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Transparency a Fundamental in Consumer Protection

Introduction

Transparency of terms is crucial in consumer contractions as they serve a fundamental role in protecting the consumer. Consumers are the weaker contractual party in the dynamic between traders and consumers. Considering that they are the more vulnerable party calls for a need for protection for the consumer on a legislative level. To ensure fairness in the dynamic of disproportionate bargaining power, transparency of terms plays a fundamental role in consumer protection. It ensures that the terms in the consumer contract be expressed in plain and intelligible language that is legible. In addition to transparency of terms being fundamental for consumer protection, this transparency of terms also positively impacts the economy as it increases economic growth. Empowering the consumer reduces market failures and improves economic efficiency and financial benefits. It shall be argued that transparency of terms in consumer contracts is of fundamental importance for protecting the consumer as the weaker contractual party, and prioritising the consumer allows for business to thrive, thereby creating a flourishing economy.

The Outline

Firstly, the bargaining power of businesses and consumers in consumer contracts will be analysed, the trader and consumer will be defined, detailing how the consumer is in ning position thanthe trader. This is followed by how this imbalance of bargaining power calls for government intervention by legislation and how this legislation protects the consumer. This is preceded by explaining how transparency of terms in consumer contracts is fundamental to consumer protection and how it fundamentally extends into the business and economic perspectives.

Bargaining Power

Consumer contracts consist of a consumer and a trader. The consumer is defined under the Consumer Rights Act 2015 S2(3), where an individual acts for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession. The trader is defined as a person acting for purposes relating to that person’s trade, business, craft or profession, whether acting personally or through another person acting in the trader’s name or on the trader’s behalf.

The Trader

While consumer contracts consist of a consumer and trader, another element comprises their dynamic: the difference in bargaining power. In this dynamic, the trader and the business they represent are in a stronger position than the consumer. This is because, more often than not, the trader has more significant financial resources, more negotiation experience, and a greater familiarity with the subject matter of the contract. Overall the trader has more experience than the consumer concerning contracts. In Macaulay v Schroeder Music Publishing Co Ltd [1974] 1 WLR 1308, Lord Diplock had a powerful incitement; he noticed that when a trader provides a consumer with a contract, it is effectively saying that “if you want these goods or services at all, these are the only terms on which they are obtainable. Take it or leave it.” Since the trader is in a position to declare the terms to their specific needs to the consumer on a take-it-or-leave basis, the trader is in a stronger bargaining position than the consumer. Regarding the bargaining power, the evidence suggests that the trader has an advantage over the consumer, as they have more significant financial resources, negotiation experience, and a greater familiarity with the subject matter of the contract.

The Consumer

The consumer is in a weaker position in the bargaining power dynamic. In contrast to the trader, the consumer is more likely not to have an abundance of financial resources, negotiation experience, or familiarity with the subject matter of the contract. The overall lack of experience in entering a contract with a trader puts the consumer at a disadvantage. For example, Ahmed would like to purchase an haute couture mascara for under £10; the saleswoman at Harrods tells Ahmed that Maybelline Lash Sensational Sky High Mascara is their most high-end haute couture mascara, and she declares the price to be £100. However, Ahmed lacked the overall experience required for consumer contracts, such as subject matter. This leads him to be blissfully unaware that the product is not haute couture or high-end and not worth £100, but is worth £8.60 as it is often on discount. Since consumer contracts are on a take-it-or-leave- basis, Ahmed’s only options are to buy the overpriced mascara or leave it. Thus, Ahmed, the consumer, is in a weaker bargaining position than the trader. Consumers like Ahmed suddenly become vulnerable in consumer contracts as they lack the experience and resources to enhance or equalise their bargaining power with the trader. Since the consumer lacks the experience, skills and resources that would give them an equal and competitive edge in consumer contracts, they are in a weaker bargaining position than the trader in this dynamic.

Calling for Consumer Protection, Aisle 5

Since the consumers lack the experience, skills, and resources to provide them with a competitive advantage or equal bargaining power, they are rendered vulnerable in consumer contracts with traders. This calls for mechanisms for protection for the consumers, which in theory, would elevate their bargaining power. This is especially significant in cases where the consumer is placed in vulnerable circumstances.

Legislation as Protection

Legislation is put in place to elevate the consumers to equalise the consumer to that of a trader during consumer contracts, thus creating the perception that there is equal bargaining power between the consumer and trader.

Transparency is the Key to Consumer Protection

Transparency in Layers: Consumer, Business, and the Economy

In consumer protection, transparency has many layers. These layers can be best seen as a positive ripple effect. First, by the government creating legislation that requires clarity of terms, it aids in the consumer to not be weaker and vulnerable in consumer contracts. Second, businesses being legally required to introduce transparency of terms manifests consumer confidence as it creates trust for the consumer. Finally, when consumers obtain this consumer confidence in companies in the United Kingdom, it positively affects the economy.

Transparency of the Terms: Consumer

Equality is the current legal trend in consumer protection in an attempt to elevate the consumer equally to that of a trader of a business. This trend is displayed in the transparency of terms. This trend is evident in law and is foundational to consumer protection overall, as they have been proven to be the weaker party.

Consumer Rights Act 2015 Section 68:The Transparency of Terms

Faith and Trust Equal Transparency.

The element of transparency is fundamental to protecting the consumer as it is also fundamental in fairness. Section 68 requires that a term be expressly written in plain and intelligible language. For example, consider the term “You may not not tie a knot in May.” Here the present term has a double negative, and the word “not”, “knot” and “may” are used in two different contexts. For most, this would be considered unintelligible language as double negatives are not easily understood by all, and some may be distracted by the word the homophones being used in multiple contexts. Thus the specific requirement of transparency reinforces traders’ obligation to operate in good faith of fair and open dealings and details in contract terms. To match the requirement set in section 68 of transparency, the duties and rights are to be displayed fully in a comprehensible method and put the consumer into a position where they can understand their practical significance.

Transparency, The Root of All Contracts

One of the significant reasons transparency of terms is so important is that transparency is the root of all contracts. To demonstrate the importance of this concept, consider the following example from the hit television series Once Upon a Time. The scene is the night of the Prince’s Ball, and Cinderella’s Fairy GodMother says that Cinderella will be attending the ball. Suddenly Rumplestiltskin kills Cinderella’s Fairy Godmother, and she disappears into a fiery mist, and her magic wand drops to the floor. Rumplestilskin then intentionally misrepresents the situation. He claims that the wand is pure evil magic and that he just “saved” her life. Cinderella inquires if he knows how to use this magic wand. He replies with a non-transparent term of “All magic comes at a price.” Cinderella further reveals her vulnerability by stating that she would do anything to have her life changed for the better. Rumplestiltskin then reveals another non-transparent term; he says that if she could bear the consequences, he would give her what she wants in exchange for a favour. This term is not transparent as it does not list the consequences; it does not clearly specify what she wants or what the favour will be. He adds that the price will be for her to give him something of hers and that this something will be decided by him on a later date and taken by him sometime in the future. Here the lack of transparency is evident by him not plainly stating what the something he will be taking from her and not plainly saying when this ambiguous item will be taken from her is. Rumplestiltskin is fully aware of Cinderella’s vulnerability and her desperate need to escape from her miserable life. He ensures her vulnerability by killing off her Fairy Godmother, so she agrees to his non-transparent terms. For all she knows, he will be requesting a hairbrush or maybe a glass slipper from her in two weeks. After Cinderella is married to the handsome and wealthy prince, Rumplestiltskin arrives and tells her that he will be asking for her firstborn child. This places distress upon her as when she agreed; she did not have knowledge of the specific subject matter that would be her consequence. This leads her and the rest of her friends to not have trust in Rumpelstiltskin. This example perfectly illustrates the unequal bargaining power between the consumer and business. This is evidenced by how Rumpelstiltskin knowingly exploited his position to make Cinderella more vulnerable than she was previously. If Rumpelstiltskin had used the plain and intelligible language of what the consequences, i.e. taking her baby Cinderella would likely not have chosen to contract with Rumpelstiltskin or Rumpelstiltskin would have to introduce new terms that would be Reasonable to Cinderella or Rumpelstiltskin will be forced out of the magic market. Faith and trust are the makeup of transparency; without these elements, transparency cannot manifest itself into fairness as consumers will inherently feel unsafe to contract.

Transparency of the Terms: The Business

As previously discussed above, transparency of terms consists of faith and trust, which manifest fairness and allow the consumer to feel safe to contract with business traders. While it does positively impact consumer protection, the positive effects of the legal requirement of transparency of terms also have benefits for businesses.

The Consequence of No Transparency

Before implementing transparency of terms via Section 68, businesses remained hesitant about implementing transparency in fear that providing too much information to the consumer would lead to the loss of customers. The consequences of non-transparency were recently evident in the Olaplex scandal. In this scandal, an ingredient called butylphenyl methylpropional was listed in one of their products. However, they failed to include a term that this product with this ingredient is toxic for fertility and reproduction purposes. This posed a red flag because the United Kingdom and European Union banned butylphenyl methylpropional in cosmetic products. While that particular product was later excluded, it did cause the consumers to have less faith and trust in the brand, which led to a decrease in sales.

Transparency of terms and their benefits in Business

From a glance from the business perspective, transparency may not be profitable for the business to plainly and intelligible set out the terms. However, section 68, which enforces consumer protection, leads to a more profitable business, which is typically the goal of each trader. By issuing consumer contracts that are in line with transparency under section 68, see an increase in customers and investors as the business becomes trustworthy and therefore, reliable. This trust implemented in consumer contracts creates a suitable environment for business growth. Additionally, the terms' transparency allows their competitors to either reduce their prices or risk leaving the market. Thereby reducing market failure. As consumers are the weaker contractual party, the transparency of terms will enable them to decide whom they should contract with on their endeavours. The transparency of terms becomes a legal requirement for traders and the business that they represent to create an environment of trust for the consumer. Thus if a company does not display terms, such as not listing the price of an item, the consumer will turn elsewhere because subconsciously, they recognise that this is not a business that should be trusted. As aforementioned, the consumer can take their business elsewhere will create the effect that the business that chooses to ignore the legal requirement of transparency will either have to change or be naturally selected out of the marketplace.

Trust, the New Baby Come Back

Another benefit of transparency of terms in consumer contracts is that if the business makes a mistake, the trust built to the consumer by transparency allows the consumer to be more understanding and instead of the business losing them as a customer, they maintain a relationship. This is evidenced by a statistic done in the United States of America that presented that 85% of American consumers were willing to stay with a transparent brand despite the brand falling into crisis or receiving a bad experience. In this sense, the transparency of terms used to protect the consumer also works as a mechanism to build business relationships; so that business in question can continue to operate. Thus, businesses being required to have transparency as part of their contractual practices allows consumers to see them in light of honesty that builds a relationship of trust that is profitable for the business in the long term.

Bargaining power in contracts from the Business Perspective

As mentioned consistently, the parties’ bargaining powers are inherently disproportionate and favours the trader. Transparency of terms is a legal intervention used to provide an elevation of bargaining power against the business trader. Some may interpret this as traders losing their advantage over the consumer, which would ultimately come at the cost of their business. However, this could not be further from the truth. The Harvard Business Review noted that the best approach for negotiations was the “trust but verify” approach; here, it was found that when one’s behaviour is open and honest, it means they consider your interest. It is making the other person or consumer feel valued that ensures they can put their faith and trust in the trader, as opposed to before transparency, where it makes the consumer feel under pressure in the contract and that this deal may not be suitable for them in the long term.

Safety of Consumer Contract

On a business level, it is demonstrated that transparency of terms in a consumer contract serves foundational importance for protecting the consumer and lays the foundation for the business to thrive at its best capacity while also ensuring that the customers can put their faith and trust in them.

Transparency of Terms and its Overall Benefit for the Economy

While it is demonstrated that transparency of terms in consumer contracts is a firm prerequisite to protecting the consumer, it also holds a foundational pillar that benefits the United Kingdom’s economy. During the G summit, the United Kingdom prime minister addressed that enhanced transparency can ensure that customers trust companies within the United Kingdom. As demonstrated in the section dedicated to business perspectives, when consumers trust a business, they are likely to stick with the company even when they are into a kerfuffle. The government recognises that when British companies fully participate in the transparency of terms in consumer contracts, it builds a relationship of trust. The relationship inspires an environment of confidence that allures others to want to take part in British companies, which in terms has a positive growth effect on the economy. Thus the government recognises that by creating foundational support for consumers through the transparency of terms when they engage in consumer contracts, they ensure the potency and success of the economy. As aforementioned, this legal intervention works like natural selection. Since the transparency of terms is a requirement, businesses can check in on each other and offer their most competitive rate or risk being whittled out of the market. This creates a competitive market and reduces market failures. This is commonly seen in Tesco, where they offer a price match with Aldi. Thus if Tesco does not offer a price that can compete with Aldi, they risk being kicked out of the grocery marketplace. Being whittled out of this market negatively impacts the British economy. Thus, prioritising the consumer in their contracts by requiring transparency of terms allows the consumer to build trust in the business and allows the business to flourish, which benefits the economy.

Conclusion

To conclude, transparency of terms in consumer contracts is of fundamental importance for protecting the consumer as the weaker contractual party, and prioritising the consumer allows for business to thrive, thereby creating a flourishing economy. It has been addressed that the bargaining power between the trader and consumer in consumer contracts is vastly different, as the trader has the most bargaining power. Since traders of a business are likely to have more significant financial resources, more negotiation experience, and a greater familiarity with the contract’s subject matter, they create pressure on the consumer, as their only option is to either take the terms as is or leave it. Since the average consumer lacks the qualities that would provide them equal bargaining power to that of a trader. The pressure on the consumer to pursue their consumer contract creates an environment of distrust and hostility, as the consumer can not fully put their faith in the trader. Therefore in this dynamic, the consumer is the weaker party in this dynamic. This consumer and trader dynamic calls for consumer protection in consumer contracts. The government has created and provided legal intervention of section 68 of the CRA to correct this imbalance. This legal intervention requires businesses to be transparent on their terms listed in their presented offer. Transparency then becomes the foundation of consumer contracts as transparency puts pressure on the trader to act with trust and faith and allows the consumer’s position to be elevated. They can now make informed decisions about whether or not to contract with the trader.
Additionally, transparency of terms allows for repairing the relationship between consumer and trader and will enable traders to present themselves as someone the consumer can put their faith and trust in the trader. Thus creating an environment of honesty instead of hostility. Since the terms must be transparent by being described in plain and intelligible language, this ensures that all traders of a business offer the most competitive terms, as the transparency will allow the business to check in on each other. If the business does not provide the most competitive terms, they risk being naturally selected out of the marketplace. As aforementioned, transparency creates a relationship of trust between the trader and the consumer. This trust built means that consumers are likely to return to the business even when the industry is caught in a moment of chaos. This is due to the complete transparency of their terms. This is especially important because if a British company makes a mistake, it will likely not lose customers. After all, trust is present. Transparency of terms in consumer contracts serves as the foundation for consumer protection, but protecting the consumer in this way allows for competitive marketplaces that put the British Economy in a position of growth. Therefore the government prioritises the consumer in their contract endeavours by requiring a business to be transparent on their terms; the government practically ensures the overall successful growth of their economy. Thus, providing contracts with transparency of terms lays the foundation for protecting and elevating the consumer, which inspires faith and trust with traders, leading to a more efficient economy.

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