State Consumer Protection Acts: Costs to Consumers

The September 2011 State Consumer Protection Acts and Costs to Consumers Task Force report, The Impact of State Consumer Acts on Automobile Insurance Premiums, is available below:

Contents and Executive Summary

Full Report

The Searle Civil Justice Institute at George Mason University’s Law and Economics Center commissioned a task force of leading law and economics scholars to examine the economic impact of State Consumer Protection Acts (CPAs) on consumers:

  • Henry Butler, George Mason University School of Law
  • Eric Helland, Claremont McKenna College
  • Joshua Wright, George Mason University School of Law

While such statutes are intended to benefit consumers generally, there are competing hypotheses concerning the ultimate impact of CPAs on consumers. Advocates of CPAs contend that these laws are necessary to correct market failures and thus are likely to benefit consumers. Critics of CPAs argue that vague definitions of illegal conduct, de minimis requirements to bring and sustain a cause of action, and generous remedial provisions result in harm to consumers by: (1) increasing litigation costs to firms that are passed on to consumers, and (2) creating legal uncertainty that chills pro-competitive business activity. While there has been much debate over whether CPAs help or harm consumers, to date there has been very little empirical analysis done to support either position.

The Searle Civil Justice Institute seeks to provide a large-scale, peer-reviewed empirical analysis to better inform policymakers with respect to whether consumers actually benefit from consumer protection statutes. The task force presented its preliminary report on state consumer protection acts and consumer welfare at a policy briefing in the first quarter of 2011.