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Consumers and Complaints: Marketing Evolution Leads to Legal Innovation from Contract Clauses to General Fairness

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Abstract

This chapter examines the ongoing legal innovation from law that heavily favors marketers to consumer complaint resolution that seeks to satisfy most consumers. The law started with the concept of “caveat emptor” declaring that consumers should not believe any “seller’s talk” and therefore could not complain about false statements. It then evolved to allow the enforcement of express warranties made by the marketer. Once explicit consumer contracts became the norm, government agencies and the courts restricted terms that unfairly favor marketers over consumers. However, U.S. law heavily favors the enforcement of contract-mandated arbitration but there is current controversy over whether such clauses also can prohibit class action arbitrations or lawsuits.

Meanwhile, after World War II, consumer product companies established complaint departments to resolve consumer complaints, when possible, at a minimal cost. As marketing changed to value long term consumer relationships over immediate concerns about profits and losses, company complaint handling departments evolved to seek to satisfy all consumers, where reasonably possible, regardless of consumer contract terms relevant to the complaints. Except for a few cases, this new approach largely replaces outside dispute resolution although dissatisfied consumers may still complain online or to outside agencies or even seek arbitration or litigation. This chapter predicts that this trend will continue and will lead to the adoption of consumer-friendly contract terms by major consumer product firms.

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Notes

  1. 1.

    Marotta-Wurgler and Taylor (2013), p. 241.

  2. 2.

    See e.g., Ayres and Schwartz (2014), pp. 546–549.

  3. 3.

    Reis et al. (2003).

  4. 4.

    Preston (1996), pp. 27–42. Soon after this, the tort of deceit evolved to condemn intentional and knowingly false statements of fact made by the seller about the goods being offered for sale in situations where buyer reliance on such statements was reasonable. Proving intent of the speaker and the reasonableness of reliance on the statement made deceit difficult to prove. Id. at pp. 70–71.

  5. 5.

    Carnegie v. Household International Inc., 376 F. 3d 656, 661 (7th Cir. 2004).

  6. 6.

    Macaulay (1963), p. 55.

  7. 7.

    See e.g., Isaacs (1917).

  8. 8.

    Dimatteo (2010), p. 729.

  9. 9.

    Marotta-Wurgler and Taylor (2013), p. 257.

  10. 10.

    Id. pp. 245–246, 265.

  11. 11.

    See e.g. Ayres and Schwartz (2014). Class action lawsuits address this failing by allowing attorneys to represent the entire class of consumers thereby challenging terms of the contract or advertising for the product.

  12. 12.

    See Sovern (2015) and Ayres and Schwartz (2014), pp. 579–585, (proposing that once marketers learn about consumer expectations of contract terms, marketers be required to warn consumers of contract terms that consumers don’t expect).

  13. 13.

    See Leff (1970) (proposing that contract terms be regulated just as the product itself is regulated).

  14. 14.

    White and Lesser Mansfield (2002), pp. 246–258.

  15. 15.

    Petty and Hamilton (2004), pp. 156–161.

  16. 16.

    16 C.F.R. § 444 (2001). See also White and Lesser Mansfield (2002), p. 233, pp. 258–259.

  17. 17.

    15 U.S.C.A. § 45b.

  18. 18.

    FTC Settlement Will Ban Fraudulent Marketers from Invention Promotion Business, available at https://www.ftc.gov/news-events/press-releases/2018/05/ftc-settlement-will-ban-fraudulent-marketers-invention-promotion, (May 10, 2018).

  19. 19.

    Shariff et al. (2010), p. 214.

  20. 20.

    Schmitz (2012), pp. 95–100.

  21. 21.

    9 U.S.C. § 1 et seq. (2012). Frankel (2014), pp. 531, 532–541 . Arbitration clauses may not be enforced if they involve lack of consent or consideration, unconscionability or fraud. Schmitz (2012), p. 91.

  22. 22.

    Resnik (2015).

  23. 23.

    Davis (2013), pp. 95–96.

  24. 24.

    See e.g., Schmitz (2012), pp. 86–94; Horton and Cann Chandrasekher (2015), pp. 64–76. Most recently, a majority of the U.S. Supreme Court held that Congressional intent was clear that arbitration clauses that prohibit class arbitrations should be enforceable despite an arguable conflict with labor laws that allow collective labor activity. Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018).

  25. 25.

    Horton and Cann Chandrasekher (2015), pp. 81–83.

  26. 26.

    Ferrera et al. (2014), p. 25.

  27. 27.

    Fitzpatrick (2010), pp. 818–820.

  28. 28.

    Bronstad (2019).

  29. 29.

    Bronstad (2017).

  30. 30.

    Epic systems Corp. v. Lewis, 138 S. Ct. 1612 (2018).

  31. 31.

    Davis (2013), pp. 95–96.

  32. 32.

    Duffy (2007).

  33. 33.

    CFPB Issues Rule to Ban Companies From Using Arbitration Clauses to Deny Groups of People Their Day in Court, (July 10, 2017), available at https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-rule-ban-companies-using-arbitration-clauses-deny-groups-people-their-day-court/.

  34. 34.

    Frankel (2014), p. 550.

  35. 35.

    Silver-Greenberg and Gebeloff (2015), p. A1.

  36. 36.

    Horton and Cann Chandrasekher (2015), p. 91.

  37. 37.

    Id., at pp. 80–81.

  38. 38.

    Van Loo (2016), pp. 558–562. The CFPB obtained about $2.5 billion annually for consumers during the same period. Ibid.

  39. 39.

    Corkery and Silver-Greenberg (2020).

  40. 40.

    Sheth and Parvatiyar (1995), p. 407.

  41. 41.

    Macaulay (1963), pp. 55, 66 (“Holding a customer to the letter of a contract is bad for ‘customer relations.’ Suing a customer who is not bankrupt and might order again is poor strategy.”).

  42. 42.

    Reis et al. (2003), pp. 197–198.

  43. 43.

    Andreasen and Best (1977), p. 93.

  44. 44.

    Ahman and Buttle (2001), pp. 31–33.

  45. 45.

    Reis et al. (2003), p. 197.

  46. 46.

    Sheth and Parvatiyar (1995), p. 410.

  47. 47.

    Siedel and Haapio (2011), p. 104.

  48. 48.

    Technical Assistance Research Programs Institute (1979) Consumer Complaint Handling in America: Final Report, ES-4. However, a similar survey done in spring 1975 found that about 60% of complaining consumers said their complaint had been satisfactorily resolved. Andreasen and Best (1977), pp. 93, 98.

  49. 49.

    Tax et al. (1998), pp. 60, 72; Homburg and Fürst (2005), p. 95.

  50. 50.

    Technical Assistance Research Programs Institute (1986) Consumer Complaint Handling in America: an Update Study Part II, ES-2.

  51. 51.

    Siedel and Haapio (2011), p. 111.

  52. 52.

    Van Loo (2016), pp. 586–587.

  53. 53.

    Id., at p. 570 (2016).

  54. 54.

    15 U.S.C.A § 45b.

  55. 55.

    https://www.bbb.org/globalassets/local-bbbs/council-113/media/complaint-stats/2016/usa_2016-sorted-by-complaints.pdf.

  56. 56.

    https://www.ftc.gov/news-events/press-releases/2016/03/ftc-releases-annual-summary-consumer-complaints.

  57. 57.

    Van Loo (2016), pp. 590–591.

  58. 58.

    The annual CFPB report is available at https://www.consumerfinance.gov/data-research/research-reports/2019-consumer-response-annual-report/.

  59. 59.

    Gundlach and Achrol (1993), p. 141.

  60. 60.

    Poppo and Zenger (2002).

  61. 61.

    Ahman and Buttle (2001), Sheth and Parvatiyar (1995), pp. 397–418.

  62. 62.

    Urban (2004), pp. 77, 82.

  63. 63.

    Van Loo (2016), p. 555.

  64. 64.

    Homburg and Fürst (2005), pp. 95, 108.

  65. 65.

    Kotler and Lane Keller (2009), pp. 128–129.

  66. 66.

    Urban (2004), pp. 77, 80.

  67. 67.

    Kotler and Lane Keller (2009), p. 129.

  68. 68.

    Knox and van Oest (2014), pp. 42, 51.

  69. 69.

    Id. at 42.

  70. 70.

    Van Loo (2016), p. 38.

  71. 71.

    Id, p. 549.

  72. 72.

    Van Loo (2016), p. 570.

  73. 73.

    Id., pp. 558–562.

  74. 74.

    Homburg and Fürst (2005), p. 95.

  75. 75.

    Knox and van Oest (2014), pp. 42, 50–51.

  76. 76.

    Van Loo (2016), pp. 564–566.

  77. 77.

    Id., at pp. 569–571.

  78. 78.

    Bouthinon-Dumas and Masson (2012), pp. 213, 232–233.

  79. 79.

    Id., p. 213.

  80. 80.

    See e.g., Dent (2009).

  81. 81.

    Powell (1993).

  82. 82.

    See e.g., Coyle and Green (2014), Choi et al. (2013) (discussing sovereign bonds).

  83. 83.

    Mooz and Evans (2015), p. 9.

  84. 84.

    Davis (2013), pp. 108–116.

  85. 85.

    Id, p. 96, citing David Horton (2010), pp. 654–655.

  86. 86.

    Resnik (2015).

  87. 87.

    Marotta-Wurgler and Taylor (2013).

  88. 88.

    Bagley (2008).

  89. 89.

    See Berger-Walliser et al. (2011), p. 66, Bouthinon-Dumas and Masson (2012), pp. 230–232.

  90. 90.

    Siedel and Haapio (2011), pp. 15–16.

  91. 91.

    See e.g., Coyle and Green (2014), pp. 133, 138–141; Choi et al. (2013), pp. 7–10.

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  1. Babson College, Wellesley, MA, USA

    Ross D. Petty

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  1. Public and Private Policy Department, ESSEC Business School, Paris, France

    Antoine Masson

  2. Utrecht Centre for Regulation and Enforcement in Europe (RENFORCE), Utrecht University, Utrecht, The Netherlands

    Gavin Robinson

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Petty, R.D. (2021). Consumers and Complaints: Marketing Evolution Leads to Legal Innovation from Contract Clauses to General Fairness. In: Masson, A., Robinson, G. (eds) Mapping Legal Innovation . Springer, Cham. https://doi.org/10.1007/978-3-030-47447-8_13

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