Consumer Law & Policy Blog

Watch Mayor Bloomberg's remarkable press conference on the sugary-drink ruling

by Brian Wolfman

We told you yesterday about a New York trial court decision invalidating New York City's ban on the sale of sugary drinks larger than 16 ounces.

Now, go here or click on the embedded video below to see Mayor Bloomberg's remarkable press conference reacting to the ruling. In case you had any doubt: The City will appeal, and Mayor Bloomberg says he expects a reversal and reinstatement of the ban.

The mayor began the press conference with a stout defense of New York's historic support for aggressive health regulation. He noted that life expectancy in NYC is up three years since 2003 -- which he attributes to the city's recent health policies -- and is two years higher than the national average. He then named one health measure after another -- e.g., various smoking bans -- that he's proud of. Then, he explained that the one problem that has gotten worse is obesity. New York, he said, not only has the legal right, but the moral responsibility to do something about it. All in all, the mayor's press conference was an unapologetic defense of the role of government and its obligation to protect the public's health.

 

"The 5 biggest lies about entitlement programs"

Here.

New York City's ban on the sale of large sugary drinks invalidated under state law as "arbitrary and capricious"

As explained here, "[a] New York state [trial] judge on Monday [March 11, 2013] threw out a ban on large sugary drinks set to go into effect in New York City on Tuesday, calling the new regulation 'arbitrary and capricious.'” The decision is here. 

We have posted about the ban many times, including here, here, here, and here. Presumably, NYC will appeal. UPDATE:  Mayor Bloomberg says the City will appeal, and he says he is confident that the decision will be reversed.

Are government job cuts undermining economic recovery?

Phil Izzo explains here that "[a]ccording to the [Labor Department's] household survey, which is where the unemployment rate comes from, there are nearly 950,000 fewer people employed by the government than there were when the recovery started in mid-2009. If none of those people were counted as unemployed, the jobless rate would be 7.1%, compared with the 7.7% rate reported on Friday. * * * No other sector comes close to those job losses over the same period. Construction is in second worst place, but its 225,000 cuts are less than a third of the government reductions. To be sure, construction and other sectors performed worse during the depths of the recession, but no area has had a worse recovery."

Has the Obama Administration lived up to its promise to be "the most transparent administration in history"?

In time for Sunshine Week, the Center for Effective Government has issued this report on how the Obama Adminsitration is doing in meeting its pledge to be "the most transparent administration in history." According to the Center, there's good and bad. Here's a synopsis:

The Obama administration has dedicated more effort to strengthening government transparency than previous administrations. The president entered office offering a grand vision for more open and participatory government, and this administration used its first term to construct a policy foundation that can make that vision a reality, issuing an impressive number of directives, executive orders, plans, and other actions aimed at bolstering government openness. With the notable, glaring exception of national security, the open government policy platform the Obama administration built is strong. However, the actual implementation of open government policies within federal agencies has been inconsistent and, in some agencies, weak.

The Center makes 10 recommendations to improve government transparency, as follows:

Create agency environments that support open government

1. The administration should assign a senior official in the White House to oversee the implementation of open government policies and ensure that individual has the authority to carry out the attendant responsibilities of implementation.


2. Agency heads should develop and make public implementation plans for key open government policies and assign a senior official the responsibility for overseeing the implementation of the agency plan. Additionally, the interagency Open Government Working Group should serve as a central forum to explore ways to improve overall implementation of open government policies.

         3. Congress should play a more active role in supporting open government practices by passing    legislation to codify open government reforms, such as the DATA Act and reforms of FOIA and declassification. Relevant committees should improve oversight of current open government policies and implementation. Transparency needs to be established by law.

Improve the accessibility and reliability of public information

1. Agencies should modernize their IT systems to create and manage information digitally, and the administration should establish benchmark requirements for electronic records that all agencies must achieve over the next four years.


2. The administration should launch an aggressive effort to improve agency compliance with its guidance on fulfilling Freedom of Information Act (FOIA) requests – speeding up processing, reducing backlogs, and increasing disclosure. The Justice Department should work with agencies to avoid FOIA litigation whenever possible and argue positions that are consistent with the president’s transparency principles when in court.


3. The administration should make proactive disclosure of public information the norm and establish minimum standards for disclosure that all agencies should adhere to, such as releasing communications with Congress and posting FOIA request logs. Additionally, agencies should continue to expand the datasets posted online and release inventories of data holdings.

Reduce national security secrecy

1. The administration should establish a White House steering committee on classification reform, initiate an oversight review of agency classification guides, and pursue policy and statutory reforms to streamline the declassification process.


2. The administration should revise its state secrets policy to require independent court reviews of secret evidence and work with Congress to permanently reform the state secrets privilege through legislation. Additionally, the Department of Justice should issue a public report on Inspector General investigations into complaints of wrongdoing that were dismissed because of state secret claims.


3. The Justice Department should renounce the use of criminal prosecution for media leaks and protect the First Amendment rights of employees.


4. The administration should order an end to secret legal opinions, memos, and directives that are used to shield controversial decisions from oversight and legal challenge.

"60 Minutes" report on drug compounding

by Brian Wolfman

Federal prescription drug oversight was significantly deregulated by the Food and Drug Modernization Act of 1997 (FDAMA), which was signed by President Clinton on November 21, 1997. Among other things, section 127 of FDAMA eliminated FDA authority over drug compounding companies, leaving regulatory oversight to state law. In theory, compounding involves only the production of a particular drug to fit the unique needs of a patient by combining or processing already approved ingredients. For instance, a compounder might re-process an FDA-approved drug to eliminate an inactive ingredient to which the patient is allergic.

Before FDAMA was enated, then FDA Commissioner David Kessler testified against exempting compounders from FDA regulation. Current FDA Commissioner Margaret Hamburg wants FDA oversight restored.

Last night, "60 Minutes" aired an expose on compounding, focusing on one compounding company that, absent any FDA oversight, produced unsterile drugs that killed and permanently injured many people. To watch the story, go here or click on the embedded video below.

 

Do taxes on income from capital discourage investment and cause job loss?

In the new tax law that went into effect on January 1, capital income tax rates on certain high-income taxpayers went from 15% to 20%. When you add in the new 3.8% Medicare surtax on net investment income, which includes capital gains, you get an overall 23.8% capital income tax rate for high-income taxpayers. (High-income generally means $400,000 in annual income for single taxpayers and $450,000 for married taxpayers.) Some people claim that higher taxes on capital income will discourage investment, harming the economy and depressing employment.

In this article, Chris Sanchirico of Penn Law School concludes otherwise. Here's the abstract:

One of the main arguments against raising capital income tax rates is that doing so discourages savings and investment and hinders economic growth. However, academic research on taxes and growth suggests that this argument has no real basis. And the primary alternatives to capital income taxation — labor income taxes and increased government borrowing — carry their own potentially adverse effects on growth.

More on the Proposed Safe Lending Act

by Jeff Sovern

Earlier in the week I linked to a Times editorial, Bleeding the Borrowers Dry, about the practice of online payday lenders of lending to consumers in states that bar the kinds of high-interest rate loans payday lenders provide.  Here is a link to my letter in the Times about the prospects of a bill that would block payday lenders from charging higher rates than allowed in the state the borrower lives in. 

FTC Pursues Phone Text Spammers

The Times report is here.  An excerpt:

The messages, which typically promise gift cards to national chain stores or other prizes, are sent to random phone numbers and usually direct recipients to a Web site where they are asked for personal information like Social Security numbers or credit card numbers, agency officials said.       

Rarely, if ever, do consumers receive any actual reward, said C. Steven Baker, the commission’s Midwest region director. Instead, the Web sites often take users through multiple screens that ask them for more detailed information or entice them to sign up for free trials of products, then charge them for shipping and handling.

* * *

Roughly 60 percent of mobile phone users have received one or more spam text messages in the last year, [Baker] said, and about 15 percent clicked on the link included in the message.

Federal law  bars the use of automated dialing machines to send text spam, which as a practical matter means that such spam is illegal, because it takes so much time to send texts manually that text spam becomes uneconomic. 

Reuters: States probing top U.S. banks over debt collection

by Jeff Sovern

Here.  An excerpt:

As with the mortgage cases, the investigation focuses on the banks' poor paperwork and their weak tracking of the debts.

When they sold delinquent credit card debt to the buyers, often at only a few cents on the dollar, they allegedly failed to provide them with the evidence that the borrowers owed the money. It is unclear, however, if the incomplete information was used to pursue borrowers who were not delinquent.

* * *

Investigators are finding that the banks often did not provide buyers of the debt with evidence that individual credit card accounts were delinquent. Instead the banks only provided basic information about how much money they thought was owed and who the borrower was, without providing original contracts, past statements, or other additional documentation.

I would be curious to know the cause of action  My guess would be a UDAP violation.  The FTC and CFPB are also looking into the matter; perhaps the CFPB could use its power to curtail abusive practices.  One interesting feature about this is that consumers are not parties to the sales of the debts, yet they are the ones who are injured.  The probe raises a host of questions: for example, if creditors are obliged to furnish the underlying information when selling the debts, presumably their costs will increase.  Will they respond by raising prices to debt buyers?  And will those higher prices make the purchase uneconomic for the debt buyers?  If debt buyers have the paperwork, will they use it to prove their claims, thus depriving the rare consumers who are represented by counsel or otherwise well-advised of a successful defense that the debt buyer can't prove the claim?  Will debt buyer claims end up being for lower amounts because the paperwork doesn't substantiate the amounts they have been claiming?  Or will the only change be better-substantiated default judgments?