Why Is Consumer Protection Important?
Consumer protection is important because consumers in any modern market economy often experience information asymmetry and a significant imbalance of bargaining power as compared to producers and sellers of products and services.
In competitive markets, producers and sellers must gain new sales, new clientele by satisfying consumer needs through increasing the range of choices available, since if consumers dislike the offerings of one producer/seller, they might turn to others. This is because the availability of substitutable goods at acceptable prices in competitive markets enables consumers to shift purchases, which pushes each producer/seller to try to meet consumer preferences.
However, producers/sellers may not always act competitively and very often would resort to unfair means, for example offering low-quality products at lower prices or misleading the consumers to believe that the products offered are of good quality. As a result, consumer interests are affected. Not only consumers do not receive a fair value for their money, their health and safety could also be adversely affected by the unsafe or defective products and services.
Hence the need for interventions, either by governmental consumer protection agencies, consumer associations or organizations, or any other relevant stakeholders, in accordance with rules and regulations laid down to protect the legitimate interests of consumers.