Fall 2014

New Book by Prof. Schneider Focuses on the Failure of Mandated Disclosure

By Jenny Whalen

Carl E. Schneider, ’79
Carl E. Schneider, ’79

Mandated disclosure. It’s the 15,000 words that stand between an iTunes user and his 99-cent download, the fine print on a doctor’s consent form, and the focus of a new book by Michigan Law Professor Carl E. Schneider, ’79.

Coauthored with Omri Ben-Shahar, the Leo & Eileen Herzel Professor of Law at the University of Chicago Law School, More Than You Wanted to Know: The Failure of Mandated Disclosure (Princeton University Press, 2014) questions the continued use of what its authors contend “may be the most common and least successful regulatory technique in American law.”

In theory, mandated disclosure—requiring one party to a transaction to give the other information—should benefit consumers. “It’s frustrating because it seems so plausible,” says Schneider, the Chauncey Stillman Professor of Law and professor of internal medicine. “You give people more information and they make better decisions.”

But, as Schneider and Ben-Shahar’s anecdotal and quantitative evidence illustrates, the policy rarely achieves its intended purpose. “We know from personal experience, logic, and the result of studies  on the effectiveness of disclosures that mandated disclosure just doesn’t work,” Schneider says. “We know how long people spend on disclosure pages on websites. Almost no one visits these pages at all, and those who do are probably looking for a way to click off the page.”

Examining forms of mandated disclosure in their respective areas of expertise—Schneider in medical law and Ben-Shahar in consumer protection—the authors concluded that most can, and probably should, be eliminated. “Mandated disclosure is a kind of panacea,” says Schneider, also a member of the U-M Institute for Healthcare Policy & Innovation. “Real regulation with bite is difficult for legislators to adopt. Everyone will vote for mandating disclosure, but if no one reads the disclosures, or if they do read them and can’t understand them, then they are useless.”

The authors point to the mortgage industry as one of the most recognizable cases in which even simple transactions have become inundated with over-complicated disclosures. “In some cases, people have made bad decisions and the solution has been to make mortgage disclosures more thorough. But even if you get 30 to 50 disclosures on your simple, 30-year fixed mortgage, that doesn’t protect you from disaster,” Schneider says. “I teach property, and when I refinance,  I don’t read all of the documents. Omri is an economist and writes on consumer protection, and he doesn’t. If we don’t, who does?”

And neither professor accepts the idea that disclosures can be improved with plainer text. “You can’t simplify your way out of this,” Schneider says. “The Obama administration has said, ‘We’ll simplify and make disclosures smart.’ But we’ve been working to simplify mortgage laws for decades. After a number of decades we have to say, ‘It’s not us. It’s the problem.’”

So until lawmakers are willing to impose stricter regulations, Schneider maintains that the vast majority of mandated disclosures currently in place should be eliminated. “It’s like bleeding for disease,” he says. “When it became clear that  this treatment was ineffective, the right thing to do wasn’t to keep using it because there was no alternative at the time. Lawmakers have to bite the bullet and make real choices  about regulation.”