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Introduction : Regulation is a major way in which government influences the U.S. market economy. The scope of government regulations is vast and reaches all sectors of the economy and all aspects of our daily lives.
It is the application of law by government or independent administrative agencies for various purposes, including remedying market failure, protecting the environment, centrally-planning an economy, enriching well-connected firms, or benefiting politicians.
Rules of Regulations:
Technical standards help to utilise faster economies of scale.
Strengthens competition when it tackles information asymmetries especially with complex products.
Protects consumers even when this means less supernormal profits for businesses with market power.
HISTORY/ORIGIN OF CONSUMER MOVEMENT
Historically, the consumer movement can he studied under five period:
(1) prior to 1890, (2) from 1890 to 1929 (early consumer movement) (3) from
1929 through the 1950s (renewed consumer interest) (4) the 1960s
(consumption) and 1970s (5) post 1980s.
3.3.1 Period prior to 1890s
Ancestors of the modern man led a highly individualistic life. They
wanted freedom and independence and were extremely self-reliant. They were
basically self-sustaining and co-operative. The welfare of consumers depended
upon the honesty and buying skill of the few local shopkeepers. Most goods
had no trademarks and barring few with brand names. The wise consumers
knew the merchandise and tried to avoid shoddy products. They had almost
no protection against merchants who raised prices needlessly, and could do
little to stop frauds such as misbranding and adulteration. But the effects of
rapidly growing society towards the end of the century changed the role of the
consumer (Aaker and Day, 1980).
Industrialization and the growth in population brought about 40 percent
of the people to the cities. Despite the growth of the doctrine of laissez-faire
in the late nineteenth century, state and federal governmental concern with the
economy extends back at least to the very first years of the republic.
Emmettee Redford has stated core of Government functions as (i) to maintain
order, (ii) to administer justice, (iii) to provide a money system, (iv) to provide
a postal system, (v) to provide certain facilities of commerce such as patents,
copy rights and uniform weights and measures, (vi) to protect the market and
promote foreign trade, and (vii) to provide internal aids to commerce such as building roads.
In the United States, there were more overt manifestations of
Government services for consumers. Thus, Pennsylvania had an extensive
amount of regulatory activity in the early nineteenth century, including the
inspection of various food stuffs, leather, tobacco, lumber, liquor and
gunpowder. While such activity benefited consumers, the benefit that accrued
to consumers were incidental to the prime purpose of legislation.
The original thrust on post-civil war regulating activity came from
farmers. State legislatures granted charters and franchises to rail road
companies and subsidized them directly and indirectly. Resentment to these
practices transformed into political action and the result was the passage of
the “Granger Laws” in mid western farm state in the 1870s and 1880s.
Between 1868 and 1887 more than 150 bills and the rail road regulations were
introduced in congress. In 1886, the need for congressional action became
apparent as a result of the supreme court’s decision in the Wabash case. The
court held that the states could not regulate inter state rail road traffic within
their own boarder even in the absence of congressional regulations.
The passage of the Inter State Commerce Act, 1887 is significant in the
development of consumer protection for two reasons. First, it was a landmark
bill being the first comprehensive regulation of a particular industry, second,
it established the Inter State Commerce Commission and established the
proceeding of the independent regulatory commission. This proved to be a
momentous precedent in its implications for later enforcement of consumer
laws. A nationwide system of rail roads served the economic news of those
and had moved into urban areas but the congestion also led to urban poverty,
tenement housing, hazardous working conditions, child labour and a variety
of consumer problems. To fight these problems, people came together. The
numerous reform organizations were also included in this movement. The
populists and progressives promoted economic and social changes. Volunteer
groups concerned themselves with local issues and newly created unions
sought equity for people of working class.