Protecting Consumers

Cross posted to Huffpo here.

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 induced auto manufacturers to deploy cost effective air bag technologies, to simulate markets for recycled paper and to require more energy efficient computer designs.