Department of Justice
Consumer Affairs Victoria Geoff Browne National Consumer Congress Melbourne, 16-17 March 2006
WHAT DOES AFFLUENZA MEAN FOR CONSUMER AGENCIES I have been asked to consider what Affluenza means for consumer agencies, such as Consumer Affairs Victoria and the other Fair Trading organisations. Accordingly, I‟m not going to debate the premise of Affluenza, but rather, I‟m going to accept the key propositions made by Hamilton and Denniss, and consider the issues they raise for consumer regulators – in particular, whether Affluenza and the proposed solutions to it foreshadow a changed role for these agencies.
The approach I‟m going to adopt is: Identify the key propositions made in Affluenza Briefly recap on the role of consumer regulatory agencies Consider the Affluenza issues and symptoms against current regulatory roles; and Identify whether new or changed roles for consumer regulatory agencies emerge
The key Affluenza propositions According to the authors, the major culprit is the marketing industry. Exploitation by the marketing industry encourages: over-consumption, „luxury fever‟, and self-centred gratification. They push wants rather than needs, cultivating a sense of deprivation
Department of Justice
Consumer Affairs Victoria Geoff Browne amongst plenty. They utilise consumer psychology, building an environment where consumers demand products they otherwise would not. A consequence is a growing, unhealthy preoccupation with money and material things, causing private and public harm. In particular, we are pushed to consume beyond our income capacity, leading to damaging, unsustainable spirals: increased credit and debt (leading to personal and financial harm); overwork (damaging personal and relationship health); and environmental costs (waste; harm to the natural environment)
And our response to these ills, supported by the same marketing industry, includes turning to drugs and alcohol (which further harms the personal and social fabric), as well as innumerous self help books, courses, and a range of other expenditure-based coping mechanisms. These are the damaging symptoms of Affluenza. The solution offered to Affluenza is „conscious consumption‟ – the cultivation of an awareness of why we buy things, and understanding what needs we are trying to meet. It is „an essential protective shield in our personal lives‟, but we must also be conscious of the impact of our decisions on the rest of the world. Consciousness needs to have both a personal and a social dimension. Some people do this. To quote: “People who have a better understanding of themselves and are less prone to self-deception can see through the marketer‟s attempts to deceive them”. But the majority do not.
The role of consumer agencies
Department of Justice
Consumer Affairs Victoria Geoff Browne At risk of great simplification, for the purposes of today‟s discussion, consumer protection agencies seek to ensure that: Representations to consumers are fair and transparent Consumers are informed; Traders are aware of obligations; and Markets operate fairly
Consumer agencies also play an important role in identifying areas where gaps, inconsistencies and new issues emerge, contributing to policy development. Information is provided to enable consumers to make informed choices. Consumer agencies have not sought to tell consumers what the correct choice is, but have relied on the consumer to make their decisions, hopefully informed. So we do not tell consumers bluntly that „credit is bad‟, but we do inform consumers about credit transactions, and the risks and consequences of too much indebtedness. In recent years there has been increasing interest in understanding consumers‟ decision making behaviours. Does the provision of information lead to informed decision making? Does more information lead to „better‟ outcomes? But then, who determines what a „better‟ outcome is? These are relevant questions for consumer agencies to consider when addressing not just the Affluenza problem, but all approaches to consumer information and advice.
Applying the Affluenza propositions to the role of the consumer agency There are three key damaging consequences of Affluenza identified by the authors, as well as its underlying cause. I will look at each of these in turn.
The first damaging consequence is “Too much credit”
Department of Justice
Consumer Affairs Victoria Geoff Browne Consumer agencies have increasingly over recent years been providing consumers with information and warnings about the risks and consequences of too much indebtedness, easy credit, unfair credit terms, and so on. The use of credit can be complex, and have long-lasting implications which may not be understood or apparent to the consumer at the point of transaction. There is clearly a need for consumers to be informed. Programs have been targetted to specific groups in response to particular needs and vulnerability. The recently released Victorian Consumer Credit Review is a good illustration of the importance and attention paid by government and consumer agencies to these risks. While Hamilton and Denniss would probably argue for stronger efforts to counter this damaging consequence of Affluenza, in my view this becomes an argument about degree, rather than role.
The second damaging consequence is longer working hours, leading to relationship damage.
The decision of individuals to spend more or less time at work is an area where consumer agencies have not traditionally had a role, and it is doubtful whether they should. Perhaps the closest consumer agencies may come to affecting decisions on a consumer‟s work-leisure choice is in pursuing their traditional roles in areas such as child care services, investment seminars, time-management courses, and the like. I find it difficult to foresee a role for consumer agencies providing information and advice to consumers about the impact of longer working hours on their family relationships. Other government agencies would be better placed to progress this argument.
The third damaging consequence of Affluenza is waste and environment damage.
Department of Justice
Consumer Affairs Victoria Geoff Browne Waste and environmental damage have long been recognised as negative consequences of individual decisions to supply and buy certain products. The prices paid by consumers do not reflect the true costs to society of environmental damage and other social consequences of their purchase. The economist‟s response to this problem is to address such negative externalities through price adjustments and /or regulation. To the extent these measures are not in place, over-consumption will occur in areas with high social costs. If Governments have not, or are unable to reflect social costs in consumer prices, is it the role of consumer agencies to inform, or seek behavioural change by consumers of these products? Alternatively, where governments have acted (for example, increased costs of landfill; plastic bag pricing or bans), should consumer agencies push beyond the measures established? It is clearly inappropriate for consumer agencies to push activities beyond that consistent with government policy, although as noted earlier, consumer agencies do have a role in providing policy advice to government. There is, however, obviously scope for consumer agencies, consistent with government policy, to inform consumers of the broader implications of their consumption activity. A good example is the recent publication in Victoria of „Consuming Planet Earth‟ – a resource for teachers to assist students to understand the broader environmental consequences of consumption activity. The section titled „A consuming culture‟ has as a learning outcome: “Students should be able to recognise that everyone is a consumer and every purchasing decision and choice has an impact on the environment” Such initiatives by consumer agencies complement broader government activity in areas such as water conservation, energy efficiency, and so on. So on this issue, my view is that consumer agencies have a role in highlighting the environment effects of consumption, consistent with broader government policy, and that this is beginning to occur. However, the effectiveness of such efforts will be
Department of Justice
Consumer Affairs Victoria Geoff Browne limited if price signals or the broader regulatory environment are not complementary, and conversely, will be strengthened when undertaken as part of a broader program.
Finally, I turn to the underlying cause of Affluenza: the wiles of the marketers encouraging over-consumption. According to Hamilton and Denniss, the solution to this underlying cause is the promulgation of „conscious consumption‟ – cultivating an awareness of why we buy things and understanding what needs are trying to be met. By accepting this as the solution, they are implicitly accepting that the alternative – somehow limiting the marketer‟s ability to create the Affluenza environment – is unlikely to be successful. In a market economy, where the motivation of business is primarily to profitably sell more product to more consumers, it is difficult to disagree. Building consumer resistance to Affluenza would lead to less consumption, and shifts in consumption behaviour towards goods and services with less personal and socially harmful effects. It requires consumers to be aware of, and resistant to the methods used by the advertising industry to influence their consumption patterns. At a secondary level, awareness of the personal and social consequences of overconsumption (that is, the three key damaging consequences of Affluenza) may also work to build understanding of and resistance to the marketer‟s efforts. Advertising and marketing are an intrinsic part of our market economy, and yet according to Hamilton and Dennis they are fundamentally damaging. Presumably governments disagree, as there is no uniform tax or regulation on marketing, although there are specific rules about when certain products can be advertised, to whom, when. At the heart of the issue appears to be the proposition that marketers are good at understanding and exploiting the psychology of consumer behaviour, whereas the
Department of Justice
Consumer Affairs Victoria Geoff Browne majority of consumers are not capable of understanding this, or protecting themselves against this. It is interesting to note that we are seeing the market itself respond to some of these issues. Game shows featuring obese people competing to lose the most weight highlight the interesting juxtaposition of effective marketing and the overconsumption mantra. So should consumer agencies promote conscious consumption to counter the Affluenza virus? This could take a number of forms: Agencies could promote the environmental and social consequences of consumption. Although more directly tackling a symptom of Affluenza, this can also assist in encouraging conscious consumption by highlighting the enironmental and social consequences of consumption. As argued earlier, this is a current role of consumer agencies as part of a broader government response to these issues. Secondly, agencies could inform consumers of the psychological games marketers play This is not really different from the information provision, cautionary and advisory role agencies play now with complex transactions, such as credit. I see no major difference in principle between advising consumers to „be aware of what the credit provider is offering you‟, and „be aware of how the marketer is encouraging you to purchase‟. The key difference is scope. One is focusing on a targetted risk area; the other is essentially an untargetted broadcast warning. Perhaps the most likely extension of activities by consumer agencies would be to incorporate these marketing alerts into other targetted consumer messages to particularly vulnerable groups. How this is best presented - whether through more information, or other more effective means of influencing consumer behaviour – is a key issue.
Department of Justice
Consumer Affairs Victoria Geoff Browne Thirdly, actively counter the marketers‟ message.
This probably best addresses the objectives of Hamilton and Denniss. It would require promotion of the „needs‟ not „wants‟ message in an attempt to directly counter advertisers‟ efforts, and weaken the over-consumption environment they create. It translates into a fairly generic, amorphous message which I doubt sits easily with current roles of consumer agencies. It is an activity which would need clear government policy and resource commitment to pursue. It also begins to raise questions about who is best placed to determine what the needs of an individual are.
In summary, consumer agencies are addressing two of the three key symptoms of Affluenza: too much credit, and environmental harm; and in my view, are not the appropriate agency to focus on the third: work-life balance and relationship impacts. With regard to the wiles of the marketers, there is scope for consumer agencies to extend current programs to incorporate reference to the approach of advertisers to influence consumer behaviour. However, I think this is more likely in a targetted approach than any broad-brush effort. Extending activities to more directly counter the over-consumption message of the marketers is, in my view, an unlikely role for consumer agencies. This is a much broader policy issue for governments to consider.
In all cases, the question remains of how best to get the message across to consumers. More information does not necessarily mean more informed consumer choice. Understanding the drivers of consumer behavior is a key element of effective consumer agency programs.
Department of Justice
Consumer Affairs Victoria Geoff Browne
Geoff Browne Deputy Director Consumer Affairs Victoria 16 March 2006