Introduction
The essence of trade revolves around the relationship that is formed between the seller and the buyer. The former can exist as a distributor of the product or the provider of a service, whereas the latter is represented by an individual or group consumer. In this bilateral relationship, both sides aim to ensure that their needs are met in the most efficient form possible. Sellers aim to gain profits by attaining higher prices, whereas consumers seek maximum value at a minimal price. At the intersection of these needs, a balance, or equilibrium, of trade is formed. Ideally, this relationship should not see the involvement of any third parties, allowing the participants of the trade to self-regulate the process.
However, dishonest exchanges may still occur, as, for example, sellers may provide inaccurate information regarding their product or elevate the price beyond reasonable levels. At this point, the involvement of regulating governmental bodies is required to maintain the integrity and transparency of the trade. In the United States, this function is performed by the Federal Trade Commission and the Consumer Financial Protection Bureau. This report investigates the role of these bodies in the economic space of the country, as well as their legal grounds and leverages.
Overview of the Bodies
The first body under review is titled the Federal Trade Commission or FTC. It is an independent agency that works on behalf of the U.S. government to prevent fraudulent, illegal activities in the market. One of the primary functions of the FTC is to enforce civil antitrust law while supporting consumer protection through legal actions (Ward, 2021). The Commission sees its mission as “preventing anticompetitive, deceptive, and unfair business practices” in order to protect consumers and promote transparent, “vibrant” competition (FTC, n.d., para. 1). The Federal Trade Commission traces its long history back to the year 1914 when the Federal Trade Commission Act was signed by President Wilson. Since that point, its agents have performed uninterrupted actions aimed at the timely detection, prevention, and punishment of the actions of sellers that obstruct the transparency of the market. As per U.S. law, all consumers are entitled to receive full and correct information regarding the product or service. Besides, it is imperative to ensure that the trade conditions remain in line with the principles of a free market economy.
Another key body that supports the interests of American residents in market relations is the Consumer Financial Protection Bureau, or CFPB. While the FTC covers a variety of trade spheres, this particular agency’s scope of work is centered on the financial sector. In addition, the CFPB is a more recent entity, as the corresponding bill was passed only in 2010 (Harvey, 2018). Within a free market economy, financial services have seen an increasing level of interest from the population. At the same time, this sphere remains highly delicate, as it deals directly with the personal finances of the people. The CFPB (n.d.) aims to ensure that American companies do not exploit the vulnerabilities of their clients, providing legal, transparent, and fair services. The agency’s jurisdiction includes a range of financial sector entities, such as insurance companies, banks, credit unions, and debt collectors. In addition to reacting to dishonest actions within this scope, the CFPB pursues public financial literacy education, attempting to nurture the required expertise within the population. Through interacting with the agency, people learn more about transparent financial instruments and learn to utilize them correctly.
Legal Protections
Within the scope of both agencies’ operations, consumers benefit from a range of legal protections. While the FTC conducts its own reviews of the market, the majority of its actions are performed on the basis of consumer reports. These include reports of deceptive advertising and other fraudulent activities observed or experienced by an individual. In response, the FTC launches an independent investigation into the issue, after which consumers may be compensated either in court or pre-court settlement. On a corporate level, the agency reacts to anticompetitive mergers or any other actions that result in poorer, unjustified value for consumers (FTC, n.d.). As FTC values prevention over response, it conducts workshops, hearings, and conferences, as well.
From the CFPB perspective, the emphasis is laid on the exchange of financial services identified above. The agency reacts to reports of unlawful or deceptive activities in the financial marketplace, enforcing federal laws and ensuring that the providers are held accountable (CFPB, n.d.). In order to seek the CFPB’s assistance, consumers need to inform the agency of such actions and explain why they contradict the country’s law. Following the reports, the Bureau investigates the actions of the company through active collaboration with its partners. If the suspicions are confirmed, legal protections may be enforced. In addition to penalizing the accountable entity, the CFPB equally ensures that the violated party receives due compensation.
Rules, Laws, and Regulations
In their line of work, both agencies follow the procedures and regulations ensured by the legislative base of the United States. As established prior, the very existence of the CFPB and the FTC is possible through corresponding Acts. Next, the FTC relies on a large number of Federal laws, including the country’s antitrust legislation that derives from the Sherman Act introduced in 1890 (FTC, n.d.). In addition, this agency follows the regulations established by “the Telemarketing Sales Rule, the Pay-Per-Call Rule and the Equal Credit Opportunity Act,” among others (FTC, n.d., para. 8). The laws that regulate the jurisdiction of the CFPB vary across the various spheres of its attention. In cooperation with the U.S. Department of Labor, the agency enforces ERISA, HIPAA, and COBRA, whereas healthcare-related matters equally rely on the Affordable Care Act (CFPB, n.d.). Overall, both bodies seek to supervise compliance with a range of federal acts that all seek to protect American consumers.
Penalties Imposed
In the vast majority of cases, both agencies work with civil legislation, meaning that they mostly address non-criminal violations of federal law. Therefore, the penalties imposed by them are usually limited to financial instruments. Both bodies follow a similar penalty pattern in their independent investigations. First of all, a letter of warning is a common instrument found in both jurisdictions. It is issued upon finding evidence of potentially harmful activities in the marketplace. Consumers receive the information that a specific service is found to hold major risks, whereas sellers are notified of further legal actions unless measures are taken to resolve the concerns. Next, if the damage is considerable, companies receive serious fines for violating federal law. If there is harm caused to a consumer, they receive compensation that covers their losses resulting from the fraudulent actions.
Practical Cases
Both agencies address dozens of cases on a monthly basis, protecting the interest of consumers. In April 2019, the FTC (2022a) sued the online service called Avant, LLC for deceptive loan practices that resulted in a total of $3.7 million of total consumer losses. The investigation revealed that the company falsely claimed to receive payments in credit and debit cards on its website, misleading its visitors. In 2020, a complaint was filed against Vyera Pharmaceuticals for seeking a monopoly over a life-saving drug, Daraprim. Through this case, the FTC (2022b) addresses the vital right of consumers to receive life-saving medications under fair conditions. Finally, in March 2020, the FTC (2021) found two recent acquisitions made by Biglari Holdings to pass the threshold established by the HSR Act. This resulted in a $1.4-million civil penalty, protecting the integrity of the marketplace. The examples reflect the hard work performed by the agency to ensure that the principles of fair trade are followed in the United States. Otherwise, accountable companies would receive unjustified, illegal gains at the expense of the consumers and their rights.
Conclusion
Ultimately, the relationship between the seller and the consumer is frequently compromised in pursuit of additional revenues, which violates federal law. In order to ensure compliance with the principles of fair trade, the government of the United States has employed two federal agencies that serve as the ultimate regulators of the marketplace. The FTC and the CFPB work to protect consumers’ rights and interests in a capitalist environment where companies violate the law to maximize their profits. Both agencies conduct active work with the population, aiming at preventing the problems rather than responding to them post-factum.
References
Consumer Financial Protection Bureau. (n.d.). Web.
Federal Trade Commission (FTC). (2021). Biglari Holdings Inc. Web.
Federal Trade Commission (FTC). (2022a). Avant, LLC. Web.
Federal Trade Commission (FTC). (2022b). Vyera Pharmaceuticals, LLC. Web.
Federal Trade Commission (FTC). (n.d.). Web.
Harvey, H. H. (2018). Constitutionalizing consumer financial protection: The case for the Consumer Financial Protection Bureau. Minnesota Law Review, 103, 2429.
Ward, P. C. (2021). Federal trade commission: Law, practice and procedure. Law Journal Press,.