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There are several important reasons for some sort of formal "consumer protection." To take it first from the consumer's point of view, the seller has possession of the item for sale and is in a much better position to know the product and/or prevent the consumer from seeing anything wrong with it. Very often, also, the seller is in a financially superior position in general and is able to intimidate the purchaser. Finally, in a society like ours in the U.S. where the producer may be far away from the market, consumer protection prevents a seller from escaping the consequences of inferior or dangerous products just because the victim is far away.

From the society's (including the seller's) point of view, some sort of consumer protection allows there to be more trust between the parties to a sale. This reduces negotiation time and other "transaction" costs and makes it possible to do more business. That is, theoretically, one reason the American and European commercial systems are more stable and prosperous than those of some third-world countries.

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