Consumer Law & Policy Blog

WBALTV: Jury hits debt collector with $38M judgment

Here.  (HT: Peter Holland) 

Perzanowski & Hoofnagle Article on What Consumers "Buy" When They Buy Digital Media

Aaron Perzanowski of Case Western Reserve and Chris Jay Hoofnagle of Berkeley have written What We Buy When We 'Buy Now', 165 University of Pennsylvania Law Review (Forthcoming 2017), Here's the abstract:

Retailers such as Apple and Amazon market digital media to consumers using the familiar language of product ownership, including phrases like “buy now,” “own,” and “purchase.” Consumers may understandably associate such language with strong personal property rights. But the license agreements and terms of use associated with these transactions tell a different story. They explain that ebooks, mp3 albums, digital movies, games, and software are not sold, but merely licensed. The terms limit consumers' ability to resell, lend, transfer, and even retain possession of the digital media they acquire. Moreover, unlike physical media products, access to digital media is contingent — it depends on shifting business models, the success and failure of platforms, and often on the maintenance and availability of DRM authentication systems years after the consumer clicked “buy now.”

This article presents the results of the first-ever empirical study of consumers' perceptions of the marketing language used by digital media retailers. We created a fictitious Internet retail site, surveyed a nationally representative sample of nearly 1300 online consumers, and analyzed their perceptions through the lens of false advertising and unfair and deceptive trade practices. The resulting data reveal a number of insights about how consumers understand and misunderstand digital transactions. A surprisingly high percentage of consumers believe that when they “buy now,” they acquire the same sorts of rights to use and transfer digital media goods that they enjoy for physical goods. The survey also strongly suggests that these rights matter to consumers. Consumers are willing to pay more for them and are more likely to acquire media through other means, both lawful and unlawful, in their absence. Our study suggests that a relatively simple and inexpensive intervention — adding a short notice to a digital product page that outlines consumer rights in straightforward language — is an effective means of significantly reducing consumers’ material misperceptions.

Sales of digital media generate hundreds of billions in revenue, and some percentage of this revenue is based on deception. Presumably, if consumers knew of the limited bundle of rights they were acquiring, the market could drive down the price of digital media or generate competitive business models that offered a different set of rights. We thus turn to legal interventions, such as state false advertising law, the Lanham Act, and federal unfair and deceptive trade practice law as possible remedies for digital media deception. Because of impediments to suit, including arbitration clauses and basic economic disincentives for plaintiffs, we conclude that the Federal Trade Commission (FTC) could help align business practices with consumer perceptions. The FTC’s deep expertise in consumer disclosures, along with a series of investigations into companies that interfered with consumers’ use of media through digital rights management makes the agency a good fit for deceptions that result when we “buy now.”

New nutrition facts label

The Food and Drug Administration today finalized a rule with requirements for a new nutrition facts label. The FDA has this blog post about the new label.

Here is a comparison of the old and new labels:

Links to the Federal Register notice and a Q&A are here.

Bill would clarify when food is too old to eat

Legislation announced Wednesday by Sen. Richard Blumenthal (D-Conn.) and Rep. Chellie Pingree (D-Maine) aims to put an end to consumer uncertainty about whether or not their food is safe to eat. With the Food Date Labeling Act, they have proposed standardized language for retail packaging: “Best if used by” to indicate peak quality for shelf-stable foods, and “expires on” for riskier foods like raw meat, fish and eggs. According to food policy advocates, the changes will save millions of tons of food from going needlessly into the garbage.

The Washington Post has the story, here.

Massive frozen food recall

The Washington Post reports:

Amid a massive frozen foods recall involving millions of packages of fruits and vegetables that were shipped to all 50 U.S. states, Canada and Mexico, authorities who want to stem the listeria-linked illnesses and deaths worry it’ll be difficult to get consumers to dig through their freezers and check for products they may have bought as far back as 2014.

It’s one of the largest food recalls in recent memory, with well over 400 products from CRF Frozen Foods in Pasco, Washington, sold under more than 40 different brand names at major retailers like Costco, Target, Trader Joe’s and Safeway. So far, eight people have been sickened by listeria that’s genetically similar to that found in CRF vegetables, and two have died, though listeria was not the primary cause of death.

The full article is here.

Hearing on Telephone Consumer Protection Act

The Senate Committee on Commerce, Science, and Transportation held a hearing yesterday entitled “The Telephone Consumer Protection Act at 25: Effects on Consumers and Business.” The committee website described the topic as:

The hearing will examine the Telephone Consumer Protection Act of 1991 (TCPA), an enacted bill that requires solicitors to maintain a “Do Not Call” list and limits the use of automatic dialing systems known as “robocalls.” The hearing will also examine the Federal Communications Commission’s application of the TCPA to new technologies and practices popularized since adoption of the Act.

The website lists the witnesses -- to supporting changes to the law to reduce or eliminate potential liability and two speaking from the consumer perspective -- and has links to their testimony.

Margot Saunders from National Consumer Law Center testified from the consumer side. NCLC's press release about her testimony is here.

The Hill's Report on the House Financial Services Committee Hearing on the CFPB Arbitration Rule

Here. 

Bagchi: Standard Terms in Consumer Contracts in Comparative Contract Law

Aditi Bagchi of Fordham has written At the Limits of Adjudication: Standard Terms in Consumer Contracts in Comparative Contract Law  (eds. DiMatteo & Hogg, (UP, 2015).  Here is the abstract:

This chapter first identifies three features of standard form contracts that challenge the classical theory of contract: standard terms lack of salience, consumers lack practical choice over such terms, and the scale of standard terms across an industry renders bilateral agreements a form of mass private regulation. After offering a descriptive overview of American treatment of standard terms, the chapter reviews how scholars have thus far conceptualized the challenge of standard terms. We have seen the lenses of consent, cognitive error, market failure, substantive unfairness and democratic degradation. Each view identifies an important concern but also suffers from some limitation in its accounting of the problem. The chapter builds off these theories to propose an alternative framework: Standard terms create cumulative externalities that implicate the public interest in ways that are not easily taken into account in the course of resolving bilateral disputes. We need legislative action that not only disallows an inevitably limited set of standard terms but also empowers courts to take into account certain externalities in the way contracts are read and enforced. For example, the scope of evidence considered relevant to contract adjudication and the interpretive defaults used to read contracts should be adjusted so that courts are in a position to limit the cumulative negative externalities of standard terms. 

How do I file a complaint about business practices with the Federal Trade Commission?

Go here to find out.

The U.S. Department of Labor issues a final rule greatly expanding the number of workers eligible for overtime pay

The U.S. Labor Department today issued a final rule that will significantly raise the pay threshold that triggers exceptions to the general rule that workers must be paid 1.5 times their ordinary pay for every hour they work over 40 hours per week. The Labor Department says that the new rule will

• Raise the minimum salary level below which workers have the right to overtime pay from $455/week to $913/week ($47,476 per year), ensuring protections to 4.2 million workers.
• Automatically update the threshold every three years, based on wage growth over time.
• Strengthen overtime protections for salaried workers already entitled to overtime.
• Provide greater clarity for workers and employers.

The Labor Department points out that employers can do several things with their work forces in response to the new rule: (a) pay time-and-a-half to newly covered workers; (b) raise workers' salaries above the new limit (that is, to or above $913 per week); (c) limit workers' work weeks to 40 hours; or (d) a combination of these things.

Go here for lots of information on the new rule from the Labor Department and the White House. The rule goes into effect on December 1, 2016.

An estimated 4.2 million U.S. workers will now be eligible for overtime pay who were not before. Click on this map showing where the newly eligible workers are located:

For more info and analysis, see this article by Noam Scheiber.