International Law

The Myth of Franchise Protection

Image via Wikipedia

This talk by Professor Omri Ben-Shahar is about the three myths fo Consumer Protection, but at least two of these myths are relevant to Franchisee Protection.

Professor Omri Ben-Shahar spoke on the "Myths of Consumer Protection" at this year's annual Ronald H. Coase lecture for first year law students.

Ben-Shahar discussed why he believes the modern consumer protection movement is largely misguided.

Consumer advocates cite three things that consumers need: information about products, access to courts, and remedies for wrongs done to them.

In the eyes of the consumer advocate, a consumer cannot compete with large corporations without these three things. It would be David versus Goliath; and Goliath would always win.

Myth #1: Consumers will be better off if they have more information

Warning labels are on everything. You can't install a piece of software or use a web site without checking some box guaranteeing that you have read the Terms of Service. Do these forms of disclosure benefit consumers?

Ben-Shahar believes not. Disclosures of information are often technical and hard to digest. People do not want to spend the time to read these disclosures. In a study of online viewing habits, 1/1000 people actually read a site's Terms of Service, and that single curious individual only glanced at the complicated contract for an average of forty seconds--perhaps just a misclick. 

People would rather just be told if a product is "good."

They do not have enough time to digest technical information on all aspects of a product.

A comparative rating service (for example, Zagat or Consumer's Digest) is likely to be much more useful to a consumer.

Unfortunately, mandatory disclosure laws do not and cannot facilitate this information.

Mandatory disclosure laws require disclosure of specific facts and cannot disseminate the more subjective determinations desired by consumers. Too much mandatory disclosure may even be harmful by desensitizing consumers to warnings that may be helpful.

Disclosure may be useful to the extent that these rating services, or other trusted sources, rely on that information.

However, it's not clear that the disclosure laws would even benefit these sources. After all, these sources specialize in collecting and digesting information.

Full post as published by Misleading Advertising Law on February 26, 2009 (boomark / email).