Consumer Policy Tools

Background Paper to Creating Confident Consumers

May 2003

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Prohibitions and Bans

At first glance, product bans appear to restrict consumer choice. However, if a product or service poses a risk to consumer safety or well-being, then the most effective means of addressing the problem may be simply to ban the product. This is especially so where the risk is unlikely to be mitigated through the provision of consumer information (e.g. that information is high cost, difficult to obtain or understand, or undervalued by consumers through differing perceptions of risk). It may be much more costly to have to obtain specific up-to-date information to avoid purchasing a hazardous product than to simply arrive at the counter to find it is unavailable. [27] Although a product ban is a fairly crude tool that restricts consumer choice, it may be more successful in lowering information costs than other tools.

Regulation can also prohibit certain conduct, such as the prohibitions on misleading or deceptive conduct and on unfair practices found in the Fair Trading Act 1986. These prohibitions seek to align consumer expectations and trader conduct, thereby modifying consumers' pre-transaction information costs. Coupled with enforcement and redress mechanisms, such prohibitions also give post-failure relief.

[27] Supra at note 2, at 158.

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