Abstract
Excerpted From: Luke Herrine, Unfairness, Reconstructed, 42 Yale Journal on Regulation 95 (Winter, 2025) (433 Footnotes) (Full Document)
Professor Randall note: While this analysis does not explicitly address racial justice, it is highly important because its focus on power imbalances in consumer markets provides a critical framework for understanding and addressing systemic inequities that shape economic outcomes along racial lines. By moving beyond assumptions of equal consumer choice and examining how vulnerability and domination operate in practice, this approach lays a foundation that can be extended to advance racial justice in areas such as lending, housing, and access to essential services.
Consumer protection laws vary on two dimensions. On one axis are the different interests implicated by consumer markets: safety, quality, informed choice, accommodation of different abilities, and so on. On the other are the different techniques through which law protects these interests: standards of quality, standards of conduct, public options, and so on. We can protect an interest in, say, safety through premarket review, through audits, through adjustment of tort liability, through public ownership with direct standard setting, through investment in research. We can protect an interest in correcting for invidious discrimination through public accommodation laws and common carrier rules, through statutes prohibiting discrimination against particular classes with respect to particular decisions, through quotas, through reparations programs. Conversely, any given technique of protection can implicate different interests: a public option in healthcare, say, might be designed to promote universality of access, relative equality of treatment, lower prices, minimal quality standards, and so on.
The ban on "unfair or deceptive acts or practices" referred to as "UDAP" (and pronounced "you-dap") among consumer protection cognoscenti--is our most general form of one of the most prominent techniques of consumer protection: conduct regulation for consumer- facing businesses. It is general in two senses. One is that it applies to nearly every consumer-facing business. Wherever in U.S. jurisdiction there is an entity that does business with consumers, there is almost certainly at least one regulatory body tasked with monitoring it for UDAPs. The original ban on ""unfair or deceptive acts or practices" was created in 1938 for the Federal Trade Commission (FTC), which has broad authority over most industries. It has also been bestowed upon the Department of Transportation (DOT) and multiple banking regulators--now guided by the Consumer Financial Protection Bureau (CFPB) and its authority over "unfair, deceptive, or abusive acts or practices" (UDAAP). Most states also have some variation of a UDAP statute, many with private rights of action.
More importantly, UDAP describes at the most abstract level what consumer-protective conduct regulation aims to prevent. If one were looking for a concise set of adjectives to describe what the Fair Debt Collection Practices Act, the tort of negligent misrepresentation, restrictions on prescription drug advertisements, bans on bait-and-switch advertising, and price gouging laws have in common, one might say they prohibit practices that are unfair, deceptive, or abusive. Seen in this way, when Congress (or another legislature) passes particular conduct regulations, it declares certain types of conduct inherently (or at least presumptively) unfair, deceptive, or abusive. And when it passes a wholesale ban on UDAPs, it delegates authority to hunt down other examples.
Tracking how agencies have used their UDAP authority is thus a good way to track the direction of consumer protection--its preoccupations, its politics, its principles--at least as it is understood by the implementing agencies.
When we do so, we find that there has been a paradigm shift in recent years.
The status quo, starting around 1980--during the "neoliberal era," for those who recognize such a thing to make sense of UDAP in terms of consumer sovereignty. Consumer sovereignty is a hypothetical condition in which consumers incidentally discipline the conduct of firms simply by shopping. The basic notion is that if consumers know what they want and know what is available, and if firms are forced to compete for consumers' business, then consumer choice on the free market will produce the mix of goods and services (and, indeed, social conditions more broadly) that best furthers consumers' interests. So long as other areas of law are oriented toward ensuring that markets are competitive, consumer protection can focus on ensuring that consumers are making informed and rational decisions, and consumer sovereignty can be achieved.
This general way of thinking was paired with a presumption that markets are generally self-correcting (even when imperfect) and that regulation that does anything other than reinforce those self-correcting dynamics is generally unwise. The practical result was an FTC that focused primarily on policing for deceptive practices, and that used the unfair-practices authority primarily as a supplement to get at not-quite-deceptive information asymmetries or, occasionally, to prevent overtly harmful conduct (such as harassment) that was not clearly informational. With either authority, the Commission proceeded with caution, preferring industry self-policing to government intervention, case-by-case enforcement to regulation (or even strategic enforcement "sweeps"), and disclosures to bans or mandates. The hope was always to do the least possible to nudge the market back into its self-corrective baseline and to avoid making any overt "policy" decisions.
As late as 2008, this way of thinking about consumer protection seemed to have no serious rival. Yet today it is on the back foot. It suffered its first major blow in the aftermath of the global financial crisis of 2007. The suddenly vivid connection between unpoliced predatory practices in the mortgage industry and the stability of the entire global economy made an absurdity of market self-correction. Congress created CFPB with an added "abusive practices" authority explicitly designed to overcome the shortcomings of the underutilized unfair-practices authority. The Bureau was aggressive from the beginning, combining regulation with enforcement to target power asymmetries that could not be attributed to informational problems (such as avoiding usury prohibitions and taking advantage of consumers' limited options). Precrisis efforts to incorporate behavioral economics into policy suddenly had a much easier time gaining an audience.
A more decisive blow came with the Biden administration. As he did in several other areas of economic regulation, President Biden appointed younger progressive bureaucrats who had been disillusioned by the postcrisis response of the Obama administration and saw the need for a break with (at least some) neoliberal policies. Many of these appointees were also driven by a dissatisfaction with the evident failures of the notice-and-consent approach to disciplining the growing power of Big Tech firms.
There has consequently been a flurry of regulatory activity at the FTC and CFPB using the unfair-practices authority since President Biden took office. Through enforcement actions and sector-wide regulations, these agencies have used the unfair-practices authority to police unequal treatment, to set baseline standards for quality, and to prevent firms from taking advantage of consumers' vulnerabilities. A case-by-case approach to pick off "bad apples" has given way to campaigns against particular types of conduct--imposing hidden fees, using negative option contracts, selling data that can be used to track people to "sensitive locations"--that use specific enforcement actions to build groundwork for sector-wide rule-makings. Disclosure remedies have largely been scrapped in favor of prohibitions and mandates, including banning several repeat offenders from doing further business in the industry. In several contexts, the unfair-practices authority has been used to protect the interests of disempowered purchasers who are not the end users of goods and services, such as gig workers and small business borrowers.
This is not just the predictable uptick in regulatory action that one expects when a Republican administration is swapped out for a Democratic one. It represents a qualitative change in how consumer protection regulators (or at least liberal and progressive ones) go and think about their task. In particular, the new generation of regulators has been critical of models that overestimate consumers' capacities to discipline sellers merely through shopping behavior--models that have caused regulators to underestimate the work that consumer protection must do to prevent sellers from dominating consumers. Drawing on a variety of social science research, they have sought to trace and respond to the many ways that sellers can exert power over consumers and the way that consumers are differentially empowered.
The first task of this Article is to describe this paradigm shift and to situate it in historical context. The second is to reconstruct its theoretical premises and argue for their superiority over the consumer sovereignty framework. Because the new framework is focused on the many ways that market structure can create problematic power imbalances between sellers and consumers, I refer to it as the antidomination framework.
The antidomination framework draws out both practical and normative conclusions from its skepticism about the power of informed consumer choice. Rather than trying to arrange markets so that competition and consumer choice do all the work, it builds inductive models about how those forces work in different contexts. The goal is to design rules that channel these dynamics in more beneficial ways, with special attention on protecting consumers most vulnerable to their effects. Rather than relying on actual or imagined payment decisions as all-things-considered value trade- offs, it recognizes the distortions that resource inequalities create. And it aims to correct for those distortions by sympathetically interpreting consumers' interests in a given context enough for retirement, for instance, or not being harassed by stalkers with access to location data, or understanding how to choose a mortgage. Then one can detect what amounts to a ""market failure" relative to those interests, rather than relative to an ideal in which free competition and "rational" consumer choices govern all outcomes.
The result of this change in perspective is a more open-textured and flexible unfair-practices authority--one that envisions a larger role for administrative agencies in shaping the processes and outcomes of consumer markets, and one that invites more contestation about which and whose interests such markets should further. If these changes seem to raise the specter of bureaucratic overreach and hubris, we have several reasons not to let that deter us. For one thing, facilitating consumer choice is still a central value of consumer protection agencies, even if they think about how to accomplish that task differently and allow room for other values. For another, establishing an unfair practice is not simply a matter of declaring it so: an agency must still put forward evidence of consumer injury and evidence that intervention is not going to make things worse (even if what is "worse" is contestable). Perhaps most importantly, the risk of regulatory overreach should be balanced against the very real risk of regulatory underreach: the potentially explosive effects of which were in evidence in the financial crisis that inspired the present reconsideration.
In the remainder of this Article, I explain this conception of unfair-practices authority at greater length, as well as how it fits into doctrine. Part I introduces UDAP and explains how the consumer sovereignty framework came to dominate its interpretation. Part II explains how the consumer sovereignty framework lost its dominance, focusing on the financial crisis and the concerns about Big Tech. Part III describes how this has tipped over into a new approach in the Biden administration. Part IV outlines the antidomination framework as a way to make sense of this new approach. And Part V reinterprets the unfair-practices doctrine in light of this new understanding, with a particular focus on mitigating worries about paternalism.
[. . .]
I have argued that there has been a recent shift in the understanding of the unfair-practices authority. This shift is still in its early stages and will likely not be much in evidence during the Trump administration (although some aspects of it may survive, judging by the pattern of dissents during the Biden administration--a topic that goes beyond our scope here). I have teased out some of the patterns involved and used them to inspire a reinterpretation of the authority--built on a different vision of consumer protection than has long been dominant.
My core interpretive argument is that the unfair-practices authority should be seen as a tool to interrupt business domination of consumers. It is an effort to correct for power asymmetries in consumer markets that prevent consumers from furthering their interests in a way that is consistent with social values. Applying the unfair-practices authority requires identifying the interests in play, which is often a contested activity.
Fear of contestation over the values that should guide consumer markets was, of course, what got us to the consumer sovereignty framework in the first place. So I conclude by addressing a final worry: What if political winds change or the FTC kicks a hornets' nest and we have KidVid-style backlash all over again? Whatever the merits of the theoretical or even the substantive policy arguments, wouldn't it be a better use of what are, after all, quite limited resources to police the most egregious conduct and nudge Congress to make the harder policy judgments?
I think not. As I have argued elsewhere, "KidVid was a perfect storm." It is worth keeping in mind, but dangerous to treat as always around the corner. The Commission has waded into controversial territory before and after and has even been overruled by Congress without shutting down. And CFPB, which regulates arguably the most powerful corporations in the history of the world, has taken a number of controversial positions and has been buffeted with attacks on its legitimacy (most successfully in the courts), but it remains standing with its full substantive powers intact. Not every time the FTC or CFPB ventures into controversial territory--not even every time a congressional majority musters the energy to oppose its efforts-- should we expect disaster to follow. To the contrary, this back-and-forth is part of what it takes to have an administrative agency accountable to democratically elected bodies.
Of course, agencies must be attuned to their political surroundings, for reasons of both strategy and accountability. As the "policy feedback" literature in political science has demonstrated, one of the effects of policy development and implementation is to shape the political conditions in which future policies can be developed. One pattern of feedback is backlash, but it is not the only or the primary one. And even where backlash occurs, progress can be made. For agencies charged with protecting consumers from powerful entities, a cowering posture will not cut it. Thinking through different ways of creating and reinforcing political legitimacy for norm setting in consumer markets can have the dual benefits of making regulation more responsive to substance (and less to avoidance) and creating space for democratic feedback, including contestation and critique. That is a more virtuous political cycle, although it is one that requires patience and a longer time horizon. It is worth trying for.
Assistant Professor, University of Alabama School of Law.
