Law360: FTC Commissioner Joshua Wright to Step Down

Here.  He is expected to rejoin the George Mason Law School faculty. 

"The Sugar Water Workout"

That's the name of Brian McFadden's comic strip on how consumers can sensibly offset the negative health effects of sugary drinks through exercise (not really). McFadden's comic reminds me of Coke's funding of the oddly-named Global Energy Balance Network.

DC Circuit reinstates antitrust case against Visa and Mastercard

The court explained:

The crux of the Plaintiffs’ complaints is that when someone uses a non-bank ATM, the cardholder pays a greater fee and the ATM operator earns a lower return on each transaction because of certain Visa and MasterCard network rules. These rules prohibit differential pricing based on the cost of the network that links the ATM to the cardholder’s bank. In other words, the Plaintiffs allege anticompetitive harm because Visa and MasterCard prevent an independent operator from charging less, and potentially earning more, when an ATM transaction is processed through a network unaffiliated with Visa and MasterCard.

The district court had dismissed the case for lack of standing and on the merits, but the D.C. Circuit reversed, explaining among other things that the district court erred in rejecting the plaintiffs' theory of economic injury as speculative. It is permissible, the court of appeals explained, to rely on economic theories of how anticompetitive behavior will harm consumers if these allegations are (as here) provable at trial.

Read the decision, issued earlier this month, here.

Some Comments on Comments on the CFPB Arbitration Study

by Jeff Sovern

Earlier this week, I posted a link to the Ballard Spahr comments, on behalf of various industry trade associations, on the CFPB Arbitration Study .  Their thesis is that the Bureau Study indicates that consumers fare better in arbitration than litigation in general and class actions in particular. For example, here is one excerpt from their comments:

Consumers who received cash payments in class action settlements obtained an average of only $32.35. * * *

By contrast, customers who prevailed in arbitration recovered an average of $5,389, compared to the $32.35 obtained by the average class member in class action settlements. Thus, the average customer who prevailed in arbitration received 166 times more in financial payments than the average class member in class action settlements.

Sounds like a big difference, except for one thing.  In the words of Director Cordray introducing the study:

For those consumers who do use arbitration, we observed that very few of them filed arbitration claims for small-dollar amounts. For example, there are almost no disputes over amounts less than $1,000.

And here's a quote from the Study itself (Section 1, p. 12):

The average consumer affirmative claim amount in arbitration filings with affirmative consumer claims was around $27,000. The median was around $11,500. Across all six product markets, about 25 disputes a year involved affirmative consumer claims of $1,000 or less.

Unfortunately, the CFPB was not able to gather much information about class action claim amounts.   But class actions are often brought to compensate individual consumers in amounts much smaller than $1,000, an amount that evidently is not even enough to cause consumers to file for arbitration.  In other words, the Ballard Spahr comments show that when consumers bring arbitration claims averaging $27,000, and almost never for under a thousand, they recover larger amounts than they do in class actions in which individual consumers have suffered far more modest damages.  Not exactly a surprise. Such an apples-to-oranges comparison is hardly evidence that consumers do better in arbitration than in class actions.

 

 

A proposed workplace beryllium rule, finally - but it is good enough?

Beryllium, a known carcinogen, is used in the construction industry, electronics manufacturing, and the nuclear energy industry, among others. Public Citizen estimates that 23,000 construction workers come into contact with beryllium daily.

Last week, fourteen years after Public Citizen first petitioned OSHA for stronger worker protections against beryllium, OSHA issued a proposed rule lowering the permissible exposure limit to 0.2 micrograms per cubic meter of air, one-tenth of the current limit.

The rule represents progress, to be sure, but new evidence that has emerged in the fourteen years since Public Citizen's original petition suggests that even the new limit might be too high.

Read Public Citizen's press release here and its 2001 petition here.

 

Article on Law and Non-Verbal Market Manipulation

Shmuel I. Becher of the College of Management (Israel) - School of Law and Yuval Feldman of Bar-Ilan University have written Non-Verbal Market Manipulation. Here is the abstract:

Consumers make purchasing decisions in various markets every day.  Contrary to common belief, such decision-making is often not the result of deliberate analysis of information and data and of rational thinking.  Rather, it is frequently based on feelings, sensations and intuition.  Purchasing decisions are not made in a vacuum and are regularly influenced by sellers’ manipulation and selling tactics.

It is well documented that people receive a substantial part of the information they possess via non-verbal communication.  One of the most alarming aspects of this reality is that consumers are mostly unaware of non-verbal cues and the ways it can influence them.  Therefore, consumers cannot correct their mistakes.  This stands in sharp contrast to the intentional efforts invested by marketers in employing non-verbal marketing methods. 

Current consumer protection law neglects to address the encoding and decoding of wordless cues exchanged between consumers and businesses.  This opens a challenging gap between the law’s intention to protect consumers from deceptive practices and its ability to do so effectively, which contributes to a false consumers’ consciousness of proper protection.  It provides consumers with an artificial sense of effective legal protection while leaving them exposed to far more sophisticated manipulations of which they are not always aware.

Non-verbal manipulations are a robust phenomenon, extensively employed by sellers who are well versed in marketing research.  Yet legal scholars, judges and legislatures lack a systematic understanding of how non-verbal cues influence consumers, let alone how the law should respond.  This Article, while focusing on the psychology of non-verbal manipulations, aims to narrow this gap both descriptively and normatively.

Federal Trade Commission issues statement of principles on "unfair competition" enforcement

The Federal Trade Commission (FTC) today issued a statement of principles on enforcement of its "unfair competition" authority under section 5 of the Federal Trade Commission Act. Four commissioners voted for the statement, and one commissioner dissented.

Go here to get all of the agency's info on the topic. 

The agency summarized its statement as follows:

In deciding whether to challenge an act or practice as an unfair method of competition in violation of Section 5 on a standalone basis, the Commission adheres to the following principles:

 

• the Commission will be guided by the public policy underlying the antitrust laws, namely, the promotion of consumer welfare;

 

• the act or practice will be evaluated under a framework similar to the rule of reason, that is, an act or practice challenged by the Commission must cause, or be likely to cause, harm to competition or the competitive process, taking into account any associated cognizable efficiencies and business justifications; and

 

•the Commission is less likely to challenge an act or practice as an unfair method of competition on a standalone basis if enforcement of the Sherman or Clayton Act is sufficient to address the competitive harm

arising from the act or practice.

 

Section 5(a)(1) of the Federal Trade Commission Act provides:

 

Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful. (emphasis added)

 

The statement of principles concerns the FTC's enforcement of its power under the italicized language.

Fifth Circuit joins growing chorus rejecting broad Rule 68 mootness rule

We’ve discussed several times (see for instance here and here) an issue that’s been percolating in the courts of appeals the last few years and which has been taken up by the Supreme Court for the coming Term in the case of Campbell-Ewald Co. v. Gomez: whether a defendant’s offer of judgment for complete relief under Rule 68 renders a case moot even if the plaintiff doesn’t accept the offer. In 2013, Justice Kagan wrote a powerful dissent on the issue in Genesis HealthCare Corp. v. Symczyk (where the majority did not reach the question). Since Genesis, several circuits have relied on Justice Kagan’s reasoning to reject the view that an unaccepted Rule 68 offer renders a case moot.

Yesterday, in Hooks v. Landmark Industries, litigated on appeal by Public Citizen, the Fifth Circuit adopted Justice Kagan’s view that an unaccepted Rule 68 offer does not moot a case, providing another strong opinion that could influence the Supreme Court’s consideration of the issue this fall. Justice Kagan has common sense and three other justices on her side. Hopefully the steady stream of appellate opinions explaining that an unaccepted offer does not moot a case will help her attract a fifth vote on the Court now that it is squarely confronting the issue in Campbell-Ewald. 

Read yesterday's decision here.

"Netflix's year-long parental leave raises bar for U.S. employers"

...pretty much sums it up. This policy, announced last week, will hopefully spur other employers toward better policies. Reuters has the story, which notes that the national norm for paid parental leave is only a month.

Arbitration and the American Bar Association's One-Sided Webinar

by Jeff Sovern

The American Bar Association's Business Law Section Consumer Financial Services Committee held a webinar earlier today in which the topic was listed as "The CFPB Begins Arbitration Rulemaking, But Its Own Study Shows that Arbitration Benefits Consumers." The sole speakers, other than the moderator, were Ballard Spahr's Alan Kaplinsky and Mark Levin. Ballard Spahr has a particular point of view on the CFPB arbitration study, as indicated in the comments the firm submitted to the Bureau on behalf of the American Bankers Association, the Consumer Bankers Association, and the Financial Services Roundtable last month. That viewpoint certainly should be expressed, and the Committee's webinars are an appropriate forum for it. But shouldn't the contrary view also be voiced at such webinars?  Why didn't the Committee also put on at least one speaker to support the CFPB study?  Is the Committee serving lawyers well when it presents only one side of a debate?

I should add that I found the webinar informative, as I often find the Committee's webinars, which are a valuable service.  But it would have been more informative if it had been more balanced.