Information Asymmetry and Consumer Protection Dynamics
Information Asymmetry in Markets
Information asymmetry refers to a lack of equivalence between parties in a transaction. It signifies a market distortion where one party in a consumption relationship possesses detailed relevant information about the product or service, its associated risks, and the optimal use of its ingredients and manufacturing elements, while the other party lacks this information.
A consumer relationship is established between two main parties: a consumer and a supplier. In this dynamic, one party, typically the supplier, holds and manages the information. The other party, the consumer, often by their inherent position, does not manage or have access to this information.
This significant disparity in knowledge and information is known as information asymmetry. Overcoming this market distortion requires a regulatory body to impose duties on suppliers to provide information to consumers.
Defining the Consumer
A consumer is a person who purchases goods and services for the private satisfaction of personal or domestic needs. They are at the end of the supply chain.
Consumer Characteristics
- Purchases goods and services that are often individually of lesser economic significance.
- Are often fragmented, dispersed, and disorganized.
For decades, efforts have been made to unite consumers, enabling them to organize and defend their common interests. Such organizations exist in most countries. A prominent example is Consumers Union, publisher of Consumer Reports. In Argentina, ADELCO is a notable organization. Chile has approximately 50 such organizations, with Odecu and CONADECUS being among the most important.
Understanding Suppliers
Suppliers are natural or legal persons who regularly sell goods and services, for which they charge a price or fee.
Supplier Characteristics
- Typically engaged in marketing goods or services, specializing professionally in this area.
- Possess comprehensive knowledge of market operations, product features, and the services they offer.
- Often meet and organize with other suppliers.
State’s Role in Consumer Protection
The state body responsible for consumer protection refers to the state’s presence and participation in the market, fulfilling a role in consumer protection. State presence is crucial, considering that in the supplier-consumer relationship, the consumer is often the economically weaker party, necessitating government intervention.
In Chile, the state agency does not apply sanctions, unlike in countries such as Colombia and Peru, where the government body both oversees and applies sanctions.
Key tasks include:
- Educating consumers.
- Informing consumers about goods and services.
- Protecting consumers through two primary methods:
- Assisting consumers with claims in court.
- Coordinating voluntary mediation processes between conflicting parties.
SERNAC in Chile: Functions
SERNAC (Servicio Nacional del Consumidor) in Chile does not monitor activities or apply penalties. Instead, its functions are to educate, inform, and protect. Prior to 1990, an agency named Dirinco existed, which possessed the authority to control and punish.
Other Regulatory Agencies in Chile
Other government agencies oversee specific business sectors:
- Banking: Superintendency of Banks.
- Telecommunications: Subtel (SubsecretarÃa de Telecomunicaciones).
- Energy/Power: SEC (Superintendencia de Electricidad y Combustibles).
Role of Courts in Consumer Protection
Courts are the bodies responsible for applying sanctions in consumer protection matters, particularly where specialized agencies do not exist or lack sanctioning powers. They are tasked with determining compensation and fines related to various penalties.
Types of Courts Involved
- Local Police Courts: Handle individual judgments. These are community courts found in each municipality, characterized by short procedures, often conducted without legal representation.
- Ordinary Civil Courts: Handle collective proceedings.