Consumer Affairs

▪ 1995

      The signing of the General Agreement on Tariffs and Trade on April 15, 1994, was one of the year's most significant events for consumers everywhere. In theory, consumers stood to benefit from freer trade, in the form of more products and lower prices. The phaseout of quotas for clothing and textiles could be seen as a plus for less developed countries (LDCs). Consumers also stood to benefit from improvements in the procedures for settling disputes between countries. On the other hand, there were concerns that the agreement might lead to lower national food standards and higher drug prices in the LDCs. In 1962 the richest 20% of the world population (most of whom lived in the North) had 30 times the income of the poorest 20%. In 1994 the gap was 60 times as great, and the role the new trade rules would play in shrinking that chasm was unclear.

      Nowhere was this problem more clearly illustrated than in Africa, where consumers faced ongoing basic problems, such as poor service, a lack of awareness of consumer rights, and a shortage of funds. The move away from command economies that were heavily regulated and controlled by governments to more liberal open markets was welcome in many areas, but it also created new problems for consumers, such as huge and sudden price increases. In some African countries consumer organizations flourished, but more than a dozen of the poorest African countries still had no consumer movement. Overall, Africa in the 1990s was characterized by increased political tolerance, allowing the emergence of consumer and other movements. A model consumer protection law for Africa based on the 1985 UN Guidelines on Consumer Protection was due to be published in 1995. It was anticipated that this model would be used for lobbying across the continent at the regional and national level. The International Organization of Consumers Unions opened its first African office, in Harare, Zimbabwe, in March 1994. It signified the first attempt to bring the continent's diverse consumer organizations together under one pan-Africa umbrella.

      Japanese consumers won greater protection through passage in 1994 of the country's first product liability law. India became one of the first LDCs to begin "ecolabeling"—letting customers know the environmental impact of the product they were buying. Eight of Asia's countries, however, including Bangladesh, Bhutan, and Cambodia, remained among the world's poorest nations, and many people continued to struggle to meet their most basic needs of clean water, adequate food, and shelter.

      In the South Pacific, a fledgling consumer movement was fast-growing where Western-style consumerism had come quickly. In the Solomon Islands, for example, people who were moving away from their traditional healthful diet of coconut, tuna, and taro were facing new health conditions, including heart disease, obesity, and diabetes. Stories of people trading the fresh fish in their diet for canned Spam were common. Basic consumer education such as how to identify out-of-date packaged food was often needed.

      In Latin America consumers breathed a sigh of relief in 1994 as the region emerged from the deep economic crisis of the previous decade. Governments pressed ahead with massive programs to liberalize trade, privatize public enterprises, and deregulate domestic markets. Economic gains had their ups and downs, and 40% of the region's population still earned less than a minimum wage and lacked sufficient access to basic consumer goods and services.

      The lack of basic services for much of the world was highlighted by World Consumer Rights Day, held annually on March 15. The problems were everywhere; in Mexico the monopoly telephone company raised user costs by 160% over two years, and in El Salvador an estimated 30% of city dwellers and 80% of rural inhabitants had no access to piped water.

      Perhaps the most dramatic changes in 1994 were felt in the former Soviet bloc countries, where consumers were grappling with the pluses and minuses of living in newly privatized economies. Throughout the republics of the former Soviet Union, the main issues were still the lack of available goods, poor quality, and fake and dangerous products, many of them imported. The breakdown of centralized structures continued, and problems with public services increased, particularly with medical services, housing, and transport.

      Implementation of consumer protection legislation in these countries continued to be a major problem. Russian consumers could claim a victory in 1994, however; the courts ruled that services, as well as goods, should be included in the 1992 Law on the Protection of Consumers' Rights. The need for strict financial services legislation and better consumer education was demonstrated by the thousands of Russians who invested in a stock pyramid scheme and ended up losing their life savings. In Romania some four million people—50% of the population—took part in a pyramid investment scheme that collapsed in 1993.

      Western European consumers in 1994 closely followed the changes in the European Union (EU) and expansion of its membership. Maintaining high health and safety standards in a single European market was the focus of much consumer concern. Many countries were afraid that membership in the EU would compromise their national health and safety standards. Consumer groups charged that the European Commission favoured industry concerns over consumer needs. In 1994, however, they managed to win a seven-year battle when the Commission agreed to regulate cross-border payments—when people send money from one country to another. Consumers would no longer have to pay double service charges to banks, and the Commission established bank liability on all payments.

      At the end of the year, consumer groups everywhere were gearing up for the World Summit for Social Development, to be held in Copenhagen in March 1995. Organizers hoped it would be the people's equivalent of the 1992 "Earth Summit" in Rio de Janeiro. (ALINA TUGEND)

      In 1994 the U.S. Food and Drug Administration (FDA) officially launched the most extensive renovation of food labels in 20 years. Mandated by the Nutrition Labeling and Education Act of 1990, the initiative imposed strict new standards for health, nutrition, and serving-size labeling claims from processors and manufacturers. For the first time, nutrition labels were required on most food packages, an estimated 90% of processed food sold in the marketplace—upwards of 285 billion items. Previously, only foods that made special claims or contained added nutrients had to carry labels, although processors labeled many other foods voluntarily.

      Under the revised regulations, the FDA designed the new labels to provide consumers with a standard reference point, the "Daily Value," representing the average diet for a healthy adult (set at 2,000 calories). The listed amounts of a product's fat, cholesterol, sodium, fibre, and nutrients also had to be presented as a percentage of this Daily Value.

      The Flavr Savr tomato became the first whole food produced by genetic engineering to reach the marketplace. Calgene Inc., of Davis, Calif., bred the tomato with a new version of a gene that affects the ripening process in tomatoes. The introduction of this gene allowed the Flavr Savr to remain firm longer than traditional tomatoes, increasing the time it could stay on the vine and ripen, thus allowing it to achieve better flavour than other commercially produced tomatoes. It was marketed amid heightened consumer concern over labeling and the safety of genetically engineered foods.

      Biotechnology critics had sparked the controversy when the first milk produced with the aid of genetic engineering was marketed earlier in the year. Although that process had been approved by the relevant health agencies, critics said that as-yet-unknown risks could develop—if not in milk, then in other products slated for the market in coming years—and consumers would not be able to avoid them. Biotechnology proponents said such concerns stemmed from a misunderstanding of the science involved in genetic engineering. Half of all consumers surveyed said they would avoid genetically engineered products, according to the Wirthlin Group Inc., but such resistance would lessen if the technology resulted in consistently lower food prices.

      Steps toward a major change in how consumers buy their electric power were taken by the California Public Utility Commission, which proposed fully opening electric power service to retail competition by the year 2002. Without utility monopolies, under which consumers were forced to purchase power at set rates from a local utility, business and residential consumers could shop among power companies for the best prices—much like people already shopped for long-distance telephone service. The proposed changes would allow consumers to tap into existing networks of electricity transmission that connect power companies nationwide.

      Efforts to open the electricity market to consumers in California, New York, and other states were opposed by critics in the utility industry, who said open competition would cause stock values to plummet, and by some environmentalist groups, which held that cheaper power would increase electricity use and thus air pollution.

      Despite the popularity and growing safety reputation among consumers, antilock brakes in automobiles were found to offer no clear advantage on the nation's roads. A study by the Highway Loss Data Institute found that antilock brakes were not reducing either the frequency or the cost of car crashes, including crashes on wet and slippery roads, where antilocks should have proved advantageous. The researchers said the problem was not the technology, which demonstrated clear benefits under test conditions, but drivers who did not know how to brake with antilocks properly. The Institute also cited studies showing that some drivers in cars equipped with antilock brakes drove less safely. (PETER L. SPENCER)

      See also Advertising (Business and Industry Review ); Retailing (Business and Industry Review ); Economic Affairs ; Environment .

▪ 1994

      Global consumption continued to mirror the world's distribution of wealth. With more than one billion people still mired in absolute poverty in 1993, some 800 million consumers were unable to purchase sufficient amounts of food. Industrialized countries consumed 15 times as much paper, 10 times as much steel, and 12 times as much fuel per person as less developed countries. Incomes of the richest one-fifth of the world's population were, on average, more than 150 times higher than those of the poorest one-fifth.

      Consumption trends were also influenced by the continuing rapid globalization of markets and the formation of regional economic blocks. The increased trade in goods and services was generally viewed as beneficial to consumers—providing them with wider choices of products at more competitive prices. On the other hand, there were also concerns that the regional "harmonization" of product safety standards and other trade requirements could lead to a significant lowering of existing consumer- and environmental-protection measures in some countries. In many countries—particularly those experiencing deepening poverty, deteriorating living standards, and reduced social spending—consumer organizations sought to ensure that basic, essential products remained within reach of low-income and marginalized consumers. Growth of the global consumer movement was especially strong in Central America, Africa, Central and Eastern Europe, and southwestern Asia.

      World Consumer Rights Day, commemorated annually on March 15, provided a global platform for local campaigns by consumer organizations and other public-interest groups. A long-running consumer campaign was also renewed at the UN following the final breakdown of its previous negotiations on a draft Code of Conduct on Transnational Corporations (TNCs). The world consumer movement, led by the International Organization of Consumers Unions (IOCU), urged the UN to adopt a more acceptable and timely set of provisions to guide the foreign operations of TNCs and promote their fair treatment by host countries.

      Jan. 1, 1993, marked the long-anticipated arrival of the European single market, encompassing some 345 million consumers in 12 countries of the European Community (EC). Its establishment as the world's largest trading bloc made it illegal for any EC country to restrict the passage or sale of any product manufactured or imported by another member country. The complete removal of regional trade barriers was expected to create a brighter shopping future for EC consumers. Cross-border advice centres began operating in several countries as the European Bureau of Consumers Unions and its members called for better consumer information, higher safety standards, effective and adequate redress mechanisms, and transparent, inexpensive ways for consumers to make cross-border payments.

      The endurance of consumers in Central and Eastern Europe was severely tested by the continuing uphill struggle to establish functional free markets in their countries. Regional governments acknowledged the need to establish basic frameworks and legislation for consumer protection, with support from consumer organizations. Many of those groups also monitored markets for hazardous products, monopolistic pricing, and other rampant abuses while addressing dire environmental problems resulting from decades of uncontrolled industrial pollution.

      In North America and Asia, the future of two regional economic alliances promised to have far-reaching consequences for consumers. The controversial North American Free Trade Agreement (NAFTA) was intended to establish a single market of more than 370 million consumers in the U.S., Canada, and Mexico. The Association of Southeast Asian Nations (ASEAN) tried to hammer out differences blocking the formation of an ASEAN Free Trade Area, which could encompass well over 1.5 billion consumers within 15 years.

      The snail-paced Uruguay round of the General Agreement on Tariffs and Trade (GATT), which began in 1986, was successfully concluded before the Dec. 15, 1993, deadline. The U.S. and the EC agreed to set aside for future consideration a few unresolved issues. The trade agreement, which would have far-reaching implications for more than 100 nations, was the broadest and most important international trade pact in history and would take effect on July 1, 1995. The GATT accord was expected to infuse more than $270 billion a year into the world economy.

      Consumer organizations also requested greater participation in the setting of international food standards by the UN Food and Agriculture Organization/World Health Organization Codex Alimentarius Commission. The institution drew heavy criticism for being dominated by industry representatives from northern countries, with consumers and representatives from less developed countries having much weaker access in comparison.

      Reforms in the Codex Alimentarius Commission were among some 100 recommendations made by a new consumer policy paper on food quality adopted by European and North American members of the IOCU. The paper also urged that specific controls and prohibitions be placed on some unsafe pesticides, food additives, growth hormones, veterinary drugs, and biotechnology and food-irradiation processes in order to ensure the quality and safety of consumers' food supplies.

      As more people became aware of serious environmental problems linked to wasteful consumption, a large percentage appeared willing to recycle their waste and pay higher prices for so-called green products. In June the EC launched a new "eco-labeling" program that would award a seal of approval to products meeting stringent environmental criteria. Green testing—evaluating the actual environmental impact of products—became an area of increasing interest and importance for consumer groups around the world. In May consumer leaders and representatives from more than 40 countries met in The Hague to discuss strategies for advocating sustainable consumption. A global policy paper was also launched that called on developed countries to take the lead in achieving sustainable consumption patterns. (KEVIN G. COOK)

      In 1993 home-equity credit cards came under attack by Bankcard Holders of America and the Consumer Federation of America as irresponsible on the part of banks. Bankers advertised the cards as a financing tool for homeowners that combined low interest rates with federal tax deductibility. Consumer advocate groups were opposed to these credit cards because consumers could lose their homes if they did not pay off their equity card balances.

      The Federal Aviation Administration continued to investigate the impact of electronic gadgets on aircraft instrumentation operations. It was found that electronic apparatuses emit electromagnetic radiation that has a range up to 3.7 m (12 ft) and can create problems for an aircraft's navigation equipment and disrupt radio signals from the airport control tower during landing. Portable phones, remote-control toys, and other radio transmitters had been banned on airplanes for many years, but most airlines allowed passengers to use cassette players, tape recorders, and laptop computers. The Federal Aviation Administration issued an advisory in February that left it to the airlines to set their own rules. At the request of pilots, a number of airlines expanded their list of electronic devices forbidden for use by passengers.

      Consumers became more concerned about the hazards of going to hospitals as studies reported that nearly 30% of hospitalized patients suffered from errors in medications or adverse reactions to the drugs they were given. It was reported that 100,000 deaths a year are caused by hospital-acquired infections. More than 50% of operating-room deaths were attributed to errors in surgery and/or anesthesia. Consumer groups such as the Center for Medical Consumers believed that the privately financed Joint Commission on Accreditation of Healthcare Organizations was not effective in correcting problems because the agency received its funding from the hospitals.

      The Federal Communications Commission issued rulings against "slamming"—switching customers from one long-distance phone service to another without their permission. Under the rulings, if a company sold a long-distance service over the telephone, it had to obtain a written authorization to switch the service, have the consent verified by telephone to an independent third party, or send the consumer information, including a postpaid postcard for the consumer to return if the service was not wanted.

      Automobile lemon laws passed by states in earlier years came under review by consumer advocate groups in 1993. Between 1982 and 1993 every state but Arkansas and South Dakota had passed a lemon law. Most states defined a lemon as a new car that had been in the repair shop for 30 days or had been returned to the dealer for the same problem four times within the first year of ownership. Consumer advocate groups believed the laws were weak because many states allowed the automobile manufacturer to run the mandated arbitration process. In some cases it was found that manufacturers forced to take back an automobile shipped the car out of state to unsuspecting buyers in the used-car market. Of 11,000 arbitration cases handled nationally by the Better Business Bureau in 1991, 1,500 resulted in consumers' receiving a replacement car or a full refund.

      From 1991 to 1993 consumer confidence in the safety of products sold in supermarkets slipped, according to the Food Marketing Institute, a trade association representing supermarkets. In 1991, 17% of those surveyed said they were completely confident the food they bought in a supermarket was safe. By 1993 only 13% were completely confident, while almost 25% were concerned about the products they bought. As a result of consumer complaints and television coverage of supermarket violations of health and safety standards, states increased their inspections of markets and publicly named those markets violating the law.

      (EDWARD MARK MAZZE)

      See also World Economy (Economic Affairs ); Environment ; Advertising (Industrial Review ).

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