What are consumer associations saying? Politicians, managers, journalists increasingly wonder about the position held by consumer lobbies on a number of issues. Only a decade ago, the power of consumer associations was virtually non-existent in Europe. Why are they now given so much weight and attention?
The EU has certainly helped the process, by extending to all member countries the consumer protection pioneered by Belgium, France, and the Scandinavian countries. But this development is also due to the increasing complexity of economic life which calls for an enlarged role for consumer sovereignty.
Comparing and selecting products and services has become exceedingly difficult, while corporate power is very strong, so that the isolated consumer is very likely to succumb to external forces and is unlikely to take to court a faulty supplier, because of the barrier represented by high legal costs. Thus it makes sense for consumers to join forces to defend their collective interest.
Consumer organizations cannot but have a good press. They defend the interests of an overwhelmingly wide section of public opinion, after all. But one should reflect upon what consumer organizations really are. They are not voluntary organizations freely providing their services. In order to be effective and have a diffuse structure, they need to hire professionals and set up facilities at significant cost.
But where do consumer associations get their funding? Not from membership fees. Consumers tend to be fickle and turnover among members is very high. When the problem is solved, the consumer is grateful but does not end up renewing her or his card the following year.
Financial resources mainly come from two sources: public funds (either national or European), money coming from the settlement of legal controversies, and even corporate funding, which must stay marginal if a given organization is not to lose credibility in the eyes of consumers. The drying up of funds and the multiplication of
competing organizations has created a very unstable situation, while the judiciary has become more aggressive in its rulings.
For consumer organizations to occupy the important role society expects from them, and become major stakeholders in advancing consumer protection the following problems must be solved. Funding sources must become more transparent, higher standards must be met for an association to sit on the bargaining table, and the press should start lending credibility only to the most professionalized organizations.
by Umberto Filotto,
Full Professor of Banking, Università di Roma Tor Vergata,
and Banking and Insurance Division, SDA Bocconi School of Management