Product Recall Fatigue

Today's Washington Post has this front page article on so-called product recall fatigue. The concern is that there are so many product recalls -- some of course more critical than others -- that consumers get lost and won't respond in large enough numbers to any of them. Below are a couple excerpts that describe the problem and some things the government is doing to deal with it. It's worth reading in full.

McDonald's asked customers to return 12 million glasses emblazoned with the character Shrek. Kellogg's warned consumers to stop eating 28 million boxes of Froot Loops and other cereals. Campbell Soup asked the public to return 15 million pounds of SpaghettiOs, and seven companies recalled 2 million cribs. And that was just a fraction of the products recalled in the United States last month alone. Government regulators, retailers, manufacturers and consumer experts are concerned that recall notices have become so frequent across a range of goods -- foods, consumer products, cars -- that the public is suffering from "recall fatigue."

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"The national recall system that's in place now just doesn't work," said Craig Wilson, assistant vice president for quality assurance and food safety at Costco. "We call it the Chicken Little syndrome. If you keep shouting at the wind -- 'The sky is falling! The sky is falling!' -- people literally become immune to the message." 

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"There is so much information out there, if you paid attention to every recall notice that came out every day, you'd go nuts," said [William K.] Hallman, [a Rutgers professor] who has studied consumer attitudes toward food recalls with a grant partially funded by the U.S. Department of Agriculture. He conducted a national survey last year in which 12 percent of respondents said they knowingly had eaten a recalled food. 

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The government maintains a Web site, http://www.recalls.gov, offering information about all kinds of recalls, and consumers can subscribe for e-mail alerts about specific products. On Friday, federal officials plan to roll out a smartphone application so consumers can check recalls as they shop.

More on Financial Reform Legislation

We posted last night on the House's passage of the financial reform legislation. Although President Obama wanted to sign the legislation before July 4th, that won't happen because of concerns about getting 60 votes in the Senate. Today's Washington Post explains the wrangling to get the 4 or 5 Senators whose votes are not yet assured. [It's hard to believe, though, that the Senate won't get to 60.]

On a related note, Fortune magazine's senior editor at large Allen Sloane tells us why, in his view, "with a rare exception or two, th[e] 2,000-page [financial reform] bill nibbles at the toes of the problems that brought us the worldwide financial meltdown. It doesn't go for the throat -- its sponsors just pretend that it does." 

The Future of Financial Reform: Looking Ahead

A few days ago, the indefatigable consumer advocate Ed Mierzwinski of U.S. PIRG had these forward-looking thoughts about financial reform at his Consumer Blog.  "It will be critical," Ed observes, "for public interest groups and the media to do three things over the next few years:"

 

-- First, we need to participate in the implementation of the law to make sure that industry lobbyists, well-versed in the ways of regulatory bureaucracy, don't use the regulatory and transition process to delay or weaken the act's provisions. 

-- Second, we need to watchdog the Congress and make sure it fulfills the oversight and accountability role it largely dropped for over ten years. The proposed act did not take the approach of breaking up the big banks or banning most risky practices. Instead it provides a very good set of tools for regulators to ensure that the banks don't take imprudent risks or do anything stupid. For this to happen, Congress needs to make sure that the administration appoints good regulators and Congress needs to do its job by making sure that those regulators do their jobs. Congress needs also to act swiftly on presidential appointments to the financial system, such as on the President's current nominees for Federal Reserve governor, including Maryland Banking Commissioner Sarah Bloom Raskin. In early August, the president will have another critical appointment available, as the term of John Dugan, head of the obscure but powerful Office of the Comptroller of the Currency (OCC), expires. Dugan has long been a steadfast opponent of states and their attorneys general taking action to protect the public against predatory or risky bank practices at the same time as his own federal agency failed to enact or enforce strong rules. Lately, he has spent most of his time blaming other than his national banks for the crisis. Most people know better. The OCC needs better leadership as its powers as prudential bank regulator are expanded under the bill and the soon-to-be-defunct Office of Thrift Supervision is rolled into it. No one will miss the OTS, which missed the warning signs of numerous bank failures and covered up others. 

-- Third, we need to plan for the future by making sure Congress finishes its unfinished business that wasn't done in the mammoth act. High on that list will be solving the Fannie Mae/Freddie Mac conundrum as the firms are still bleeding billions of dollars. [And] although Congress enacted the landmark Consumer Financial Protection Bureau, it failed to modernize the Federal Trade Commission.

(As a litigator, I'd add that we need to be ready to bring and defend the inevitable litigation, including regulatory challenges, that will arise out of the new legislation and its implementing regs).

Henry Sommer, a distinguished consumer advocate and bankruptcy expert, is also thinking about the past and future of consumer rights, but in much broader terms. He's guest-blogging at Credit Slips and you can read the first in a series of his reflections here, suggesting we may be experiencing a return toward consumer protection after a thirty-year hiatus.

House Passes Financial Reform, 237-192

Brian Beutler has the details at Talking Points Memo:

By a vote of 237-192, the House of Representatives this afternoon voted to pass final legislation dramatically changing the rules that govern the financial industry. Nineteen Democrats joined 173 Republicans in opposing the legislation, which, in addition to limiting the risky practices that lead to the 2008 collapse, will create a new federal agency dedicated to protecting consumers from predatory financial products, and bring to a close the Troubled Asset Relief Plan -- the bailout program created by the Congress in the midst of the financial crisis. Three Republicans voted for the bill, and four members (two Democrats, two Republicans) did not vote. The Senate is set to take up identical legislation shortly after they return from next week's Independence Day recess.

The NY Times story is here.

Forced Arbitration and the Kagan Hearings

by Deepak Gupta

 The forced arbitration of claims arising out of statutory protections for consumers and employees has become a hot topic at the Kagan hearings. The parade of comments by Senators started even before the hearings began, with a written statement by Senator Leahy criticizing the Supreme Court's 5-4 decision in Rent-a-Center v. Jackson, and similar remarks on the Senator floor by Senator Franken (video of which we've already posted here). The topic was raised again in Senator Whitehouse's opening statement on Monday and in an extended colloquy between Franken and Kagan this morning.

In his statement, Leahy called the Rent-a-Center decision "a blow to our nation’s civil rights laws and the protections that American workers have long enjoyed under those laws." He noted that "more than one hundred million Americans work under binding mandatory arbitration agreements" and that "most Americans are not even aware that they have waived their constitutional right to a jury trial when they accept a job to provide for their families."

Congress worked for years on a bipartisan basis to pass laws to protect workers from race discrimination, gender discrimination and age discrimination.  . . . Rent-a-Center is unfortunately just the latest in a line of divisive and devastating Supreme Court decisions where five justices have, in effect, gutted those statutory protections. ... Congress should now take a closer look at the way in which binding mandatory arbitration is creating a legal underground where American workers are left without protection. 

There is no rule of law in arbitration. There are no juries or independent judges in the arbitration industry. There is no appellate review. There is no transparency. And as a result of today’s divisive ruling, there will likely be no justice for millions of American workers and their families.  The courthouse doors have simply been closed to them.  Today’s opinion also gives big business a disincentive to treat their employees fairly and will no doubt lead to virtually all companies requiring their employees to sign one-sided arbitration agreements as a condition of employment.

Senator Whitehouse's opening statement at the Kagan hearings struck a similar chord:

Unfortunately, the conservative wing of the current Supreme Court has departed from [the Court's] great institutional traditions. Precedents, whether of old or recent vintage, have been discarded at a startling rate. Statutes passed by Congress have been tossed aside with little hesitation, and constitutional questions of enormous import have been taken up hastily and needlessly. Only last week, the Rent-A-Center decision concluded that an employee who challenges as unconscionable an arbitration demand must have that challenge decided by the arbitrator. And the Citizens United decision -- yet another 5-4 decision -- created a constitutional right for corporations to spend unlimited money in American elections, opening our democratic system to a massive new threat of corruption and corporate control. There is an unmistakable pattern. For all the talk of umpires and balls and strikes at the Supreme Court, the strike zone for corporations gets better every day.

Finally, Senator Franken this morning used the hearings as an opportunity to sharply critique not only the recent Rent-a-Center decision, but also the Court's 2001 decision in Circuit City v. Adams, which rewrote the Federal Arbitration Act to include most employee claims.  The relevant portion of the transcript form this morning's hearings is available after the jump.

Does the Dodd-Frank Financial Reform Bill Still Have 60 Votes in the Senate?

According to today's Wall Street Journal, because of the recent death of Senator Robert Byrd and a few Senators who are threatening to switch their votes, the legislation's fate may be in doubt even though a similar bill earlier cleared the Senate and House-Senate conferees reached a deal last Friday.

San Francisco Requires Cell Phone Retailers to Inform Customers About Radiation Emissions

As the Washington Post explains in today's edition, "[l]ast week, the [San Francisco] Board of Supervisors passed a law -- the first in the nation -- requiring retailers to inform their customers how much radiation the cellphones on their shelves emit, so shoppers can figure out how close the devices come to the upper limits on radiation set by the Federal Communications Commission."

You can read the San Francisco ordinance here. Here's the full Post story, which discusses the dispute over whether cell phone use causes cancer. Another story from the ABC affiliate in San Francisco has more information and links to related articles. In retaliation, the trade group for the industry (CTIA - The Wireless Association) has announced that it will stop holding its fall trade show in the City by the Bay.

Prof. David Cole on the Supreme Court's First Amendment Jurisprudence

Georgetown law professor David Cole maintains in this N.Y. Review of Books piece that when the Supreme Court engages in "strict scrutiny" of legislative regulation of corporate speech (as in the Citizens United case), the Court is really strict, but when national security is the governmental interest, "strict scrutiny" is something altogether different.

Some Seeming Disappointments in the CFPB Bill

by Jeff Sovern

I haven't read the conference Dodd-Frank bill yet, so take this with a grain of salt, but judging by Gretchen Morgenson's column in today's Times, it is a long way from a complete victory for consumers. Of course, the auto dealers won their carve-out, and Morgenson's column indicates that the conferees went with the Senate version of preemption, meaning that the OCC can declare state consumer protection laws preempted even if federal law does not provide for corresponding protection, and the Financial Stability Oversight Council can override CFPB rules.  I'm sure the bill is still worth supporting, but losing on all three of those is disappointing.

NY Times Editorial on Forced Arbitration and the Supreme Court

Today's New York Times contains this terrific editorial, linking to Public Citizen's research on mandatory arbitration outcomes, criticizing the Supreme Court's recent decision in Rent-a-Center v. Jackson, and endorsing intervention by Congress:

Beware the Fine Print

Buried in the fine print of most contracts for cellphones, health insurance and credit cards is a clause requiring that all disputes be decided by binding arbitration, rather than a court. Businesses love these provisions, because arbitrators act quickly and almost always rule in their favor, and many employers are requiring new hires to sign similar agreements.

All of this sounds pretty unfair, but apparently not unfair enough for the Supreme Court, which has now made the arbitration process even more onerous. The court ruled last Monday there was nothing wrong with requiring that the fairness of an arbitration clause be determined by — an arbitrator. To appreciate the absurdity, consider the case at hand, which was brought by Antonio Jackson, a black account manager for Rent-A-Center in Nevada who tried to sue the company for racial discrimination after being denied repeated promotions.

Mr. Jackson had earlier signed an employment agreement saying that all employee discrimination claims had to be arbitrated but a host of claims brought by Rent-A-Center against employees could go before a judge. Any challenge to the fairness of the arbitration clause would also have to go before an arbitrator.

A federal judge dismissed Mr. Jackson’s lawsuit because of the arbitration clause, but the Ninth Circuit Appeals Court revived it, saying courts could rule when arbitration agreements were “unconscionable.” That decision was reversed by Justice Antonin Scalia and the four other conservative members of the Supreme Court.

By challenging the entire arbitration agreement as lopsided and unfair, the majority said, Mr. Jackson triggered the need for arbitration and could not seek court relief. Justice John Paul Stevens, in one of his final fervent dissents, described that notion as “fantastic.” If a contract is invalid, he said, how can the arbitration clause it contains still be valid?

There are many ways in which an arbitration clause might be considered “unconscionable.” What if an employer inserts a provision that the employee has to pay all arbitration fees? Or that the employer gets to pick the arbitrator? In one famous case, a contract between the Hooters restaurant chain and its employees allowed the company to select two members of a three-arbitrator panel. That contract was struck down. Unless Congress changes the rules, these cases may never get back to the courts, where they have a chance for a fair resolution.