DOJ Consumer Protection Branch announcements

December 4, 2015 (Blog)

Protecting Consumers from Bad Medicine

 

December 1, 2015

Dietary Supplement Manufacturer Pleads Guilty to Criminal Contempt of Court

 

$39 million settlement over Target data breach

NBC News reported last week:

Target Corp. has agreed to pay $39.4 million to resolve claims by banks and credit unions that said they lost money because of the retailer's late 2013 data breach. The preliminary settlement filed on Wednesday resolves class-action claims by lenders seeking to hold Target responsible for their costs to reimburse fraudulent charges and issue new credit and debit cards.

Target has said at least 40 million credit cards were compromised in the breach, and that as many as 110 million people may have suffered the theft of personal information such as email addresses and phone numbers. The Minneapolis-based retailer has taken steps to avoid a recurrence, including being among the first U.S. retailers to install microchip-enabled card readers at all stores.

Here's the story.

Net neutrality was back in court Friday

NPR discusses what's at stake in the latest court battle over net neutrality, in which the D.C. Circuit heard argument Friday. Last Feburary, the FCC redefined its role in regulating the internet; this lawsuit is the telecom companies' challenge to the FCC's action.

For our discussion of the last D.C. Circuit decision on net neutrality, go here.

This American Life investigates why entire neighborhoods get sued for unpaid debts

An excellent story about the intersection of race and financial insecurity, and the ripple effects of widespread debt collection focused in a single community.

Click here for the story (or the entire hour episode from last week, on various subjects, is great listening if you have the time).

California Supreme Court: State-law suit alleging food is mislabled as "organic" is not federally preempted

The decision in Quesada v. Herb Thyme Farms is here.

Here's a brief excerpt from the beginning of the opinion that sets the scene and summarizes the holding:

To buyers and sellers alike "labels matter." (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 328.) They serve as markers for a host of tangible and intangible qualities consumers may come to associate with a particular source or method of production. (Id.at pp. 328–329.) Misrepresentations in labeling undermine this signifying function, preventing consumers from correctly identifying the goods and services that carry the attributes they desire while also hampering honest producers‘ attempts to differentiate their merchandise from the competition.

 

Among those labels Kwikset cited as making a difference to some consumers, and as potentially actionable under state unfair competition law if misused, was the designation of produce or other food as "organic." (Kwikset Corp. v. Superior Court, supra, 51 Cal.4th at pp. 332–333.) Here we must decide whether such a state law claim is viable, or whether the federal regulatory regime for certifying organic growers preempts a state claim that a certified grower is intentionally mislabeling conventionally grown produce and selling it as "organic."

 

We hold a state law claim that produce is being intentionally mislabeled as organic is not preempted. When Congress entered the field in 1990, it confined the areas of state law expressly preempted to matters related to certifying production as organic, leaving untouched enforcement against abuse of the label "organic." Moreover, a central purpose behind adopting a clear national definition of organic production was to permit consumers to rely on organic labels and curtail fraud. Accordingly, state lawsuits alleging intentional organic mislabeling promote, rather than hinder, Congress‘s purposes and objectives. Because the Court of Appeal concluded to the contrary, finding these state fraud claims impliedly preempted, we reverse its judgment.

A new Obamacare myth is born: Hordes of Americans are 'gaming' the system

That's the name of this article by veteran LA Times columnist Michael Hiltzik. Here's how it starts:

With the traditional attack points on the Affordable Care Act having faded away--most enrollees were already insured (wrong), millions of people lost their coverage and couldn't replace it (wrong), etc.--Obamacare's critics have been looking for new ones. An up-and-coming star of this firmament is the notion that Americans are "gaming" the system by waiting until they're sick to enroll in an individual policy, then dropping it as soon as they're cured. This theory has been around for a while, but it got a jolt of life last month when [mega-insurer] UnitedHealth Group appeared to blame such a strategy for losses that were leading it to consider withdrawing from the individual insurance exchange market as soon as 2017.

The rest of Hiltzik's article systematically reviews the evidence and counter-evidence for the "gaming" hypothesis. Hiltzik makes his case that the "gaming" problem doesn't exist. Highly recommended.

Climate change denial denial

By Paul Krugman: here.

Former Massey CEO guilty of conspiracy, acquitted of other charges

Earlier this fall, we flagged the federal criminal trial of Massey Energy's former CEO Don Blankenship as an important test of corporate accountability. Blankenship was accused of skimping on mine worker safety and thereby contributing to the 29 deaths that occurred in the 2010 explosion of the Upper Big Branch mine.

Yesterday, a jury found him guilty of conspiring to violate federal safety standards but acquitted him of charges regarding false statements and securities fraud. The maximum prison sentence on the conspiracy conviction is one year. Safety and environmental advocates, though noting the mixed nature of the verdict, praised the decision as a deterrent to future wrongdoing. For instance, Public Citizen President Rob Weissman explained: "Today’s guilty verdict should send the message to coal company executives that society will no longer tolerate this trade of miners’ lives for coal and profit."

The Times has the story. Public Citizen's statement is here.

"How an $84,000 drug got its price"

...in this week's Post, is the story of a drugmaker choosing profits over accessibility in pricing a Hepatitis C drug. "Gilead Sciences executives were acutely aware in 2013 that their plan to charge an exorbitantly high price for a powerful new hepatitis C drug would spark public outrage, but they pursued the profit-driven strategy anyway," the Post reports, summarizing a Senate Finance Committee report this week. Why it should come as a surprise that a company chose to maximize its profits is not clear to me, but the article is nonetheless an interesting look at a drug pricing decision, including what factors were considered and how high a price the company believed it could set given public relations concerns.

Instead of expressing shock at profit-focused corporate decisions, though, policymakers should consider what they themselves can do to modify corporate behavior, increase competition, and lower prices. The companies are unlikely to do it voluntarily. 

Check out the story here.

CFPB finds CARD Act helped consumers avoid $16 Billion in credit-card fees

A report from the Consumer Financial Protection Bureau released yesterday details how the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) has helped reduce the cost of “gotcha” credit card fees by more than $16 billion. "Since the reform law, total costs to consumers have fallen with the elimination of certain back-end pricing practices such as over-limit fees. Over the same period, credit has generally become more available to consumers and the number of new accounts has grown faster than in almost every other major consumer credit market. Concerns remain, however, about other back-end practices such as deferred-interest promotions that can hit consumers with unexpected costs," the CFPB found.

The CFPB also found, however, that "concerns remain about other back-end practices such as deferred-interest promotions."

The CFPB report is here. A good summary is contained in the press release, here.