for the two for a long time until she decides to get her own means of travel to the airport. Failure by the two to turn up also makes her to miss her flight meaning that the ticket that the organisers had given her was rendered useless because of non performance of Mike and Laura. This means that Kathy had to use her money to get another ticket to fly to her home city. Failure by Mike and Laura to turn up to honour their promise is a breach of contract because they had bound themselves, though not in writing. They had assured Kathy that they would take her to the airport and this made Kathy to shelf her personal travel arrangement. Had mike and Laura turned up to take Laura to the airport, she would not have missed her flight and the return ticket that the organisers had given her would not have been rendered useless. On the other hand, had Mike and Laura not committed themselves to take Kathy to the airport, Kathy would have made her own travel arrangements and would have arrived at the airport early enough to catch her flight and even if she missed her flight in the absence of the promise made by the two, she would have had herself to blame.

The question that arises is whether Mike and Laura are legally liable and whether they are supposed to compensate Kathy for the losses she accrued and the inconveniences she got due to non performance of the two. The fact that Mike and Laura sent an apology letter confirms that the two were aware that their non performance had failed Kathy and they also knew that they had breached a contact and this means that the apology letter is legal evidence that Kathy can use against the two. The promise to take Kathy to the airport is an unwritten contract which is on the other and legally binding because the offer was made and accepted, then reneged upon. Mike and Laura may argue that they had offered to assist Kathy but failed to assist because of unforeseen circumstances but the problem is that they never informed her on time so that she could make alternative arrangements. A promise remains a valid contract unless the offering party communicates otherwise and had Mike and Laura communicated to Kathy that they were not in a position to honour the contract, they would have avoided the inconveniences that made her to miss her flight. My advice to Cathy is that she should use the apology letter against Mike and Laura to claim compensation for the damages and losses incurred due to non performance of the two. Most importantly, the two should be made to reimburse the money she spent on her second flight ticket after she missed her flight because mike and Laura failed to honour the promise.

Analysis of case 2

The second case involving Nonaka and Namiko is a bit complex because it involves two contradictory clauses of the contract law. The terms and conditions signed by the couple represents a contact between the hotel and the couple regarding their stay and signing the terms and conditions implies that the couple had agreed to be bound by the laid out conditions. One of the conditions that later came to haunt the couple is that the hotel will take utmost care of all the guests in the hotel but will not be held liable for the dissapearance or damage to the property belonging to the guests. This condition is contradictory because if something disappears, it means that the hotel management had not exercised the duty of care. The couple may have signed the contract expressed by the terms and conditions blindly because they were tired and secondly, they did not understand English fully but this is not an excuse because the couple did not inform the management in the first case that they did not understand English. Had they informed the management that they don’t understand English, the management would have cared top explained the contents of the contract to the couple. This does not however exonerate the management of the hotel from blame because the contract between them and the couple stipulates that the managements owes the couple a duty of care (Duncan, 2000). There is no way you can care for guests and not care for their belongings.

The terms and conditions may state that the hotel; is not liable for the disappearance of items but this condition is nullified by the duty of care expressed elsewhere in the same condition which implies that disappearance can only occur if the duty of care is neglected. The fact that an expensive camera belonging to the guests disappeared within the hotel premises means that the hotel had failed in providing care to the guests. The hotel may not be liable for the disappearance of the camera as per the terms and conditions but the hotel stands to be blamed for failing to provide care to their guests and their properly which led to the disappearance of the expensive gadget. Though the couple had got into the contract blindly, there are some loopholes in the contract that still favour their case against the hotel management. To start with, the couple according to the contract law are not recognised as reasonable parties to enter into a contract because of their tired state of mind and their inability to understand the language of the contract, but since the terms and conditions covering the issue at hand has two contradictory clauses, they can take advantage of this contradiction to claim compensation from the hotel management.

The hotel has offered to provide care to all its guests and there is no way you can delineate guests from their property which means that duty of care stipulated inn the contract extends to their property and the fact that an expensive camera disappeared from the hotel premises means that the hotel has failed to honour the contract between it and the couple. The hotel may not be responsible for the disappearance of the camera but is liable for the disappearance of the camera because it failed to exercise the duty of care stipulated in the contract between the hotel and the clients. My advice to the couple is that there is a legal loophole in the terms and conditions concerning the disappearance of their camera because this condition is self contradictory which means that the hotel management cannot escape liability. If the couple sues the hotel for the disappearance of the camera, the hotel may win because the terms and condition says that the hotel is not responsible for the disappearance of property but if the couple sues the hotel for not humouring the duty of care, stipulated in the contract, the couple is likely to get compensated for the lost gadget. Therefore, I would advise them to file a suit against the hotel for neglecting the duty of care stipulated in the contract.

References

Bush, C. (1995). Uniform business law: with business forms and illustrative cases. Chicago: The H. M. Rowe.

Cunningham, R.A. (1984). The Law of Property.Sydney: Heinemann.

Duncan, B. (2000). Consumer protection laws. London: Chandler House.

Estelle, M. (2000). Contract Law. Oxford: OUP.

Teddy Supplies sexual harassment policy that Pollard signed which outlines the terms of the Company towards issues of sexual harassment is very categorical in stating the procedures to follow and conditions when filing a sexual harassment claim. In this section we shall briefly review the circumstances of the case against the sexual harassment laws that governs the workplaces of all the organizations in the United States. The sexual harassment laws are governed by the Civil Rights Act, 1964; based on this Act the employer is given the mandate to put in place prevention measures that would discourage sexual harassment actions in the workplace. Towards this end an employer is expected to ensure the following two issues have been addressed in the work place; one, to take proactive actions that prevent sexual harassment in workplace before it occurs (Larson, 2003). Secondly, to ensure that employees are conversant with the organizational sexual harassment policy that must be enforced by the employer (Larson, 2003).

Based on the case study it would appear that Teddy has failed in both these requirements which would potentially make them more liable; this is because the circumstances of the case indicate an existence of a culture of sexual harassment that has been going on for years at the Company’s workplace. The fact that sexual harassment continued to take place for that long indicates that the sexual harassment policy for Teddy was both ineffective and certainly not preventive. But there are other issues to consider in this case; the Teddy’s sexual harassment policy states that a complaint must be filed within three months failure to which the complaint will have been assumed to have been waived by the complainant. From the circumstances of the case, it is clear that Pollard took more than three months to file the sexual harassment complaint.

But this condition does not appear anywhere in the Civil Rights Acts which would mean that this conditions will be inadmissible in a court of law during the case hearing even if it is is pointed out. But on the other hand, there is one issue to consider in this case scenario which Teddy can use as their defense; this is because Pollard did not fully make use of the available channels to file a sexual harassment claim. This is because the law expects that exhaustive and complete efforts must have been undertaken by the employee filing a sexual harassment complaint which Pollard never did (Larson, 2003). But at the same time it is clear that Teddy never “took reasonable measures to prevent and correct any sexual harassment behavior” (Larson, 2003). Thus, my assessment is that Teddy will lose this case despite the mitigating circumstances.

• The Civil Rights Act recognizes sexual harassment cases to be into forms; one, is hostile work environment and two, quid pro quo (Larson, 2003). Quid Pro Quo is when sexual harassment is directed towards an employee in such a way that continued job benefits are pegged on the employee continued cooperation in providing sexual favors (Larson, 2003). Hostile work environment on the other hand is where sexual harassment incidences occur in workplaces in a way that does not involve exchange of favors; in this case it is more subtle and may occur in many forms but is characteristically seen to occur in repetitive patterns (Larson, 2003). The circumstances of the case indicate that Pollard sexual harassment was of the latter category.
• Hostetler v. Quality Dining, Inc., 218 F.3d 789, 810-11(7th Cir.) (Vlex.com, 2009). This case involved a female employee, Hostetler who is the plaintiff and the defendant Quality Dining Inc. The fact of this case are that at one time a fellow male employee named Indiana physically attacked her where he sexually harassed her, upon complaining to the supervisor she was transferred at another branch of the Company where the sexual harassment continued to take place. Later she filed a case of sexual discriminations against her employer for being made to work under hostile work environment. At ruling the judges determined that the employer had a case to answer based on the fact that “her new location (where she was transferred) was inconvenient and arguably left her worse off; remedial measures that make the victim worse off are necessarily ineffective” (Vlex.com, 2009). The similarity of this case with our case study are striking given that Pollard was transferred to another department, though not because of sexual harassment reasons, but an action which resulted in heightened sexual discriminations on her by her male colleagues. The precedent set by the ruling of this case will thus strengthen the case of Pollard against the Teddy’s.
• Disparate treatment is described under Civil Rights Act as “intentional discriminations” based on several factors among which include gender. In determining whether disparate treatment has occurred a court of law will rely on whether the victim was treated differently from other members of a certain group. This means that based on this definition Pollard was indeed disparately treated since the sexual harassment instigated against her were directed towards her by virtue of her being the only female working on that department.
• Yes the presence of sexual harassment policy is a defense to Teddy because it implies that it has taken preventive efforts as required by law, but unfortunately not to an extent of enforcing it. Two cases are pertinent in this case; Farley v. American Cast Iron Pipe Co., 74 and Stuart v. GMC, 217 F.3d 621, 633 (Dotcr.com, 2009).
  • The 90 days window period for filing a sexual harassment policy should be abolished because it will not be upheld in a court of law in any case; besides it can be interpreted to be inconsistent with the articles of the Civil Rights Act which does not make it conditional to have a window period.
  • The policy should make it mandatory that all form of sexual harassment complaints be officially written down so as to avoid cases where victims’ claims that they had made oral complaints to the supervisors as is the case in this case study.
  • All sexual harassment complaints to be directed to a special enacted committee directly using a specified procedure, this way the process of reporting sexual harassment cases is streamlined and there is no possibility of defeating or obstructing justice. As at is, the supervisor might opt not to forward the written report when it is handed to him.

If these recommendations have been integrated before, Pollard would not currently be claiming that she has severally filed a verbal sexual harassment complaint to the supervisor and the whole system would have been able to detect sexual harassment incidences well before they had become rampant. In the case of Stuart v. GMC, 217 F.3d 621, the court waived responsibility against the employer because enough evidence was shown that demonstrated that employer enforced the sexual harassment cases and investigated the cases promptly.

The fact that her replacement was a male further confirms to the court that she was more likely sexually discriminated; nevertheless, even if her replacement was a female the gravity of the harassment would not really be lessened.

Ideally, the damages that Pollard would hope the court to award her would be back pay damages because of her income loss during the time that she was fired and compensatory damages for her mental suffering.

References

Dotcr.com. (2009). Preventing Sexual Harassment: A Fact Sheet for Employees. Web.

Larson, A. (2003). Sexual harassment Law. Web.

Vlex.com (2009). Ann M. Hostetler, Plaintiff-Appellant, v. Quality Dining, Inc., Defendant-Appellee., 218 F.3d 798 (7th Cir. 2000). Web.

Introduction

In practice, consumer protection laws are designed to protect both the consumer and the business against fraud and unfair competition. However, the proposed one-way contract favors the business against contractual liabilities leaving out the customer. The purpose of this article is to investigate the regime of one-way contracts between the customer and the business, which binds the consumers to the business and not the other way (Ben-Shahar, 2012). The study has revealed that existing contracts are disguised as one and not two-way contracts (Harris Jr, 2006). Redesigning the consumer protection laws for better contracts is possible.

Summary

Ben-Shahar (2010) provides a detailed review of one-way contracts that are enforceable against the customer and not the business. Ben-Shahar (2010) notes that consumer-to business contracts are characteristically designed with bad pro-business and difficult to enforce and expensive pro-consumer terms. The existing gaps eventually end up as deterrence to criminal law. Consumer Protection Acts (CPA) do not guarantee direct compensation to consumers but guarantee a significant level of protection through private attorneys.

CPAs have proved to be effective as well as being the source of diverse and frivolous suits. Perceptions of one-way contracts that are enforceable by one party emerge. Ben-Shahar (2010) argues that consumer-oriented contract remedies do not apply in this case, but a business can resort to legal remedies if the customer fails to honor the contract. Consumer-oriented contracts allow both parties to rewrite and redesign the laws and terms of engagement between them.

Literature review

Ben-Shahar (2010) accurately depicts a situation where businesses are not subject to legal liabilities when a breach of contract between the customer and the business occurs. A one-way contract enforceable only against the consumers defines the paradigm which Ben-Shahar (2010) proposes to be a better way of protecting the customers. According to Ben-Shahar and Logue (2012), the traditional reasons for establishing a binding contract between the customer and the business are to protect both parties.

However, Wang (2008) notes that disputes arise if businesses craft contracts that fail to account for the rights because they lack legal backing. According to Wright (2012), contract laws are designed to protect consumers based on a fair relationship between both contracting both parties. Wright (2012) provides the basic definition of fair treatment from the perspective of the areas of marketing such as product policy, pricing, marketing communication, distribution, and privacy issues.

Wright (2012) argues that traditional contracts are designed to ensure consumer protection due to product flaws such as hidden defects, excessive pricing, consumer irrationality, standardization, safety issues, and negative externalities. This is a widely accepted and applied approach to consumer protection based on the general principles of consumer protections established under the law in many countries including the USA and China (Harris Jr, 2006).

However, Ben-Shahar and Logue (2012) dismiss the veracity argument on the consumer protection law by asserting that laws fail because of inherent weaknesses that enable businesses to exploit customers and evade liability. However, the discourse fails to show how emphasis can be placed on consumer-oriented contract remedies, which in practice can be achieved by invoking criminal or tort laws to protect the consumer. Here, the critical aspect is to distinctly define the points of demarcation between the customer and the business to enforce a state of fairness.

References

Ben-Shahar, O., & Logue, K. D. (2012). Outsourcing Regulation: How Insurance Reduces Moral Hazard. Michigan Law Review, 1(1), 197-248.

Ben-Shahar, O. (2010). One-Way Contracts: Consumer Protection without Law. European Review of Contract Law, 6(3), 221-249.

Harris Jr, H. S. (2006). Making of an Antitrust Law: The Pending Anti-Monopoly Law of the People’s Republic of China, The. Chi. J. Int’l L., 7 (1), 169.

Wang, X. (2008). Highlights of China’s new anti-monopoly law. Antitrust Law Journal, 75(1), 133-150.

Wright, J. D. (2012). The Antitrust/Consumer Protection Paradox: Two Policies at War with Each Other. Yale Law Journal, Forthcoming, 1(1), 12-45.

Introduction

The protection of consumer welfare is a critical government initiative. There are notable economic challenges associated with low income families. Therefore, policymakers must consider the implementation of workable economic strategies. This is vital in creating price and demand equilibriums (Arnold 2010, pp. 10).

In a typical economy, various consumers depict diverse preferences for various goods. It is vital to comprehend how policies have implications on the prevalent market trends. It is necessary to analyze the consumer behavior and preferences within specific economies.

This paper presents a practical approach to policy implication on the purchasing trend within the market. The paper applies a hypothetical approach, with the analysis of the preference trend of goods X and Z.

The Household Preferences over the Two Goods with Similar Policy Implications on the Household Items In Terms Of the Utility and Level of Consumption of the Two Goods

Convex indifference curves are extensively used in the analysis of economic policies. In this scenario, the assumptions on the hypothetical goods are indicated. Good X is measured along the horizontal axis. On the other hand, good Z is measured along the vertical axis of the convex curve.

The two policy options can be analyzed from the convex curve. The concept of “diminishing marginal utility” dictates the nature of the convex curve to be applied in the analysis (Fakhrul Islam & Jabbar 2010, pp. 26).

In establishing the appropriate household preference for the two goods, the rule of “diminishing marginal utility” may be applicable. The first policy advocates for the provision of the household with a voucher.

The voucher is exchangeable for a specific quantity of the good X. Observably, the second proposition advocates for the offering a supplement based on the income. This is to be sufficiently applied in buying the good of similar amount.

A normal household consumption preference is applicable for the realization of equal policy effect (Mceachern 2012, pp. 34). This relates to the utility and level of the consumption of the two goods. Given the two goods, X and Z, the household is able to define its preference.

Consequently, the household can arrange these preferences in an order. In this context, the preferences remain complete. The policies provide an equal stance and significance. The graph below indicates the action of normal household preference necessary for the equal action of both policies.

(From Gilbert 2004)

The Household Preferences over the Two Goods with Potentially Different Policy Implications on the Household Items In Terms Of the Utility and Level of Consumption of the Two Goods

To achieve this aim, the transitivity preference of the household is applicable. An important assumption can be drawn from this association. The disparity indicates that there is more preference for a particular good (Schotter 2009, PP. 45).

Therefore, it can be deduced that if X is preferred to Z, it is true that the household has a spatial preference. The transitivity preference condition is eminent in this association. The disparities on the impact of these two policies emanates from the differences in preference for the two goods, X and Z. When the household depicts a higher level of preference for a particular good, the other is likely to be diminished.

Alternatively, the less preferred good may be supplied in fewer quantities in the market. The law of “diminishing marginal utility” may be applicable in explaining the variances in customer preferences (Feldman & Serrano 2006, pp. 46).

Consequently, these have a potential impact on policy formulation. Policy makers recognize the importance of engaging public participation processes. There is a potential indication from a positive policy on the utility or consumption level of a specific good.

The basic implication is that most consumers prefer to utilize goods that have most preferred qualities. It is assumed that the household may be satisfied with any policy advocating for a particular good or product. The graph below indicates the state of preference in which the consumers are better off.

(From Gilbert 2004)

Explanation of the Possibility of Occurrence of a Substitute Effect Associated With Either of the Above Policies

Most markets are likely to experience a substitute effect. The impacts of substitute effects are always noticed in the demand of various goods. The effects of any transformation within the price encourage the clients to choose a particular good. These clients are more likely to purchase a specific good. This trend may be due to its reduction in price.

A consequent rise or increase in the price of goods is likely to cause a shift in the pattern of purchase (Mceachern 2009, pp. 59). There is bound to be an occurrence of a substitute effect within any market.

Therefore, within any typical economy, the consumers are more likely to buy goods that retail at very low prices. The interaction of substitution and income effect may also play an important role in the development of substitution. The income of the household may shift. This is due to eminent economic factors within the entire market.

Basically, substitution effect refers to the transformation on the consumption trend. Substitution effect may entail the alteration in the utilization patterns. This occurs as a result of a change notable within relative prices of goods within the market. This trend can be noticed in the action of various customers or clients.

This is always as a result of the eminent trends within the general market. There is an evident possibility of occurrence of a substitute for both of the products under context (Mceachern 2012, pp. 78). This can be due to several factors.

There are several factors that might lead to the emergence of this pattern. In the present era, various elements play a significant role in consumer behavior and preference. Therefore, there is a high possibility of occurrence of a substitute effect.

An Explanation Whether the Policies May Succeed At Both of the Goals

Ideally, it is notable that these two policies are not likely to succeed at both of these goals. The competing demand and supply are important factors within the general market. Ideally, there are many elements that determine the market equilibrium (Schotter 2009, PP. 71).

It is imperative to note that the diverse factors associated with market patterns are critical. The variances observed in the household preference are critical. Particularly, this is in the determination of the success of the two policies. Market conditions within any economy are susceptible to both external and internal factors. These factors interact to alleviate the possibility of existence of a perfect market

. Therefore, there is bound to be a state of disparity in the action of these two policies. The customer preferences are more likely to rule the market demand and supply trends. Apart from these, there are other external factors that may lead to the development of notable disparities. These include weather conditions, tastes, and prevailing fashion within a particular economy.

Income is an important factor in the determination of prevailing market trends. Generally, high or increased rate of income raises the demand schedule. Consequently, these have a positive impact on the level of supply. The equilibrium point denotes the critical point within any market.

However, even in equilibrium states, customers have the capacity to identify themselves with trendy and valuable products. There are other approaches that might be applied. Introduction of new products with lower market prices is possible. This approach is likely to shift the focus of demand within the market (Mceachern 2012, pp. 112).

Apart from this, there is a potential shift in the consumer interests within the general market. The introduction of the third good is likely to help in the shift in the basic centre of interest.

The preference includes one of the vital factors that dictate the prevailing market conditions. The graph below indicates the likelihood of occurrence of a substitute effect between the two goods. Consequently, this has significant impact on the policies.

(From Gilbert 2004)

Calculation of the Firm’s Cost Minimizing Input Combination and the Corresponding Level of Minimum Cost

It is supposed that the company is presently experiencing the conditions of a short-run. The firm also has a fixed level of K at 25 units. Therefore, the calculation of the firm’s minimizing input combination and the corresponding level of minimum cost is as follows:

Production function = Q = K0.5L0.5

Q = K0.5L0.5 = (8 X 0.5) X (4 X 0.5) = 2 X 4 = 8

Cost function

TC = FC + VC

FC = Q

FC = K0.5 X L0.5

FC = 8 x 0.5 X 4 x 0.5 = 8

TC – 8 + 24 = 32

Cost minimization

MC = MR (where MC represent marginal cost and MR represent marginal revenue)

MC = change in TC/ change in Q

TC = C X Q

25X4X8 = C X Q

Q = 800 – C

Q = (800 – C) C

TC = 800C – C^2

MR = MC

800 – C^2 = 32

800 – 32 = 2C

768/2 = 2C/2

C = 384 (minimum cost)

Q = 384 / 8 = 48 units (minimum units)

Calculation of the Input Combination the Firm Will Use In The Long Run and the Corresponding Level of Minimum Cost

Production function = Q = K0.5L0.5

Maximum units = 100

Labour cost =$ 8

Capital cost = $ 4

Total cost = 8×4 = 32 x 100 units = $3200

Total produce under the cost function

Q = K0.5 X L0.5 = 8

Minimum cost per unit = 3200/8 =$400

An Explanation Whether the Firm Can Experience Economies of Scale In The Long Run

The firm may not experience superior economies of scale in the long run. Basically, this is due to the observable differences within the unit cost variations (Schotter 2009, PP. 115). Important lessons can be drawn from the various outcomes of the calculations.

As shown, the minimum cost in the short run is $384. On the other hand, it is notable that the long run cost is $400. The obvious variances in these costs depict important lessons. Generally, there is an inferior match between the expenditure and the income.

List of References

Arnold, A 2010, Economics, South-Western Cengage Learning, Australia.

Fakhrul Islam, M & Jabbar, A 2010, Consumer preferences and demand for livestock products in urban Bangladesh, International Livestock Research Institute, Nairobi, Kenya.

Feldman, M & Serrano, R 2006, Welfare economics and social choice theory, Springer, New York, NY.

Gilbert, S, Microeconomic Theory. Web.

Mceachern, A 2009, Microeconomics: a contemporary introduction, Thomson/South-Western, Mason, OH.

Mceachern, A 2012, Economics: a contemporary introduction, South-Western Cengage Learning, Mason, OH.

Schotter, A 2009, Microeconomics: a modern approach, South-Western Cengage Learning, Mason, OH.

Consumer protection has always been a special domain for numerous agencies and non-profit organisations. These organisations and agencies provide consumers with legal and information support, as they are building their relationships with sellers and suppliers. However, any violations of consumer laws and rights can easily result in criminal charges. This is why a police department can and should be actively involved in consumer protection.

The police department often receives consumer complaints, and many of these complaints are valid and demand thorough criminal investigation.

It would be fair to say that the police department is in a better position to investigate such cases than consumer protection agencies and non-profit organisations providing legal support. At times, the boundary between administrative and criminal law violations is extremely blurred, and only a law enforcement professional can help determine the scope of the issue, its gravity, consequences and potential solutions.

One of the most common consumer protection cases involving police is that of identity theft. At times, consumers make purchases from unreliable suppliers, who use their credit card information for fraudulent purposes. In this situation, filing a complaint to the local police department is the first step to resolving this criminal issue. The police will have to examine the customer’s credit card report and identify fraudulent inaccuracies and the criminal’s identity (herself).

Very often, consumers receive fraudulent messages about awards and lottery prizes, especially by phone. At the same time, they are asked to make a purchase or donation, in order to get their prize. This is a sophisticated scheme of fraud, which crosses the boundary of administrative and consumer protection law. Apparently, only the police department can help protect the rights of the consumers, who have been defrauded of their possessions in this way.

The police department may also get involved in cases, when trade solicitations become a huge pressure for the potential customer. A reputable business owner will never insist that the customer makes an instant purchase decision. In case of threats, the local police department will react immediately, because consumer rights are violated, and the consumer’s life and health may be put under risk. Certainly, if consumer rights violations lead to injuries or death, they become a matter of the local police’s concern.

For instance, some police departments assume a responsibility for checking and monitoring non-licensed chimney contractors. Overall, any consumer rights violations, trade violations and deceptive practices, false pricing and advertising, as well as consumer frauds that contain the signs of crime are to be investigated by the local police department. This is also the case of consumer extortion.

Consumer extortion has become quite common, and thousands of customers suffer from the loss of their property as a result of deceptive business practices.

More often than not, it is the local police department that receives extortion complaints from consumers. The local police department can get involved in an extortion case, when it has the features of a crime, including felony. Recently, many moving companies have fallen into an extortion disgrace, and some business owners were even arrested for extortion and unauthorised used of the movable.

Unfortunately, many cases of consumer rights violations end up as a civil matter; for this reason, business owners are not afraid of extorting their customers for a certain sum of money. Simultaneously, for an attorney and police professionals who know their job, detecting the signs of crime in consumer extortion is not difficult, and the police department can interpret such actions as felony.

The provision of consumer protection is influenced by specific objectives being addressed. The prior approval on one extreme end requires a product and traders to be authorized before they enter the market and in, particularly as a matter of concern consumer products, their type of approach is mostly reserved for sectors that are hazardous like pharmaceuticals, while for traders it is reserved for professionals whose activities can pose a considerable degree of harm when undertaken poorly. At the same time, an industry can be allowed to regulate practice and self-regulation will be used in which industries are trusted to put their own houses in order. The term standard is used in different contexts as will become. (Hadfield, et al. 1998)

Within the law, the law warranties have a role in a consumer’s purchase decisions (Wilkes and Wilcox, 1981). A product with a limited warranty is less desirable than the one with superior warranties that are associated with even greater quality and therefore less risk (Bearden and ship 1982; Perry and Perry 1976). Products need not be complex and expensive for warranties to be understood. Manufacturers are likely to change either full or limited warranties because in the provision there was confusion and this includes the difficulty to interpret the prospect of burden and cost. The consumer often believes that a warranty serves the purpose of reducing post-purchase risks just in case the product fails to function.

As regards consumer protection, consumers face serious threats to their health and safety. The role plays by the law in the control of the supply of products that are harmful to the body remains only to few people who can dispute. It is not clear to what basis exactly this law should provide protection. Consumers are unaware the threats such products pose due to lack of enough information and therefore these products get to harmful to third parties. As a result this safety regulation is justified from economic point of view. However beyond this type of analysis I can argue that even though consumers might have been informed about the risks the products pose to them, the risk of the products affecting third parties were non-existent.

Legal techniques in various forms exist and are open to policy makers although all of them have inherent advantages and disadvantages (Peter Cartwright, 1999).

As concerns Business Law, Consumer protection laws are made mainly to protect consumers and are drawn on legal forms, criminal laws also included, tort and contract for their objectives to be attained. As a primary concern other numerous provisions like prosecutions of fraud and protecting property that facilitates litigation also protects the consumer. The due effect of this is that the boundaries of consumer protection law are not easy to draw. This therefore provides evidence that the level of education needed to read and understand is way beyond of what 50% of the population of America has attained, the 12.7 the median years of education completed and adults 25 years or older and way beyond. This evidence should indicate in essence that warranties need continued improvement to be more readable and the consumers be given the right to know to what extent the warranty is and precisely what claims may be made. This case falls under consumer protection.

Works cited

Bearden, William and Terence Shimp” The use of extrinsic cues to facilitate product adoption,” The journal of marketing research, 29(1982): 229-239.

Hadfield et al. Information based principles for rethinking consumer protection policy. 21 JCP 131 at 136 (1998).

Perry, Michael and Arnon Perry “Service Contract Compared to warranty as means to reduce consumers’ risk” Journal of Retailing, 52 (2): 33-40.

Peter Cartwright “consumer protection and the criminal law” Consumer protection (1999) Page 1.

Wilkes, Robert E. and James B. Wilcox “Journal consumer perceptions of product warranties and their implications retail strategy” Journal for Research, 4 (1976): 35-42.

Wilkes, Robert E. and James B. Wilcox “Limited versus full warranties: The retail perspective,” The journal of Retailing, 57 (1981): 65-77.

Introduction

This paper discusses a product recall that involved Halco LED Bulbs. When the product was being manufactured and sold to clients in different international markets, it was mainly used for displays in retail outlets. The PAR30 bulbs that are also in this category measure about 4.75 inches long and 3.75 inches wide while the PAR38 bulbs measure approximately 4.75 inches long and 4.75 inches wide (CPSC, n.d). Several LED bulb models, such as the PAR30/14WW/NFL/LED, PAR30/14WW/FL/LED, were also included in this recall. Essentially, a product recall is affected if a product is found to cause more harm to users about benefits.

The recall date of the ProLED bulbs was July 15, 2014, with the recall number: 14-123. The main reason behind this recall is that when in operation, the LED bulbs may overheat. Since they are mostly hanging above consumers, they may fall onto them. The result of such a fall may be either a serious burn or injury. Hence, the ability of these bulbs to separate from the sockets poses a threat to t consumers and warrants their recall.

Brown, Nicol, and Ferguson (2005) argue that the LED bulbs are manufactured in such a manner that during operation, they neither generate heat nor release UV and IR radiations into the environment. Considering the sophistication of the technology involved in manufacturing the products, the safety of consumers relies on the safety procedures and precautions set by the manufacturer. In case the product had not been recalled by the manufacturer and it causes serious harm to the consumer, the manufacturer (Halco Lighting Technologies) would be fully liable for negligence.

Duty of care

In tort law, the duty of care would involve the legal obligations that would be imposed on the Halco Company to ensure that it highlights a reasonable care precaution to the consumers of its product in ensuring that they are not harmed or injured (Howells & Weatherill, 2005; Seaquist, 2012). Recalling this product by the company emphasizes the company’s consideration of the safety of its clients and that the release of these products into the market was not by negligence.

Standard of care

In this case, the standard of care determines the level of prudence and caution that the Halco Company has taken in producing its products professionally. The level of negligence in allowing the use of the LED bulbs by the consumers is minimal and the risks that have been reported by the consumers of the goods are less (Seaquist, 2012). The company had already eliminated all the environmental hazards that the bulbs might have posed to consumers with the only hazards being reported to be on overheating of the bulbs. This is controllable through the use of appropriate power watts. Hence, the company had observed a standard of care in its product production process (Kim, Bae, Kim, Kim & Song, 2012).

Breach of the duty of care

The business establishment has a duty of care to its consumers and is expected not to breach it in case of a serious health risk report posed by its products. In making a recall on its LED bulbs, the company has taken responsibility for its products and, hence, has not breached a duty of care.

Actual Causation

This involves a relationship between conduct and result (Seaquist, 2012). The firm’s quick reaction to this issue in recalling its product indicates its dedication to serving its clients efficiently by ensuring that it responds to any result or complaint that may result from the use of its goods (Howells & Weatherill, 2005).

Proximate causation

The few reports that the firm has received contain no legally recognized injuries from the company’s goods (Seaquist, 2012). Though several causes of falling LED bulbs have been reported, the company’s products have not caused any physical injury to its consumers.

Actual Injury

No actual prejudice of the reported cases has passed without the company’s response (Seaquist, 2012). In responding swiftly to the reports from its clients and recalling its products, the company had demonstrated its dedication and willingness to ensure the safety of its clients.

Defenses to negligence

As per this case, it would be expected that the clients of Halco’s LED Bulbs complain of health risks and injury resulting from the use of the LED bulbs and cite negligence for the harm (Seaquist, 2012). However, in this case, the manufacturer had stepped in before any serious damage is experienced by the consumer hence ensuring a quick consumer protection strategy (CPSC, n.d).

Conclusion

Considering the recall of the LED bulbs by the Halco firm, the consumers should be able to understand the risks associated with the continued use of these products. As per the consumer protection guidelines, the company is no longer responsible for any injuries that may result from using the LED bulbs after this recall. According to CPSC (n.d), consumers should immediately stop using purchasing and using products that have been recalled from the market.

References

Brown, D., Nicol, D., & Ferguson, I. (2005). Investigation of the spectral properties of LED-based PAR30 bulbs for general illumination. Optical Engineering, 44(11), 111-123.

Howells, G. G., & Weatherill, S. (2005). Consumer protection law (2nd Ed.). England, United Kingdom: Ashgate.

Kim, Y., Bae, H., Kim, G., Kim, H., & Song, S. (2012). Analysis of the Electrical and Optical Properties in Omni directional LED Bulbs by Energy Star. Journal of the Korean Institute of Electrical and Electronic Material Engineers, 25(9), 750-754.

Seaquist, G. (2012). Business law for managers. San Diego, CA. Bridgepoint Education, Inc.

U.S. Consumer Product Safety Commission (CPSC). (n.d.). Halco Recalls LED Bulbs Due to Risk of Injury and Burn Hazards. Web.