The history of the consumer movement

1. Chapter 2
The Consumer Movement
Part 1
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2. The Consumer Movement
Outline
Introduction
Demographic and Consumption Shifts
Consumerism and the Consumer Movement Defined
Consumer Movement Worldwide
Decades of Consumer Advocacy
Conclusion of the Decades of Consumerism
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3. The Consumer Movement
Introduction
Adam Smith wrote Wealth of Nations in
1776. He said that consumers will
make choices that give them the greatest
amount of satisfaction. He was a
proponent of the invisible hand
(minimizing government intervention in
the marketplace).
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4. Rational Self Interest
 Adam Smith promoted this concept, meaning
that people will make choices that will give
them the greatest amount of satisfaction at a
particular time based on the information they
have at their disposal at the time.
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5. Rational Choice Theory
 It is the dominant theoretical paradigm in
Microeconomics.
 It assumes that individuals choose the best action
according to stable preference functions and
constraints facing them.
 Although rationality cannot be directly empirically
tested, empirical tests can be conducted on some of
the results derived from the models.
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6. HOWEVER….
 We know that not all consumption is rational!
 Give an example of an irrational consumption
decision….
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7. • Some times we
consume because of
STATUS.
• Paris now has her own
line of clothing. What
woman will purchase
these products?
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8. Conspicuous Consumption
 When a person pays an extremely high price
for a product for its prestige value leading to
a much higher demand than a simple
price/demand relationship would justify.
 Prestige: a high standing achieved through
success or influence or wealth etc
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9. Law violation!!!
 Law of Demand: if nothing else changes,
consumers will buy a greater quantity of a
product at a lower price than at a higher
price.
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10. Price increases, demand is supposed to decrease
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11. Designer bags…..do they hold more than
normal bags?
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12. Conspicuous Consumption
 A means to distinguish between the rich and
the poor.
 The haves and the have nots.
 The Jones and the folks trying to keep up
with the Jones.
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13. Two very different homes..
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14. Demographics and consumption shifts
 1776, US population 2.5 M
 Today, over 300 M on October 11th 2006
 1776……rural dwellers, freedom,
independence
 1890 40% of US population had move to
cities, less control over production of goods
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15. The Consumer Movement
Introduction
The United States was founded on the free
market system, however, by the late 19th
century there were situations (e.g., monopolies)
that led to the desire for consumer protection.
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16. A monopoly
 is defined as a persistent market situation
where there is only one provider of a
product or service, in other words a firm
that has no competitors in its industry.
Monopolies are characterized by a lack of
economic competition for the good or
service that they provide and a lack of
viable substitute goods
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17. 1880s Monopolies
 Railroads (Pacific Railway Company)
 Farmers being ―railroaded‖ into using certain lines
 Telephones (American Bell Telephone
renamed…..AT & T in 1899)
 Much like Charter today…no other options
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18. Monopolies
 Do not protect consumers
 Take choice out of consumer’s hands
 Do not have to provide good/safe/equitable
products…
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19. The Consumer Movement defined:
 Policies aimed at regulating
products, services, methods and standards of
manufacture, selling, advertising in the
interests of the buyer.
 Consumer activists demanded
safe, reasonably priced, and accurately
labeled products, along with the right to
complain and be satisfied with products.
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20. Why do we protect consumers?
 In simple terms, consumer protection seeks
to identify and address bad goods, bad
services, unfair practices for consumers
because some consumers cannot protect
themselves.
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21. Examples of at-risk consumers:
 Elderly
 Youth
 Poor
 Rich
 Who else?
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22. Protection Examples:
• You’ve got to be
kidding me….
• First it was E-Coli and
now its “Salmonella
finding prompts
peanut butter recall”
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23. When do we need protection?
 Are consumers being discriminated against
on the basis of criteria, such as wealth, class,
race or gender, unrelated to cost?
 Are consumers obtaining goods and services
that are defective in some way for which they
did not bargain?
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24. How do we protect consumers?
 Through Consumer Policies.
 Government sponsored policies.
 Through Education.
 Education is a key tool to prevent consumer
injury.
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25. Consumer Movement Background
 ―Consumer movement consists of the
organized efforts of individual citizens and
private, not-for-profit organizations to
enhance the rights and collective welfare of
consumers‖ (Herrmann & Mayer, pp. 584)
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26. Background
 ―Primary goal of the movement is to advance
efficiency and equity in the marketplace‖
(Herrmann & Mayer, pp. 584).
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27. The Movement Contains:
 People who are motivated by economic
issues and seek benefits for themselves
 Examples?
 People who are guided by moral concerns
and pursue benefits for others.
 Examples?
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28. Consumer Movement is…
 Diverse in goals, levels of commitment, &
social backgrounds of participants
 Exhibits diversity in leadership
 Demographics
 Preferred tactics and strategies
 Ideology – individual responsibility vs. protection
(liquor laws, smoking)
 Anti-government vs. pro-government
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29. Ralph Nader
• “Unsafe at Any Speed”
• detailing his claims of
resistance by car
manufacturers to the
introduction of safety
features
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30. Esther Peterson
• workers’ rights
• equal pay for equal
work
• truth in advertising
• nutrition labels and
“sell before” labels for
food products.
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31. Economic vs. Social Regulation
 ―Economic regulations‖ regulate the price,
entry, exit, & service of an industry.
 Examples:
 Gasoline
 Long distance telephone prices
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32. Economic vs. Social Regulation
 ―Social regulations‖ address health, safety,
employment fairness, environmental quality,
and other non-economic questions.
 Examples:
 Job discrimination
 Clean water/air acts
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33. In sum:
 The consumer movement consists of a broad
and loosely coordinated set of individuals and
private, not-for-profit organizations that
consciously seek to advance the welfare of
consumers.
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34. Consumer Movement World wide
 US recognized leader…
 Common link: food and drug regulation
 Labeling: multiple languages
 Legislation in one country leads to similar
laws in other countries
 Information is borderless…..
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35. Examples:
 International Consumer Protection and
Enforcement Network
 International Consumer Rights Protection
Council
 FTC Office of International Affairs
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36. Why do we need International Protection?
 BEIJING, Jan 24 (Reuters) - China promised on Wednesday to
crack down on illegal imports of foreign garbage after media
reports in London said Britain had dumped millions of tons of
waste into the country.
Britain's Sunday Mirror said Britain disposed of 1.9 million tons of
garbage in China every year, casting a "harsh light on China's
booming rubbish imports and their baleful influence" on the
environment, the China Daily reported this week.
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37. Not kidding….
• This quarter of a mile
long ship docs in
Britain with Chinese
goods and then
leaves…with UK
garbage….
US exported $60 Billion worth of garbage to China
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38. The Consumer Movement defined:
 Policies aimed at regulating products,
services, methods and standards of
manufacture, selling, advertising in the
interests of the buyer.
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39.  Consumer activists demanded
safe, reasonably priced, and accurately
labeled products, along with the right to
complain and be satisfied with products.
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40. Two Specific At Risk Groups
 Women
 Children
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41. Women’s Movement
 1837: Young teacher Susan B. Anthony
asked for equal pay for women teachers.
 The first women's rights meeting in the
United States, held at Seneca Falls, New
York, in 1848, itself followed several decades
of a quietly-emerging egalitarian spirit among
women.
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42. SUSAN B. ANTHONY
• was a prominent
American Civil
Rights leader who
played a pivotal role
in the 19th century
Women’s rights
movement to
introduce women’s
suffrage to U.S.
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43. LUCY STONE
• First woman in MA to
achieve college degree,
first woman to marry and
keep her own last name.
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44. Elizabeth Cady
• When Elizabeth Cady married
abolitionist Henry Brewster
Stanton in 1840, she'd already
observed enough about the
legal relationships between
men and women to insist that
the word obey be dropped
from the ceremony.
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45.  December 10, 1869: Wyoming territory
passed a law permitting women to vote.
 1872 Republican Party Platform made
reference to Women’s Suffrage.
 Susan B. Anthony urged women to vote
using the 14th Amendment as the foundation
for that right.
 November 1872, Anthony and others attempt
to vote and get arrested.
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46.  1893 Lucy Stone dies
 1902 Elizabeth Cady dies
 1906 Susan B. Anthony dies
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47.  Finally on August 26, 1920, the Nineteenth
Amendment to the United States Constitution
became law, and women could vote in the fall
elections, including in the Presidential
election.
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48. First woman to run for President
• 1872 Victoria Woodhull
• She became a colorful
and notorious symbol for
women's rights, free
love, and labor reforms.
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49. Children’s Movement
 The children’s rights movement is a historical and modern
movement committed to the acknowledgment, and expansion
of the rights of children around the world.
 "A child is any human being below the age of eighteen years,
unless under the law applicable to the child, majority is
attained earlier."
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50.  In the US, the children's rights movement was born in the
1800s with the Orphan Train. In the big cities, when a child's
parents died, the child frequently had to go to work to support
him or herself. Boys generally became factory or coal
workers, and girls became prostitutes or saloon girls, or else
went to work in a sweat shop. All of these jobs paid only
starvation wages.
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51. Child Coal Miners……
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52. Shoe Shiners……..
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53. Child Labor Reform and the U.S. Labor Movement
 1832 New England unions condemn child
labor.
 1836 First state child labor law
 1842 States begin limiting children’s work
days (10 hours only)
 1881 Newly formed AFL supports state
minimum age laws (14 yrs)
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54. This is who you have to blame….
 In 1852, Massachusetts required children to
attend school.
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55. 1906
 Legislature set the maximum hours of labor
for children to 55 a week and adopted a list of
dangerous occupations prohibited to children
under 16.
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56. 1938
 Federal regulation of child labor achieved in
Fair Labor Standards Act
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57.  As minors by law children do not have
autonomy or the right to make decisions on
their own for themselves. Instead their adult
caregivers, including parents, social workers,
teachers, youth workers and others, are
vested with that authority depending on the
circumstance the child is in
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58. Pre-Industrial and Industrial
Revolution Marketplace
• Dependence on one’s own
skills
• Honesty and competence of
local producer
– Handshake was as good as a
contract
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60. Pre-Industrial and Industrial Revolution Marketplace
 Last four decades of 19th century
 rapid industrialization; nationwide markets
 could no longer depend on past experience to
judge goods; no information upon which to judge
new goods entering marketplace
 corruption in business and government; corporate
schemes to eliminate competition; control prices
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61. First Era: late 1800--Early 1900s
• 1898 First National
Consumer’s League
formed (NCL).
• Focused mostly on
worker conditions.
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62. First Era: 1800 Early 1900s
 Reformers (middle to upper class)
 Formed the first Consumer’s League in NYC in
1891
 Prepared a ―white list‖ of shops that paid fair
wages, had reasonable hours, and sanitary
conditions.
 Focused on local social problems and political
corruption.
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63. Would you trust this guy?
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64. We do…..he’s John Pemberton
 Invented Coca-Cola as a headache cure.
 Derived from Peruvian coco leaves and
Africa cola nuts.
 1888-1906 Coca-Cola did contain cocaine (9
milligrams)
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65. Muckrackers
 American journalists, who attempted to expose the abuses of
business and the corruption in politics. The term derives from
the word muckrake used by President Theodore Roosevelt in
a speech in 1906, in which he agreed with many of the
charges of the muckrakers but asserted that some of their
methods were sensational and irresponsible.
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66. Examples:
 Mcclure’s Magazine
 Standard Oil: bribery, fraud, violence
 Dr. Harvey Wiley-U.S. Dept of Ag
 Food preservation.
 ―Poison Squad‖ volunteers who were fed food adulterants to see
effect.
 chemical impurities or substances that by law do not
belong in a food, pesticide, or other substance. Some
are added intentionally to lower the manufacturing cost
of the product,
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67. More Muckrackers
 Upton Sinclair
 ―The Jungle‖ fictional expose of the working
conditions of Chicago meat packing houses.
 Nauseated readers 
 President Theodore Roosevelt
 Threw support behind Meat Inspection Act
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68. First Era: Early 1900s
Legislation
 1887 - Interstate Commerce Act
 address the issues of railroad abuse and discrimination
 1890 - Sherman Antitrust Act
 prohibit trusts (concentration of economic power in large
corporations)
 1906 - Pure Food and Drug Act; Meat Inspection Act
 Ended by: Economic hardship, World War I
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69. Second Era: 1920s-30s
 1920s: incomes rose; advertising, new
products; purchasing unfamiliar consumer
durables and foods
 Your Money’s Worth (Chase & Schlink, 1927)
called for product testing.
 Consumers’ Research (CR) group formed by
Schlink to do product research
 Ended by: Great Depression
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70. Second Era: 1930s
 Consumer Organizations/Books
 1933 - 100,000,000 Guinea Pigs: Dangers in
Everyday Foods, Drugs, and Cosmetics (Kallet &
Schlink)
 Its central argument propounds that the American
population is being used as guinea pigs in a giant
experiment undertaken by the American
producers of food stuffs and patent medicines and
the like.
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71. Second Era: 1930s
 FDA activities and FDR sent message to
Congress to strengthen Food & Drug
Administration (FDA)
 1936 - American Chamber of Horrors FDA exhibit
of unsafe cosmetics and adulterated foods!
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72.  1937 - The Elixir Sulfanilamide disaster was a
mass poisoning in the United States. It
caused the deaths of more than 100 people.
Capsule form was safe, liquid was not.
 After this manufacturers had to test/prove drug
safety.
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73. Second Era—1940-1950s
• Economist John Kenneth Galbraith is known for his liberal
views. His book, The Affluent Society, called for less emphasis
on production and more on public service. He was a key
advisor to John F. Kennedy and was a friend of Esther Peterson,
who later became the first special assistant for consumer affairs
to President Johnson.
• Advertising became more pervasive with the advent of
television.
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74. Second Era: Legislation
 1934 - Federal Communications Commission
 regulates communications by radio, television,
wire, satellite and cable *Janet Jackson’s
wardrobe malfunction
 1938 - Federal Food, Drug and Cosmetic Act
 Regulates product ingredients
 Ended by: World War II
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75. Regulating drugs….
 The Bayer Company sold heroin as ―a superior cough
suppressant‖
 Merck (Germany) offered 800 different products in its
catalogue, including quinine, morphine, strychnine and
codeine
 Edward Robinson Squibb, M.D., founded a company to
supply ether and chloroform to the U.S. Navy
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76. Why include cosmetics?
 Countless beauty mavens suffered serious
health problems thanks to killer cosmetics
like Lash Lure, an aniline eyelash dye
introduced in the 1930s that caused 16 cases
of blindness and one death and Koremlu, a
depilatory cream of the same era that
contained rat poison.
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77. The Third Era: 1960s and 70s
 Preceded by the 50s when rapid increase in real income; high
levels of consumption – but consumers wanted to make
educated purchases.
 Resurgence of interest in consumer education
 American Council on Consumer Interests established to
encourage fact finding on consumer problems.
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78. Third Era: 1960s and 1970s
 Activities of Government
 President Kennedy’s Consumer Message in
1962
 Enunciated the ―Consumer Bill of Rights‖:
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79. Consumer Bill of Rights
 the right to safety,
 to be informed,
 to choose
 to be heard by the government in
decision making.
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80. The Right to Safety
 Products offered for sale should not pose undue risk of
physical harm to consumers or their families; yet in a recent
year, for example, some 33 million people in the U.S. were
reported injured—and 30,000 were killed—in product-related
accidents. Products that cause injuries include impure food,
defectively manufactured automobiles and tires, drugs that
have harmful side effects, and unsafe appliances.
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81. CPSC
 The U.S. government agency responsible for
the safety of most products is the Consumer
Product Safety Commission (CPSC). The
CPSC was established in 1972 to protect the
public from unreasonable risk of injury
caused by consumer products;
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82.  The CPSC is responsible for enforcing the Flammable Fabrics
Act (1953), which requires fabrics to meet standards of fire
resistance, as well as the Poison Prevention Packaging Act
(1970), and the Hazardous Substances Act (1960), which ban
the use of certain dangerous substances and require
warnings and safety information on the labels of others. The
CPSC does not have authority over food, drugs, or motor
vehicles.
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83. FDA
 The Food and Drug Administration (FDA) is
charged with ensuring that processed
foods, drugs, medical devices, and cosmetics
are safe and properly labeled; that foods are
wholesome; and that drugs are effective.
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84. FDA
 It has the power to seize unsafe products and
to criminally prosecute businesses that
violate safety laws and standards.
 The FDA inspects food-processing plants to
be sure that foods are made and packaged
under sanitary conditions.
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85. FDA
 The agency must approve the safety and
efficacy of all new prescription drugs before
they can be marketed. The FDA also sets
safety standards for radiation-emitting
products such as microwave ovens.
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86. The Right to Be Informed
 Consumers need sufficient information in
order to choose wisely among the competing
products and services available. The
marketplace, however, contains a great many
different and complex products, and
advertising is usually not informative enough
for consumer purposes.
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87.  The Federal Fair Packaging and Labeling Act
(1967), for example, requires that packages
be labeled truthfully with such basic facts as
quantity and ingredients.
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88.  The Federal Truth in Lending Act (1968)
requires that consumers be told in clear,
accurate, and uniform terms how much it
costs them to borrow money from a lender.
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89.  Unit-pricing laws in some states require
supermarkets to show the cost of an item per
pound, quart, or count (for paper goods), so
that shoppers can compare the cost of
different sizes of products. Many states
require the dating of perishable foods to
enable buyers to choose fresh foods.
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90.  Many consumer problems are caused by
incorrect or fraudulent information. The
Federal Trade Commission (FTC) bears the
primary responsibility for making sure that
advertising and labeling are not false or
misleading.
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91. The Right to Choose
 The structure of the American economic system is based on
the belief that, generally, competition is the best regulator of
the marketplace. According to this theory, when many
companies are selling a product, the effort of each to attract
more customers keeps prices at the lowest level that allows
businesses to cover costs and make a fair profit.
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92. The Right to Be Heard
 A consumer who has been cheated or who has bought a
product or service that does not perform properly has a right
to seek a refund, replacement of the product, or other remedy.
Sometimes, however, a buyer finds that the manufacturer or
seller will not cooperate in resolving the complaint. In recent
years laws have been passed to help dissatisfied consumers.
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93.  The Better Business Bureau, a business
association, makes information about
complaints it has received against
businesses available to interested parties.
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94.  Esther Peterson - first appointee to the post
of While House Consumer Advisor
 Later removed by Ford, reappointed by
Carter
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95. Third Era: 1960s and 1970s
 Books/ Individual’s Activities
 Rachel Carson’s The Silent Spring
(1962)
 inspired widespread public
concerns with pesticides and
pollution of the environment
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96. DDT banned
 DDT was developed as the first of the
modern insecticides early in World War II. It
was initially used with great effect to combat
malaria, typhus, and the other insect-borne
human diseases among both military and
civilian populations.
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97. Why was it banned?
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98. Third Era: Legislation
 1960 - Federal Hazardous Substances
Labeling Act
 requires that certain hazardous household
products bear cautionary labeling to alert
consumers to the potential hazards
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99. Third Era: Legislation
 1962 - Kefauver-Harris Drug Amendment
 Required drug companies register with FDA
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100. Third Era: Legislation
 1966 National Traffic and Motor Vehicle Safety Act
 allowed new standards to be set by the federal government.
 1967 - Wholesome Meat Act;
 State and federal meat inspection
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101. Third Era: Legislation
 1968 Wholesome Poultry Products Act
 Inspects and grades poultry
 1969 - Child Protection and Toy Safety Act
 Warning labels for age appropriate toys
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102. Third Era: Legislation
 1970 - Credit Card Liability Act; Poison
Prevention Packaging Act; Clean Air Act
 1972 - Consumer Product Safety
Commission established
 1974 - Fair Credit Billing Act
 1975 - Magnusson-Moss Warranty and
Federal Trade Commission Improvement Act
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103. Recent Decades – 1980s to 2000
 Continued trend toward economic and social
deregulation, market-based approaches, and emphasis on
personal responsibility
 Some new consumer protection laws primarily in response to
events and new technologies creating previously
unaddressed consumer problems
 Abolishment of the White House Office of Consumer Affairs
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104. 1980s-2000s
• 1980s saw less government intervention.
• 1990s had little emphasis on consumer
protection but environmental issues gained
support.
•Attention paid to corporate scandals
(WorldCom, Enron) and the need for
consumer protection and anti-trust
legislation.
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105. Credit CARD Act of 2009
 It is comprehensive credit card reform legislation that
aims "...to establish fair and transparent practices
relating to the extension of credit under an open end
consumer credit plan, and for other purposes.―
 Regulates Interest rate hikes
 Sets Fee caps
 Sets Age limits
 Controls Funky wording
 Prevents double cycle billing

106. Patient Protection and Affordable
Care Act (PPACA) of 2010
 The PPACA reforms certain aspects of the
private health insurance industry and public
health insurance programs, including
increasing insurance coverage of pre-existing
conditions and expanding access to
insurance to over 30 million Americans
 *being challenged in state courts as to the
constitutionality of the Act.

107. Consumer Financial Protection Bureau
(CFPB) July 21, 2011
 Elizabeth Warren was
chosen by President
Barack Obama last
year to set up the new
Consumer Financial
Protection Bureau.
 former Ohio Attorney
General Richard
Cordray will be the
director.

108. Enjoy the rest of the day 