Antitrust, I’m really happy for you. Imma let you finish, but consumer protection is having one of the best repudiations of the neoliberal era of all time.
In all the debates about whether and in what sense “Bidenomics” inaugurates a new approach to economic policy—and even for all the talk about price controls and data privacy and the challenges of AI—there has been little acknowledgment of the recent sea change in consumer protection. This oversight is surprising because many of the most impactful and popular administrative activities in the Biden Administration (including several of those that have been publicly discussed in terms of “promoting competition”) have been enacted by consumer protection agencies using consumer protection authorities.
Some efforts you may have heard of: a multi-pronged crackdown on “junk fees” across the economy, a rule that requires companies to make it at least as easy to cancel subscriptions as to sign up for them, a nascent effort to shut down misleading and harmful uses of AI. Other actions seem to have mostly caught the attention of specialists: a piecemeal elaboration of more robust data privacy and data minimization obligations (which may lead to a more comprehensive regulation), new limitations on telemarketing, efforts to reduce the impact of medical debt on creditworthiness and make its collection more difficult, a ban on a major company using facial recognition technology after overtly discriminatory practices were discovered, and other initiatives to expand antidiscrimination norms into the spaces between regulatory regimes. Indeed, consumer protection has increasingly been used to enforce workers’ and small businesses’ rights where other laws come up short, to begin to enforce norms against tracking and selling data on people’s reproductive care or religious worship and, as I will discuss in a future post, to shore up renters’ rights in a world of private equity landlords.
These and other actions amount to more than just the uptick in regulation that we can expect during (even neoliberal) Democratic administrations. As I argue in a forthcoming article, they also represent a changing of the guard to a generation of consumer protection enforcers who reject many of the basic premises of consumer protection from the neoliberal era. It is difficult to say at this point how many of their innovations will survive a future Harris or Trump Administration, but given the relative lack of political controversy around them, it seems that at least some will. They may even play an important part in whatever shape post-neoliberalism takes (if, indeed, post-neoliberalism comes to be).
Consumer Sovereignty and its Erosion
To understand what’s at stake, we have to understand what came before.
As I’ve discussed previously, the neoliberal era in consumer protection began with a bang at the Federal Trade Commission. The agency had spent much of the 1970s expanding its consumer protection practice under the influence of the Naderite consumer movement. But after the newly created business lobby launched a then-unprecedented attack on the FTC, Congressmembers — who a mere year earlier had been asking why the agency was not doing more — were literally stamping and shouting in approval of bills that limited the agency’s powers. Carter appointees initially maneuvered around these limits to preserve what they could. But when Reagan took office, he appointed James Miller, a Chicago School economist, to chair the agency and to revamp it to be more deferential to “market forces” and “consumer choice.” (Miller would go on to helm the drafting of the notorious executive order that required all executive branch agencies to subject all major rules to cost-benefit analysis.)
The result was the “consumer sovereignty framework.” One element of this framework was a semi-conscious institutional trauma response: to avoid the possibility of political backlash, the agency tended to avoid any regulatory or enforcement actions that might seem, in some amorphous way, controversial or overly interventionist. Chicago School economic theory — and then post-Chicago versions of law-and-information-economics — presented itself as the way to determine which interventions were proper and which improper in a disinterested anti-paternalistic manner. Consumer markets were to be seen as spaces in which presumptively (perfectly) rational and (perfectly) informed consumers chose between presumptively (perfectly) competitive sellers and in which any imperfections were generally corrected over time as firms jostled for consumers’ business and consumers learned which firms had their interests at heart. The FTC (or, indeed, any agency) was meant to intervene hesitantly — letting the self-correcting process play itself out as much as possible — and then mostly in order to ensure that consumers had the information necessary to perform their market disciplining function. In practice, the result was fewer consumer protection actions, focusing primarily on near-fraudulent or otherwise egregious conduct, and almost no new sector- or economy-wide regulations.
The premises of the consumer sovereignty framework experienced some erosion in the early 2000s, when the FTC began to realize that disclosure could not possibly be counted on to protect consumers from threats to their data and so began gingerly to enforce substantive norms of data security. But it was after the Global Financial Crisis — that crisis of neoliberalism — that the framework truly began to fall apart. Inspired by then-Professor Elizabeth Warren’s proposal, Congress created the Consumer Financial Protection Bureau in part to remedy the underenforcement problem that had let predatory behavior in the mortgage market run so rampant that it collapsed the global economy. The regulatory culture of the early CFPB was much more proactive than the neoliberal FTC, and it much more readily acknowledged the limitations of consumer choice documented in the behavioral economics literature. However, its staff (many of whom came from the FTC) also continued to presume that information disclosure and education should be first-step solutions and remained hesitant to make interventions justified by policy but that might result in political backlash.
The deeper change came when a generation of bureaucrats who came of age during the financial crisis began to gain influence in the Democratic party — primarily through the efforts of now-Senator Elizabeth Warren and, to a lesser degree, other progressive allies. (This is also, by the way, what happened at the Department of Education vis-a-vis student debt, but that’s a story for another day.) LPE’s own Lina Khan is, of course, among this number, but some of the path was laid out by Rohit Chopra (who now helms the CFPB) and Rebecca Slaughter before Khan arrived at the FTC. For these and other officials, a deeper rethink of regulation was necessary.
The Emerging Anti-Domination Framework
In both words and deeds, a new paradigm has emerged. In my article, I call it an “anti-domination framework” (refining what I’ve previously argued for under the rubric of “moral economy”). The anti-domination framework treats consumers as generally rational but inherently constrained on multiple dimensions. It treats markets as deeply structured by institutions, with competitive dynamics that vary with context. Samuel Levine, the Chair of the FTC’s Bureau of Consumer Protection, has repeatedly emphasized that it is time to reevaluate the longstanding assumptions that “marketplaces can essentially self-regulate and…that consumers are in the best position to avoid harm by evaluating products and service on their own.”
The goal of consumer protection, then, is not to feed rational consumers necessary information and plug them into a self-correcting system but rather to prevent businesses from using their power over multiple dimensions of social life to shape consumer markets in ways that take advantage of consumers’ constraints so as to undermine consumers’ interests. In a September 2021 memorandum to staff, Chair Khan emphasized the need to “broaden [the FTC’s] frame” by “focusing on power asymmetries” and “tackling the most significant harms across markets, including those directed at marginalized communities.” As I discuss further in the article, developing an account of this framework requires a deep reconsideration of how to model markets (roughly, inductively and full of institutions) and how to evaluate market outcomes (looking beyond willingness to pay toward substantive intersubjective interests and balancing them in terms of social priorities). Consumer protection is not a discipline known for its theory, and much work remains to be done to flesh out the details.
In practice, the change in perspective has meant much less of an emphasis on easily-proven fraud and more of a focus on shifting the balance of power in favor of consumers. (It has also meant that the category of “consumer” has been less circumscribed — the focus is on disempowered purchasers/users, which could include workers, renters, and so on.) Doing so often involves a combination of investigatory, regulatory and enforcement actions, often undertaken in strategic combination, sometimes across agencies, in order to set norms for entire industries. The junk fee crackdown, for instance, has combined reports, settlements, administrative penalties, guidance documents, and quasi-legislative rules at the FTC, CFPB, FCC, and beyond. Indeed, strategic enforcement efforts have now begun to combine consumer protection with antitrust (and other) authorities to calibrate the appropriate way to check corporate power. For instance, the FTC introduced its (challenged) ban on non-compete clauses under its unfair methods of competition authority (traditionally referred to as an “antitrust” authority) while also enforcing against companies who make deceptive claims about earnings and (along with the CFPB) warning that it is considering declaring some fine print in quasi-employment agreements unfair (and signing an MOU with the NLRB on employee surveillance).
The shift away from consumer sovereignty also frequently means eliminating options for consumers and reducing the possibility of information overload in the name of improving the overall option set. Banning certain types of fees as “junk” is a clear example, as is banning companies from certain types of tracking. Disclosures and disclosure remedies have also become disfavored: where once an unauthorized sharing of consumer data would have been remedied with a warning to consumers, now companies find themselves ordered to delete that data, prohibited from collecting further data of that sort, and under an obligation to track down shared data and have others delete it. There is even a renewed focus on children’s vulnerability and the problems with advertising too much to them, the original sin of the supposed overreach of FTC regulation in the 1970s.
Perhaps most importantly, the new anti-domination approach does not stand back and let markets play out — rather it seeks to shape outcomes, especially at the cutting edge of technology. In that 2021 memorandum, Chair Khan rejected a “whack-a-mole approach” that waits for harms to become clearly established, committing instead to “target[] root causes” and, ideally, to do so “before they become widely adopted.” The enforcement sweep on AI deception after a public warning to AI companies that they would not receive kid-glove treatment just because they were at the technological frontier illustrates this approach clearly (there is simultaneous antitrust investigation going on in that industry), as does the rule on social media influencers and the CFPB’s rule on “open banking.”
Where to?
It remains to be seen how much of this will survive. Our regulatory-hostile federal courts have not yet had a real chance to start to eat away at these efforts (I’m cautiously optimistic, but who knows anymore), and the next President may be (depending on party) either somewhat or much more skeptical of this approach.
But I think the efficacy and the popularity of this type of anti-domination consumer protection among multiple constituencies will make it difficult to totally stamp out. Even as rumors swirl about Harris removing Chair Khan, one of the few policy goals that her campaign has been clear about (and which doesn’t involve border crackdowns or steadfast support for ongoing genocide) is giving the FTC more explicit authority to police price gouging in the food system (perhaps modeled on the NY law I discussed here at The Blog). And the “populist” right may be on board with at least some of these efforts, as relatively low-cost politically ambiguous ways to make their favored constituencies’ lives easier. There is not yet an indication that they see an opportunity to use consumer protection to implement reactionary gender or racial politics, but that possibility cannot be ruled out.
What can be said with assuredness is that the politics of consumer protection have changed. This shift is still in its early stages, but much more is up for grabs today than at any point in the past forty years.
