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Helping Buyers Beware: The Need for Supervision of Big Retail

Since the 2008 financial crisis, consumer regulators have closely supervised sellers of credit cards and home mortgages to stamp out anticompetitive practices. Supervision programs give financial regulators ongoing access to sophisticated firms’ internal data outside the litigation process. This often enables examiners to identify and correct harmful conduct more rapidly and effectively than would be possible using publicly available information and cumbersome legal tools.

Consumers spend four times more on retail goods than on financial products. The retail sector’s dominant firms—such as Amazon, Walmart, Unilever, and Kraft—employ large teams of quantitative experts armed with advanced information technologies, huge volumes of data, and in‐store experimentation to develop behavioral economics–related practices analogous to those seen in consumer finance. The empirical data suggest those practices in the aggregate may significantly harm all households, costing even a family at the poverty line hundreds of dollars annually. Yet unlike in consumer finance, regulators have declined to supervise sellers of retail goods.

This Article argues for wider adoption of the financial sector’s emerging—though largely unarticulated—paradigm that views regulatory supervision of firms as central to consumer protection. That paradigm suggests the consumer goods sector needs the inverse of what consumer finance needed in the wake of the 2008 crisis. Then, Congress created the Consumer Financial Protection Bureau to provide more consumer protection because regulators had previously focused excessively on supervising financial institutions to ensure firms’ safety and soundness. In contrast, the consumer goods sector has a regulatory body—the Federal Trade Commission’s (FTC) Bureau of Consumer Protection—that focuses solely on consumer protection but does not supervise firms. Fortunately, congressional action would not be required for the FTC to develop a supervision program. The agency’s leadership would simply need to exercise the authority that Congress long ago granted.