Introduction
In order for the government to empower and protect consumers in modern markets employing a less interventionist approach, there are several policy options. One such intervention is the introduction and enforcement of the competition law. Economic development and realization of better livelihoods can be catalyzed by interrelationships between government policies such as protection of the consumer, alleviation of poverty, competition law, and macroeconomic policies. Markets have both demand and supply sides. Nurturing healthy competition among suppliers of goods and services is sought by competition policy. The work of consumer policy is to facilitate functioning markets by empowering consumers to make informed choices, exercising their preferences, and informing the suppliers about the needs of the consumers. Since any production must be consumed, it is important for consumers to generate the signal of their preferences.
Government measures to curb cartels in the market
Therefore, the government should discourage the formation of cartels by suppliers through the formulation of the right consumer policy. These cartels usually cause markets to deliver outcomes, which are sub-optimal. A good example to elaborate this is that whenever consumers lack sufficient knowledge to enable them makes sound choices, the result is usually market failure. Therefore, any government intervention in the market should reflect the degree of market failure so as to produce net benefits for consumers. Net benefit in this case means that whatever will be the end result should be less the cost of regulation and market failure on the consumer side. In order to assist consumers in a relatively competitive market, which is free from market failures, the government should use the non-binding co-regulation approach in order to supplement Trade Practices Act Provisions. For instance, to focus their efforts on the interests of consumers, the participant of the competitive stimulus market may require a code of conduct that is non-binding. On the other hand, the government should introduce more binding co-regulation or mandated mechanisms. In less competitive markets that are suffering more severe market failures. Since consumers bear the cost of market intervention, their protection requires a careful balancing act as a tool for addressing market failure.
Protecting and empowering consumers
The other thing that the government can do to protect and empower consumers is the device policies that do not hinder national markets from expanding. There will be a significant gain by the consumers if firms are able to operate nationally. Costs can be brought down by the existence of national firms. This is because such firms are able to achieve economies of scale and as such exert a competitive discipline on the local firms. These cost gains will be passed down to the consumers if the policy implemented is effective. Similarly, national markets produce an effective dividend by providing quality goods at a low price (Kahneman, 2008). Allowing firms to expand nationally means that consumers will have a variety to choose from, since firms will be more accountable, there will exist more niche operators. National firms are dynamic, more competitive, and more reliable than regional firms are.
Government initiatives for market expansion
The government to encourage the expansion of national markets can use a number of initiatives. Such initiatives may include continued development and implementation of the competition stream of the National Reform Agenda that incorporates reforms to boost the productivity of a country. This is realized through the facilitation of competition and efficient functioning of national firms7. Through this initiative, the government can harmonize regulations, which help in the process of market segmentation. Governments can also reduce the burden of regulation across all levels of operations. For example, Henry explains that, as a consumer policy to harmonize the safety of products, the Council of Australian Governments (COAG) identified regulation as a consumer policy priority for all Australian Governments. Henry continues to note that the Productivity Commission review into the safety of the products concluded that a significant contribution to the development of truly national product markets can be realised through a single national system of product safety. As a rule, more goals of protecting consumers will be considerably enhanced by any government, given that government formulates policies, which support the existence of national markets.
Policies for empowering consumers
The last option that I will discuss is for the government to formulate policies that will prioritize the empowerment of consumers. Such interventions will empower consumers to drive the market and activate competition. An empowered consumer is one who has information concerning the quality, price, availability, and range of products. Rational decision-making among consumers can be explained by behavioral economics. The central insight of behavioural economics is that people use intuition to form judgments rather than rationale. Intuition has to do with people’s decisions that are made through an automatic process of perception. Therefore, consumers quickly, effortlessly, automatically, and emotionally make judgements7. Such consumers are strongly affected by current stimulation. Kahneman outlines that, ‘the central characteristic of agents is not due to poor reasoning, but intuitively acts. In addition, the behavior of these agents is not guided by what they are able to compute, but by what they happen to see at a given moment’.
As policies to empower consumers are designed, they should have some sense of enabling people to make rational decisions. The governments should design laws that compel suppliers to disclose product information so as to prohibit conduct that is deceptive and misleading. In Australia, the treasury is using Financial Literacy Foundation in its efforts to empower consumers. Due to the complexity of modern markets, recent policies must enable individuals to take more responsibility for their financial decisions especially with regard to retirement savings. For consumers to take advantage of the choices and opportunities before them, there is a need to inform them so that they can be confident. The key role of Financial Literacy Foundation in Australia is to raise awareness of the benefits of developing good skills for managing finances. The foundation also creates opportunities for all Australians to learn more about money.
Conclusion
Consumer policies that are sound must ensure that consumers are protected in various circumstances. It is not advisable to rush to employ tools for protecting consumers. This is because such an action will lessen the power and autonomy of any consumer. The depriving the consumer autonomy and power will then be counterproductive to the goal of empowering consumers. There are many challenges in designing consumer policies. To overcome such challenges, it is important to understand four key principles. The intervention employed by the government should be non-regulatory and regulatory tool that best suits the existing situation. In addition, it is also crucial to understand that consumer welfare is driven by competitive markets, and the same consumers drive competitive market. We have also seen that the policy employed by the government should not prohibit expansion of national markets, but rather support them. Finally, sound government policy should be able to empower consumers and protect them when appropriate.
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