Consumer Law & Policy Blog

FTC and Partners Bring 191 Actions Against Timeshare Resale Scammers

Here. And an FTC infographic below:

Erwin Chemerinsky on why he thinks the Supreme Court's McBurney decision is wrong

As you will recall, in late April, the Supreme Court decided McBurney v. Young, holding unanimously that neither the Privileges and Immunities Clause of Article IV nor the dormant Commerce Clause of the United States Constitution prevents a state from limiting the right of access to the state's public records to its own citizens. (For early commentary on the decision, go here.)

Now, law professor and dean Erwin Chemerinksy has weighed in with this ABA Journal piece, saying that the unaminous Court was unanimously wrong. A few excerpts:

[T]he court upheld the ability of a state to give its own citizens a right to government records while denying this to out-of-staters. This is troubling on many levels. First, it is a very cramped reading of the Privileges and Immunities Clause. In the past, the Supreme Court has stressed that this provision has the broad goal of keeping a state doing exactly what is involved in this case: creating a right for its residents that it denies to those from other states. ... It makes no sense to limit the Privileges and Immunities Clause to those rights that are protected by the Constitution. ... If Virginia had a law that made it a crime for non-Virginia residents to criticize the governor of Virginia, that would violate the Privileges and Immunities Clause, but it would be invalidated as infringing the First Amendment. The Privileges and Immunities Clause is important in exactly the situation of McBurney, where a state creates a right for its own citizens but denies that right to out-of-staters. Second, the court significantly underestimates the importance of allowing all to have access to a state's records. The fact that freedom of information laws are only several decades old--Virginia's was adopted in 1968--is not dispositive, or even relevant, to assessing their importance. Freedom of information laws provide a key way for people to learn of a government's activities. All affected by a government entity should be able to have access to its information. ... Finally, the court offers no justification for allowing a state to discriminate against those from other states in this way. Because the court said that the Privileges and Immunities Clause and the dormant commerce clause did not apply it went no further to assess whether there is any reason for this discrimination. ... The Supreme Court is correct, of course, that no state is required to have a freedom of information act. But every state does. And the constitutional principles preventing states from discriminating against out-of-staters are clear and broad enough that the court should have held that a state may not discriminate in an area that is so important to government accountability and the free flow of information.

Grossman Paper: FDA and the Rise of the Empowered Consumer

Lewis A. Grossman of American has written FDA and the Rise of the Empowered Consumer. Here's the abstract:

This paper traces the historical evolution of a view of consumers as informed, rational, and rights-bearing decision makers, and the corresponding diminution of FDA’s role as a paternalistic gatekeeper acting in conjunction with medical and scientific experts to prevent products and information from reaching the public. 

The relationship between consumers and FDA-regulated products has changed dramatically since the mid-1960s.  A half century ago, FDA treated consumers as passive and ignorant. Accordingly, the agency gave them relatively little latitude to make their own choices among products and denied them much of the information they could have used to inform such choices.  By comparison, today’s consumers of food and drugs are much more empowered to make their own, unmediated choices among a wider variety of products, guided by a deluge of labeling and advertising information.

The paper examines this phenomenon against a background of three societal and cultural trends during the past half century: Americans’ declining trust in major institutions, the “rights revolution,” and the dramatic expansion of health care information accessible to consumers.  It then examines a variety of specific regulatory developments during this period of change.  In a section on food, the paper considers reforms in standards of identity and nutrition labeling, the rise of health claims as facilitated by the First Amendment, and various popular movements for freedom of choice with respect to food ingredients and dietary supplements.  The paper then turns to drug regulation, examining the rise of patient labeling and direct-to-consumer advertising of prescription drugs, the tidal wave of “switches” from prescription to over-the-counter status, and the birth of social movements seeking to influence FDA drug approval policy.  The paper concludes by speculating on whether this new model of consumer is a permanent one.

States that don't opt in to the Affordable Care Act's medicaid expansion stand to lose money (in addition to putting their citizens' health at risk)

We have posted frequently about the ramifications of the states' decisions to opt-in (or not) to the Affordable Care Act's massive medicaid expansion, including just a few days ago, when we noted the large number of states that have either decided not to opt in (19) or are still thinking about it (8).

A new study by Carter Price and Christine Eibner says that states that don't opt in not only will undermine the health of some of their neediest citizens, but will lose money by providing uncompensated care for some of the people who would have been covered by the medicaid if their states had accepted the expansion. Read the whole study, which is published in the journal Health Affairs. Here's the abstract:

The US Supreme Court’s ruling on the Affordable Care Act in 2012 allowed states to opt out of the health reform law’s Medicaid expansion. Since that ruling, fourteen governors have announced that their states will not expand their Medicaid programs. We used the RAND COMPARE microsimulation to analyze how opting out of Medicaid expansion would affect coverage and spending, and whether alternative policy options—such as partial expansion of Medicaid—could cover as many people at lower costs to states. With fourteen states opting out, we estimate that 3.6 million fewer people would be insured, federal transfer payments to those states could fall by $8.4 billion, and state spending on uncompensated care could increase by $1 billion in 2016, compared to what would be expected if all states participated in the expansion. These effects were only partially mitigated by alternative options we considered. We conclude that in terms of coverage, cost, and federal payments, states would do best to expand Medicaid.

The government knows whom you've called, and when, and for how long

A stunning revelation this week about consumer privacy: the federal government has obtained a secret order from a secret court to obtain "telephony metadata" -- i.e. who's called whom when and for how long -- for all Verizon calls made to or within the United States.

The Washington Post story quotes an anonymous expert as suggesting that such orders have been issued routinely by the Foreign Intelligence Surveillance Court since 2006, and are not connected with any particular investigation. No probable cause is required.

Check out a copy of the order itself, available here from the Guardian. As the Guardian's coverage notes, "It is not known whether Verizon is the only cell-phone provider to be targeted with such an order, although previous reporting has suggested the NSA has collected cell records from all major mobile networks."

This is a frightening development for consumer privacy and a disappointment from the administration of a president who as a candidate promised reform on wiretapping and civil liberties. (Here's some helpful background from Politifact on President Obama's promises and the renewal of the Patriot Act.)

An Appreciation for Sid Wolfe – Ave Sed Non Vale

Allison has already noted that Sid Wolfe has relinquished his position as Director of Public Citizen Health Research Group in favor of Michael Carome, but I want to add my personal appreciation of his willingness to step aside after so many years of leadership. 

Organizations that hope to renew themselves depend on leaders who both recruit top-notch staff and, eventually, step aside so that others may lead in their turn.  They thus avoid the ossification that can result from one person staying in charge too long, and the crisis that could confront the organization if the leadership has to change too precipitously.   First Alan Morrison, then Joan Claybrook, and now Sid Wolfe — the founding generation of leadership at Public Citizen — have done the organization a good turn by stepping aside one by one.

Sid has long said that the Health Research Group would be the last job he ever held; he is proving that by continuing to work as a staff member at HRG.  I myself have found being a staff member here at Public Citizen to be a dream job; indeed, I am grateful that so many colleagues have been willing to direct the Litigation Group so that I can keep doing that job.

The intersection of disability rights and copyright

My office just submitted an amicus brief in the Second Circuit that I thought our readers might find interesting. The brief on behalf of 15 leading national disability rights organizations and academic researchers in Authors Guild, Inc. v. Hathitrust, No. 12-4547, urges the court of appeals to uphold a district court ruling that the HathiTrust's efforts to make university library collections accessible to people with print disabilities constitute a non-infringing fair use under copyright law. The brief details the efforts of people with disabilities and the federal government to make copyrighted works accessible and describes the role of fair use in harmonizing disability rights law, copyright law, and the Progress Clause of the Constitution.

USA Today: Consumer protection bureau is under attack, but working

Here.

A New Front in the Battle Over Swipe Fees: A Constitutional Challenge to New York’s Credit-Card Surcharge Law

by Deepak Gupta

Whenever consumers use credit cards, merchants pay swipe fees, which are typically passed along to all consumers in the form of higher prices. American consumers pay the highest swipe fees in the world—eight times those paid by Europeans. These fees, which amount to about $50 billion annually, are highly regressive: low-income and minority cash customers end up subsidizing high-income credit customers. Unfortunately, most consumers don't know about the fees. And even those who do typically can't do anything about them.

Merchants are, however, permitted to charge different prices to consumers who pay with credit versus cash, which would give consumers the option to choose a lower-cost payment method in exchange for lower prices. The credit-card lobby has long fought to stop merchants from being able to implement such dual pricing. Under state laws adopted at the industry's behest, the price difference must be described as a “discount” for cash, not a “surcharge” for credit—even though they're mathematically identical. In New York, a merchant who uses the wrong word could face criminal prosecution.

This morning, our firm (Gupta Beck) filed a lawsuit challenging the constitutionality of the New York state law forbidding merchants from imposing a “surcharge” on any customer who pays with a credit card. Along with the Friedman Law Group, we represent five New York merchants: a hair salon, an ice-cream parlor, a liquor store, a martial-arts academy, and an outdoor furniture store. The suit, filed in federal court in Manhattan, has been assigned to U.S. District Judge Jed Rakoff.

Our principal claim is that New York’s law violates our clients' constitutional right to free speech and that the state is, in effect, seeking to enforce the credit-card industry’s preferred speech code. Merchants, we contend, should be able to use whatever words are most effective to inform their customers about the high cost of using credit cards, and consumers have a right to receive that communication. Here are a few quotations from the press release:

"A ‘surcharge’ and a ‘discount’ are just two ways of framing the same price information,” says Adam Levitin, a Georgetown law professor who has studied no-surcharge rules. “But consumers have a much stronger reaction to ‘surcharges,’ and are less likely to use credit cards if they understand that they will have to pay more. Credit card companies know this, which is why they insist that any price difference be labeled as a ‘discount.’” Those interested can read a couple of Levitin's law review articles on this topic here and here. He's been writing in depth in this area for years.

“Swipe fees harm consumers and merchants alike,” says Ira Rheingold, Executive Director of the National Association of Consumer Advocates. “They’re like an invisible tax, funneling vast amounts of money from consumers to large banks and credit-card companies. And, worst of all, low-income consumers who pay in cash end up subsidizing rewards for high-income credit users.” 

“Swipe fees are a huge expense for us,” says plaintiff Peter Freeman of Brooklyn Farmacy & Soda Fountain, a neighborhood ice-cream parlor in Carroll Gardens, Brooklyn. “We just want to let our customers know about these fees in a way that will make them pay attention. But we can’t afford the risk that the state will prosecute us for using the wrong words.”

Nine other states (California, Colorado, Connecticut, Florida, Kansas, Maine, Maine, Oklahoma, and Texas) have laws similar to New York’s, and challenges to those laws are expected to follow today’s action. The laws have taken on new life since this February when Visa and Mastercard, under a national class-action settlement, dropped contractual provisions prohibiting merchants from imposing surcharges. The battle is also playing out in statehouses across the country, with credit-card company lobbyists now urging more states to pass no-surcharge laws. 

The complaint can be viewed here.

The feds begin regulatory oversight of self-driving cars

by Brian Wolfman

Last October, we told you that California Governor Jerry Brown signed a bill that establishes a regulatory framework for allowing self-driving cars on California roads. If self-driving cars work as planned they will greatly reduce crashes that kill and maim tens of thousands of people every year. They'll improve fuel economy too.

Now the feds are getting involved, in part to help the states establish their policies. Last Thursday, the National Highway Traffic Safety Administration (NHTSA) announced 

a new policy concerning vehicle automation, including its plans for research on related safety issues and recommendations for states related to the testing, licensing, and regulation of "autonomous" or "self-driving" vehicles. Self-driving vehicles are those in which operation of the vehicle occurs without direct driver input to control the steering, acceleration, and braking and are designed so that the driver is not expected to constantly monitor the roadway while operating in self-driving mode.

The policy covers

• An explanation of the many areas of vehicle innovation and types of automation that offer significant potential for enormous reductions in highway crashes and deaths;
• A summary of the research NHTSA has planned or has begun to help ensure that all safety issues related to vehicle automation are explored and addressed; and
• Recommendations to states that have authorized operation of self-driving vehicles, for test purposes, on how best to ensure safe operation as these new concepts are being tested on highway.

NHSTA's full policy statement is available here.