The Potential Secondary Effects of Consumer Legislation: A Conceptual Framework

In recent years, numerous pieces of consumer‐oriented legislation have been passed at both the federal and state levels. Although such laws are usually assumed to have a beneficial impact on consumers, situations may occur when either (a) the law fails to accomplish its primary objectives because of poor design and implementation, weak enforcement, and/or illegal action on the part of business firms that allow them to circum vent the law, or (b) the law leads to unforeseen strategy change by business firms that tend to minimize or nullify the expected benefits of the legislation. These unforeseen reactions or secondary effects frequently serve to weaken the law's potential benefit for the consumer. This paper focuses on the secondary effects problem by examining the kinds of strategy changes that business firms might make in response to consumer legislation and the factors affecting these changes. An analytical framework is developed for evaluating the potential costs to the consumer of these secondary effects and comparing these costs with the expected benefits to be derived from consumer protection laws.