[Random-bits] Protecting Consumers

[James Love]

http://www.huffingtonpost.com/james-love/protecting-consumers_b_154983.html
January 3, 2009

Protecting Consumers
James Love, The Huffington Post

Back when campaign spending was limited by law, there was an effective
quota on taking money from special interests. After the cap was reached,
it was more effective to do favours for voters than corporate interests.
One way to do this was to support consumer protection initiatives.

Politicians once made reputations fighting high prices, unsafe products
and misleading and unfair business practices. Somewhere along the line,
after the Nixon appointees to the U.S. Supreme Court eliminated campaign
spending limits (Buckley v. Valeo), interest in the practical concerns
of consumers dramatically declined. There are some exceptions, but for
every Member of Congress like Byron Dorgan, Henry Waxman or Ed Markey,
there are many more who focus their energies on issues more relevant to
helping out industry sectors than consumers.

While a predictable consequence of un-capped campaign spending, the
decline in attention to the problems of consumers is rarely examined in
terms of the impact on the public.

To be fair, some of the lack of current activity is a consequence of
past successes. Reforms to protect consumers that were achieved during
the 1960's and early 1970s were substantial and durable. Cars are much
safer. Airlines can't arbitrarily bump passengers without compensation.
Generic drug markets work better. And lots more was done.

There is also loss of confidence in government. In the late 1970s and
early 1980s, considerable attention was given to the risks of regulatory
capture, or the unintended consequences of regulatory interventions.
Good intentions are not enough.

The economy has also grown more complex. We are using a much larger
number of products and services, many of which move in international
trade. The pace of innovation is faster.

Still, despite the challenges, there is plenty to be done, and it
matters a lot to people struggling from paycheck to paycheck, and who
suffer from poorly functioning markets.

Predatory lending and abusive debt collection practices, usurious
interest rates on consumer debt, the high price of new medicines and
medical, dental and legal services, the proliferation of unfair
contracts of adhesion for online transactions, the marketing of
unhealthy food products, slumlords that bilk renters of security
deposits and fail to provide decent living accommodations, insurance
policies or warranties that don't protect, the collection and sale of
personal information leading to loses of privacy, the manipulation of
data formats to prevent consumers from switching to competing software
products, undisclosed conflicts of interest in reviewing and
recommending products, and thousands of other topics have an impact on
our lives. (Ed Mierzwinski blogs about many of these issues here).

There are also broader ways of considering the interests of consumers.

I travel a lot, most of it internationally. I'm often appalled that
airlines can sell seats with such limited leg room, that I have to
contend with an endless set of pay for use wifi connections, that it is
so difficult to find electrical outlets in some airports, and I resent
having to pay to use luggage carts. I'd vote for a member of Congress
that would champion a travelers bill of rights to address these and
other irksome aspects of travel. There countless areas where governments
could make consumers better off, if there was interest and political
will.

One should also consider more the impact of government policies on
consumers. The "incentives" for testing medicines on children is a six
month extension of a drug marketing monopoly. It works, but at a very
high price -- to consumers. Isn't there a cheaper way to do this? Do we
really need to grant a 95 year monopoly as an incentive to publish new
copyrighted works?

Many consumer protection measures involve disclosures of different
types. Certainly more can be done. A consumer protection agenda focusing
on transparency might include requirements for more useful reporting of
service problems for airlines, telecommunications providers,
manufacturers of personal computers and other widely used consumer
electronics products, and other industries, perhaps provided by
independent auditors. There could be far more transparency for
pharmaceutical markets, including prices of products from manufacturers,
hospitals and retailers (some hospital and pharmacy mark-ups are very
high), and information on actual R&D outlays on products, as well as on
marketing outlays and payments to physicians and academics who recommend
products. We need better adverse events reporting.

Regulators should collect information on revolving door employment
situations (including the relevant employment histories before and after
government jobs), to make the risks of agency capture more transparent.

There are other, potentially even transformative ways to consider the
interests of consumers. The Internet was created by network users, and
first existed and grew as a challenge to more restrictive and closed
networks that were largely designed to control and exploit users. The
Free/Open Source software movement was likewise designed by both
programmers and users, seeking more access, freedom and voice in
software development. The open access journal movement is an effort by
scholars and readers to create a publishing model that works better for
them. The blogsphere is, among many other things, an collective effort
by the public to create a rival systems of reporting and commentary.

I'm currently involved in a deeply ambitious effort to transform the way
we pay for the R&D for new medicines. Rather than grant 20 year legal
monopolies to drug developers for new inventions, and suffer from a host
of pricing and marketing abuses, and weak incentives to invest in
medically important inventions, drug developers would compete for shares
of a massive R&D prize fund, that reward drug developers for the impact
of inventions on the improvement of health outcomes. (Read more, here,
here and here).

In many different ways, political leaders could find ways to make things
work better for consumers. There are several instruments for doing this.
Governments can mandate greater transparency, regulate business
practices, or use government procurement policies* to shape markets.

In an era of limited economic resources for families, greater attention
to the protection of consumer interests would be welcome.

In the 1970's there was an effort to create a federal agency to advocate
on behalf of consumers. This was a major initiative, that would have
created a permanent institutional presence for advocating on behalf of
consumer interests before all federal agencies. The idea, championed by
Ralph Nader at the time, was to provide a durable and well funded
institutional capacity and mandate to evaluate and promote the interest
of consumers in interagency deliberations, ruling making, and other
areas.

In 1974, a bill to create a federal Consumer Protection Agency (CPA) was
supported by thirty-two state governors, 120 national and local
consumer, farmer and union groups, the Economic Crime Committee of the
National District Attorneys Association, the U.S. Conference of Mayors,
and the National Association of Attorneys General. It passed the passed
the House of Representatives by a three-to-one margin. The bill was
opposed by Presidents Nixon and Ford, and by the nation's business
establishment.

Carter promised to support the legislation to create the agency, but
after he gave only lukewarm support, the legislation was defeated and
eventually forgotten in the wave of anti-government sentiment that
accompanied the election of Reagan in 1980.

President Clinton was never focused on consumer protection issues. He
pushed a largely deregulatory agenda on issues concerning e-commerce,
and refused to discuss anything but self regulation or industry
controlled dispute resolution for online transactions. He picked
corporate lobbyists to staff many key positions in the government, got
rid of the NIH requirements for reasonable pricing of government funded
pharmaceutical inventions, extended copyright terms to 95 years for
corporate owners and pushed for the anti-consumer DMCA digital copyright
legislation, blocked parallel trade on pharmaceuticals from Canada and
Europe, tried to undermine European Union privacy measures, and he
loaded up trade advisory bodies with corporate lobbyists, while he and
his cabinet refused to meet with the TransAtlantic Consumer Dialogue.

Bush has been extremely hostile to consumer protection issues. Obama
will soon be President, working with solid democratic majorities in the
House and the Senate. He should use his power to advance consumer
interests in ways that have been neglected for decades.

----------------
* Government procurement policy was used to induce auto manufacturers to
deploy cost effective air bag technologies, to simulate markets for
recycled paper and to require more energy efficient computer designs.

-- 
James Love, Director, Knowledge Ecology International
http://www.keionline.org | mailto:james.love at keionline.org
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