Is Mandatory Disclosure Helping Consumers?

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The Regulatory Review features commentators on a recent book that questions whether mandatory disclosure is really working.

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The last time you purchased something, maybe a car or just a song on iTunes, were you presented with a litany of terms and conditions before completing the transaction? Vendors in many markets are required to make a great deal of information available to the consumers of their goods and services. This is called mandatory disclosure, and it is designed to protect consumers by evening the playing field and ensuring they have access to all the information they need to make a well-informed decision about what to purchase. But did you actually read those terms? Likely not. So if people are failing to read the information disclosures, is mandatory disclosure really working?

That is precisely the question a recent book, More Than You Wanted to Know: The Failure of Mandated Disclosure, sets out to answer. The authors, Omri Ben-Shahar, a professor at the University of Chicago Law School, and Carl E. Schneider, a professor of law and internal medicine at the University of Michigan, present data on mandated disclosures and its failures. They analyze why disclosures do not work, and why policies requiring such disclosures remain in place even when they are ineffective. At the end of the day, Ben-Shahar and Schneider argue that mandatory disclosure is a failed policy, and should be cast aside as such.

The Regulatory Review is excited to feature commentators on More Than You Wanted to Know. Essays by commentators analyze the book and its take on mandatory disclosure. We begin with an essay by the book’s authors, Ben-Shahar and Schneider, who give an introduction to mandatory disclosure and why they think it has failed.

The Failed Reign of Mandated Disclosure

June 15, 2015  |  Omri Ben-Shahar and Carl E. Schneider

The fact is that disclosure does not work; it cannot be fixed; and it can do more harm than good. It has failed time after time, in place after place, in area after area, in method after method, and in decade after decade. If disclosure could work, it would be working by now.

Information Overload and Mandatory Securities Regulation Disclosure

June 16, 2015  |  Troy A. Paredes

Disclosure is powerful, but that does not mean that more disclosure is always better than less. Too often, SEC filings are full of too much repetition and too much information that is not useful to investors. The SEC is reviewing its mandatory disclosure regime to try to make it more effective, including looking at how to correct for information overload.

Are Mandated Environmental, Health and Safety Risk Disclosures Really as Bad as iTunes License Agreements?

June 17, 2015  | Charles Howland

Ben-Shahar and Schneider’s arguments against mandated disclosure become less surefooted when they direct their critique to examples in the environmental, health, and safety realms. Outside of product safety warnings, many of their critiques fall short.

Defending Disclosure

June 18, 2015  | Eric W. Orts

There are many examples of mandated disclosure successes not included in the book. What is so wrong, for example, with Energy Star, fuel economy standards, and greenhouse gas reporting? If these everyday cases of mandated disclosure pass muster, then informational regulation in other contexts might work as well.

Mandated Disclosure May Have Flaws, But It Still Has Value

June 22, 2015  | Ginger Zhe Jin

For a policy as popular as mandated disclosure, documenting pitfalls is valuable. Whether the errors warrant a universal dismissal of mandatory disclosure is another question. Before we rush to abandon mandated disclosure, it is worthwhile to think about it in a more balanced view.

Mistaking the Symptom for the Disease

June 23, 2015  | Lauren Willis

Disclosure—mandated or not—can give consumers false comfort and overwhelm consumers into making worse decisions. Yet the deeper problem is that the law allows firms to employ disclosure to bind consumers to terms outside consumers’ ordinary expectations.

Response to Disclosurites

June 24, 2015  | Omri Ben-Shahar and Carl E. Schneider

We hope the marvelous ingenuity and energies of the army of disclosurites can be shifted to the pressing task of telling lawmakers that mandated disclosure is no longer a respectable panacea and beginning to offer lawmakers alternatives that more directly and effectively address the problems mandated disclosure was supposed to solve.