An Economic Analysis of Consumer Protection in Contract Law

The traditional justification of consumer protection is founded on the notion of restraining the monopoly power of huge companies and the potential that they posses to influence consumers via advertising that limits consumers’ ability to verify what is in their own best interest. This theory refers not to the individual consumer in a concrete situation, but stresses a general economically weaker position of the consumer vis-à-vis the suppliers. Consumers are seen as less knowledgeable and as economically inferior to producers and traders. So a large deviation between the ideal of consumer sovereignty and reality is presumed. The power imbalance on the market (“countervailing power”) leads to demand for market reconciliation, compensation or balancing. According to this conception the state must support the consumers as weaker market participants during the counterweight