Consumer Law & Policy Blog

Tsesis Article: Marketplace of Ideas, Privacy, and Digital Audiences

Alexander Tsesis of Loyola of Chicago has written Marketplace of Ideas, Privacy, and Digital Audiences, forthcoming in the Notre Dame Law Review.  Here's the abstract:

The availability of almost limitless sets of digital information has opened a vast marketplace of ideas. Information service providers like Facebook and Twitter provide users with an array of personal information about products, friends, acquaintances, and strangers. While this data enriches the lives of those who share content on the internet, it comes at the expense of privacy.

Social media companies disseminate news, advertisements, political messages, while also capitalizing on consumers’ private shopping, surfing, and travel habits. Companies like Cambridge Analytica, Amazon, and Apple rely on algorithmic programs to mash-up and scrape enormous amounts of online and otherwise available personal data to micro-target audiences. By collecting and then processing psychometric data sets, commercial and political advertisers rely on emotive advertisements to manipulate biases and vulnerabilities that impact audiences’ shopping and voting habits.

The Free Speech Clause is not an absolute bar to the regulation of commercial intermediaries who exploit private information obtained on the digital marketplace of ideas. The Commerce Clause authorizes passage of law to regulate internet companies that monetize intimate data and resell it to third parties. Rather than applying strict scrutiny to such proposed regulations as one would to pure speech, judges should rely on intermediate scrutiny to test statutes limiting the commercial marketing of data.

Legislative reforms are needed to address the substantial economic effects of massive, commercial agglomeration of data files containing histories, daily routines, medical conditions, personal habits, and the like. To address this logarithmically expanding cyber phenomenon, Congress should temporally restrict the retention and trade in private data. Internet intermediaries should not be immune from such a restriction on private data storage. For such a policy to be effective, safe harbor provisions shielding internet intermediaries should be modified to allow for civil litigation against internet companies that refuse a data subject’s request to remove personal information no longer needed to accomplish the transaction for which it was originally processed.

Sad News: FTC Crippled by Government Shutdown

by Jeff Sovern

The FTC was expected to run out of funding to conduct most of its operations at some point today, according to the Washington Post. The FTC's shutdown is obviously bad news for consumers. My understanding is that because the CFPB receives its funding from the Fed, it is not subject to the shutdown.  

Applications for Janet D. Steiger Fellowship now open; it pays law students $6,000 to do summer consumer law work

Excerpts from the announcement:

The Janet D. Steiger Fellowship Project provides law students the extraordinary opportunity to work in the consumer protection departments of state and territorial Offices of Attorneys General and other consumer protection agencies, including the National Association of Attorneys General and the Attorney General’s Office of the District of Columbia, throughout the United States. * * * 

The first and second year law students who have served as Steiger Fellows have characterized their experiences as truly rewarding, often well beyond their expectations. 

More information here. The application deadline is January 28.

Judge Young Speaks His Mind About Arbitration

It could have been a routine order directing arbitration in a commercial dispute no one beyond the parties would likely care about. Instead, Judge William Young of the U.S. District Court for the District of Massachusetts used the occasion of a dispute between two companies about the meaning of their arbitration agreement to deliver an opinion with some firmly stated critiques of arbitration as well as informative asides about a number of other aspects of litigation, including some stinging comments about affidavits drafted by lawyers.

The parties had tied themselves in knots litigating over an arbitration agreement they had drafted but apparently didn't understand. Judge Young had to explain to them that they had actually agreed to arbitrate over an issue they had asked him to decide (namely, whether the arbitrators had authority to issue injunctive relief). In accordance with the agreement, he sent the issues to arbitration while entering a stand-still injunction stipulated to by the parties. In doing so, he had a few choice words about both consumer/employment arbitration ("forced arbitration," as he correctly called it) and commercial arbitration.

Judge Young began with the observation that "[i]t is important to note that this is not 'forced arbitration,' that one-sided species of arbitration unconscionably forced on vulnerable consumers and workers and almost universally reviled, enforceable only due to the mandate of a slim majority of the Supreme Court." (Don't hold back, Judge Young; tell us how you really feel!)

But even as to "the knowing mutual resort to arbitration" by "independent equals, each represented by skilled counsel," Judge Young pointed out that arbitration has serious flaws. In particular, he pointed out that in the case before him, as in many others, arbitration was likely to be much more expensive to the parties, and much slower than litigation in court (perhaps to the benefit of attorneys who lacked the stomach for a real trial of the issues, if not their clients). It would, however, allow the parties to resolve their dispute "entirely [out of] public view," and such "[s]ecret, private tribunals carry with them a host of other societal ills."

Judge Young concluded:

Which is the better approach to adjudication? I am not so self-regarding (or confident) to stake a claim. The honest answer -- it depends. As regards this case, the facts are these:

The litigation costs will be roughly equivalent, though the start-up costs of arbitration are greater. So long as one party wants speed, the Massachusetts federal courts are markedly faster, 5-8 months start to finish. In arbitration, [the parties] can cloak themselves in secrecy; in federal court they cannot. At the conclusion of arbitration, the parties will receive an award but no explanation and will have virtually no appellate rights. At the end of a federal trial the parties will get a thorough written decision and award. Each will have full rights to appeal to one of the finest appellate courts in America.

Which course is better? You be the judge.

For our readers who may be interested . . . a guide to government shutdowns

Happy New Year.

Sternlight article on mandatory arbitration's detrimental effects on employment law and society's must vulnerable employees

Law prof Jean Sternlight has written Mandatory Arbitration Stymies Progress Towards Justice in Employment Law: Where To, #MeToo?. Here's the abstract:

Today our employment law provides workers with far more protection than once existed with respect to hiring, firing, salary, and workplace conditions. Despite these gains, continued progress towards justice is currently in jeopardy due to companies’ imposition of mandatory arbitration on their employees. By denying their employees access to court, companies are causing employment law to stultify. This impacts all employees, but particularly harms the most vulnerable and oppressed members of our society for whom legal evolution is most important. If companies can continue to use mandatory arbitration to eradicate access to court, where judges are potentially influenced by social movements, social movements will no longer be able to assist the overall progressive trend of our jurisprudence. While the phenomenon of mandatory employment arbitration is not new, recent Supreme Court opinions have encouraged an even greater number of employers to use this practice to force employees to take any disputes to arbitration, rather than to court. Focusing particularly on the #MeToo movement, this Article will consider this reality and its detrimental implications for the evolution of legal precedent affecting our most vulnerable employees.

 

Did Johnson & Johnson cover up possible asbestos contamination in its baby powder?

In case you've not read about the allegations that Johnson & Johnson covered up possible asbestos contamination in its baby powder, read this article by Roni Caryn Rabin and Tiffany Hsu.

We've posted before (for instance, here) about suits against Johnson & Johnson alleging that talc in baby powder caused the plaintiffs' ovarian cancer. Plaintiffs won large verdicts in some cases. Johnson & Johnson says there's no link between baby powder and ovarian cancer, and the National Cancer Institute has said that "[t]he weight of evidence does not support an association between perineal talc exposure and an increased risk of ovarian cancer."

But the Rabin-Hsu article points out that "asbestos, unlike talc, is an indisputable carcinogen. Even trace amounts are considered dangerous. Its dagger-like fibers penetrate deep into tissue and can lead decades later to cancer of the lungs, voice box and ovaries, and to mesothelioma." Rabin and Hsu quote a lawyer who has defended asbestos makers saying that the asbestos concern “puts the defense in a much more difficult position. You get a much higher degree of indignation from juries.”

Delaware Chancery Court Rejects Corporate Forum Selection Clauses, With Potential Implications for Forced Shareholder Arbitration (Amended)

Alison Frankel of Reuters reports that the Delaware Chancery Court has held that Delaware corporations lack authority to include in their charters "forum selection clauses" applicable to federal securities fraud claims asserted by shareholders. Put more simply, the ruling limits corporate power to tell shareholders where they have to file their claims. As Frankel's article explains, the decision may imply that corporations can't include provisions that would force shareholders to arbitrate federal securities claims. Reuters has posted the opinion here. The ruling is subject to appeal to the Delaware Supreme Court. If sustained, and if applied to arbitration clauses as well, the ruling will be a major victory for shareholder rights.

Consumer groups ask FTC to investigate apps that manipulate kids

Today, in conjunction with a new study that details a host of concerning practices in apps targeted to young children, 22 consumer and public health advocacy groups (including Public Citizen) called on the Federal Trade Commission to investigate the preschool app market. The groups' letter urges the FTC to hold app makers accountable for unfair and deceptive practices, including falsely marketing apps that require in-app purchases as “free” and manipulating children to watch ads and make purchases.

The study, “Advertising in Young Children’s Apps,” was led by researchers at University of Michigan C.S. Mott Children’s Hospital, and examined the type and content of advertising in 135 children’s apps. Researchers found a number of troubling advertising practices, including apps that force kids to watch ads or make in-app purchases in order to advance in the game, ads disguised as game play, and beloved characters urging children to make in-app purchases. Advocates assert that these practices are deceptive to kids and parents alike.

The effort is spearheaded by the Campaign for a Commercial-Free Childhood and the Center for Digital Democracy. More information is here.

Study ranks best federal agencies to work for -- good and bad news for consumer protection

The Partnership for Public Service issues an annual ranking of "Best Places to Work" in the federal government. The rankings are based on questions posed to hundreds of thousands of federal employees.

This year, two agencies abut which we frequently blog declined in the rankings. The Consumer Financial Protection Bureau's score fell 25.2 points from 76.9 to 51.7 (out of 100), representing a drop from 7th in the rankings to 26th (out of 27). The CFPB results showed a large drop in employees’ views of top agency management. A short analysis of the findings on the CFPB is here.

Among mid-size federal agencies, the Department of Education scored the lowest. The Department dropped 12.4 points, from 47.3 to 59.7.

One bright spot for consumer protection agencies: The Federal Trade Commission, ranked first at mid-size agencies, rising from a score of 81.4 to 84.0.

The study is available here.