The role of private litigation in market regulation: beyond legal origins

The problem of how consumer law is to be enforced has taken a new turn as a result of the development of the ‘law and finance’ or ‘legal origins’ theory propounded by leading American economists. Although this theory mainly deals with corporate law, securities regulation and other financial matters, its basic findings can also be applied to consumer law in the broad sense. In this broad sense, a shareholder or an investor is also a consumer in the sense and ambit of European consumer law. Indeed, the ‘legal origins’ theory claims to be applicable not only to narrow areas of corporate or financial regulation, but to the ‘social control of economic life’ in general. Consumer law is certainly part of this wider concept of social regulation. In this chapter an overview of the main features and current state of the ‘legal origins’ theory will be given. It proceeds to argue and explain that the legal origins theory must be put in a more historic perspective regarding the relationship between private and public law regulation. From this perspective, it will become clear that the legal origins theory does make a significant contribution to our understanding of regulatory strategies, but does not provide a substitute for policy decisions which need to be made by legislators and society in general.