The impact of e-commerce developments on consumer welfare - Information disclosure regimes

Information disclosure requirements are a relatively common feature of consumer protection regimes generally. In the case of retail investment products such requirements have been in place since the late 1980s. Now the European Distance Marketing of Financial Services Directive will impose a similar disclosure regime wherever a contract is concluded at a distance. But, despite the popularity of disclosure regimes with policy makers, the available evidence suggests that such regimes may not be particularly effective. The purpose of this paper is to discuss first, the extent to which disclosure regimes are underpinned by a solid understanding of consumer decision-making behaviour, and secondly, the implications the development of the internet as a delivery channel for retail investment products might have for their effectiveness. The paper concludes that, despite the indeterminacy of consumer decision-making research such that it fails to provide a ready model on which to (re)design disclosure regimes, the development of the internet as a delivery channel both compounds the challenges for the regulator in devising an effective disclosure regime, but also provides the regulator with an opportunity to explore the potential to deliver interactive capabilities which would enhance the potential to better influence consumer decision making. As such, the paper should be of interest to regulators, the industry (which has expressed doubts about the cost-effectiveness of such regimes) as well as academics interested in regulatory policy.