Earlier today, in an American Bar Association Antitrust Section webinar chaired by Harvey Saferstein, and with panelists Deborah Goldstein, Center for Responsible Lending, and Daniel D. Sokol, Professor of Law, University of Florida Levin College of Law, Hofstra's Norman I. Silber delivered the remarks that appear below about the Consumer Product Safety Commission and the Federal Communications Commission. Norm has graciously consented to allow posting of his notes for his talk to the blog. He cautions that this was designed for verbal presentation and that he did not record his sources and therefore can’t footnote but indicated by quotations lines that are taken from others. He is grateful for conversations with many individuals who helped provide him information which he has privately acknowledged.
Weakening the Consumer Product Safety Commission.
As consumer affairs professionals know, the CPSC regulates the sale and manufacture of more than 15,000 different consumer product lines, from cribs to all-terrain vehicles. It fulfills its mission by banning dangerous consumer products, establishing safety requirements for other consumer products, issuing recalls of products already on the market, and researching potential hazards associated with consumer products. Showcase recalls in the last few years, among hundreds of recalls, include the dangerous flaming Samsung Galaxy smartphones, exploding hover-boards, and IKEA bookcases that tip over. A number of consumer affairs professionals believe that the recall approach is a poor substitute for pre-market clearance and better inspection. The chief problem the Agency has faced is the glacial pace of rule-making, which has stalled rules that by most experts estimation can save many lives without imposing undue expense on consumers and businesses.
In 2008, in a show of strong consumer bipartisanship, connected to tragedies in connection with lead residues, the CPSC was granted extensive new regulatory authorities and mandates to improve consumer product safety through the Consumer Product Safety Improvement Act (CPSIA); new tools and building new capabilities, such as a new public information database and a world-class testing laboratory. Then Senator Obama took a leading role, but it was an accomplishment President Bush took pride in.
Among other things, the 2008 Safety Improvement Act upped the agency’s penalties for failing to comply with recall rules and for permitting unsafe products to enter the market rose to an aggregate limit of $15 million, with adjustments for inflation. Over the past two years, the CPSC has reached multimillion-dollar settlements under its elevated penalty authority.
Now comes the election. There is currently a Democratic majority but President Trump can remove Elliot F. Kaye as chair. But if he does he can’t turn around and appoint another chair because CPSC chairs must be confirmed by Senate and so the chair will remain vacant for some time; likely the commissioners will on their own vote one of two Republicans to be vice chair, and when Kaye is removed, a Republican vice chair will be acting chair. But there will be 3 Democrats until Oct 2017, when a Democratic majority is lost. At that point one can anticipate a de-emphasis on collecting all of the penalties already assessed, and perhaps more permissive attitude about consumer risk-taking.
Bills have been floated by Republicans that would increase what is already a big problem–“paralysis by analysis,” as a CPSC employee told me. These bills have been discussed already, and some involve OMB review of all regulation. They will have tough sledding: unlike ACA, such a bill is not about appropriation and would require 60 votes to pass, which Trump is unlikely to obtain.
Nothing stops Congress from cutting budgets across the board. It also could target the CPSC and savage its budget. The Republican dominated commission also could curtail or eliminate industry reporting responsibilities, although the database program has proved itself to be less controversial.
The CPSC at this time does not appear either at the center of controversy or to have acquired aggressive opponents, but its proactive work and deterrent impact is likely to diminish.
Deconstructing the Federal Communications Commission.
During the Obama years, Democrats on the FCC identified major segments of the communication marketplace as intrinsically inefficient, opaque, and independently incapable of generating competitive markets and promoting consumer well-being. Most notably, in February 2015, the FCC reclassified broadband Internet access as a telecommunications service, thus subjecting it to Title II common carrier regulation, and generated rules protecting net neutrality, the principle that all internet content should be equally accessible to consumers; and in October 2016 it adopted rules bolstering consumer privacy online, allowing consumers “to forbid Internet providers from sharing sensitive personal information, such as app and browsing histories, mobile location data and other information generated while using the Internet.” Internet providers are turning their customers’ behavioral data into opportunities to sell targeted advertising. Dissatisfied with being mere carriers, these companies increasingly view the information they collect “as a source of revenue.” Under Chairman Tom Wheeler (departing), and with the support of Commissioners Clyburn and Rosenworcel (departed), the FCC also thwarted the Comcast merger with Time Warner Cable, and reformed the Commission’s E-rate and Lifeline programs. The Commission also imposed stiff multi-million dollar penalties for anti-competitive and deceptive practices, for example by penalizing the throttling back of data speeds for those who had bought unlimited data and used high amounts.
Had Hillary Clinton been elected, Wheeler would have been defending his signature accomplishments, which have been bitterly opposed by the nation’s largest cable and phone companies, in court. But the Commission would have gone further to set more stringent data privacy standards and anti-fraud rules. Among the items being planned was a measure to rein in the cost of so-called “Business Data Services” (BDS), which are specialized communications links that serve businesses and institutions like hospitals, libraries and schools. “Because of a lack of competition in this market, which is dominated by the likes of AT&T and other telecom giants, these businesses and institutions have been socked with billions of dollars of “overcharges over the last decade.”
With the election tables have turned and everything is upside down. Republicans on the Commission have traditionally identified the maximization of consumer welfare with the maximization of corporate freedom by the dominant service providers and media conglomerates. They have interpreted most consumer protection efforts, for instance efforts to regulate service providers as common carriers, as misguided paternalism.
It is the prerogative of the incoming president, in this case President Trump, to nominate the next FCC chairman; and the transition team is not so much under the influence of Trump as of Speaker Ryan and Vice President Pence. Starting soon there will be a Republican majority.
The FCC transition team is dominated by individuals who despise the Common Carrier rule. Jeff Eisenach head of the team, and potentially a Commissioner, is at NERA Consulting and the American Enterprise Institute. They are likely to reclassify the internet service providers to end the net neutrality regime. It may also be the case that they will leave neutrality intact but eviscerate its effect through a back door, such as through permitting “sponsored data” by which certain activities don’t “count” against usage.
ATT is likely to be a major player in guiding the transition, and actors have spoken about preventing all future regulation of new market activities. There is even serious conversation about radically revising the enabling legislation for the Commission, or repealing it entirely, eliminating the consumer protective functions of the Commission and parceling out these elsewhere. Regulating the broadband spectrum, they say, could be handled administratively; privacy and fraud could go to the FTC, and anti-trust regulation might be sent to the Justice department.
There is also the definite probability that the new FCC will scale back or simply decline to enforce the fines and penalties assessed by the previous administration. There is further discussion about preventing the Commission, if it remains, from doing any further regulation prospectively.
Privacy concerns are relatively bipartisan, and if responsibility for protecting privacy rights were to be transferred to the FTC that could in some sense be a net wash.
I think that it is unlikely that Congress will repeal the Commission, if only because the FCC could be used by the Trump administration to modify media coverage. Given the President-elect’s penchant for using his “bully-tweetlet” to intimidate individual private corporations, it is worrisome to see that Trump has indicated that he would block the ATT/Time Warner deal without specifying reasons, except for continual tweetlets to the effect that he doesn’t think he is receiving fair coverage by CNN, which is part of a Time Warner Division. It is one thing to bully a company to pull a plant out of Mexico, another if he were to use the power to block a media merger to chill free expression.
Whether the Trump administration can do more damage by playing favorites or by eliminating the FCC entirely is at this moment a question I can’t answer.
Concluding thoughts: The title for this presentation has been “the Trump” administration, but in the case of these agencies Mr. Trump seems to have less to do with agency direction than the Pence/Ryan constellation; and the nature of consumer protection under them persons will, if I am correct, quickly take the form of an effort to associate the consumer interest with the dismantling of regulation and “unleashing opportunity”.
The impact on the CPSC is likely be to decreased deterrence against dangers in the marketplace, and correspondingly increased random consumer risk. The impact on the FCC will be felt in more aggressive and sometimes deceptive marketing, and corporate profits at the expense of consumer autonomy and honest information. The end of net neutrality rules might bring lower prices and more innovation in some areas, but more generally may herald a confusing world in which large players can exercise market power to take larger market shares and dominate cultural and political communication.
I think it is interesting that nothing that is being suggested as likely to happen in the area of the consumer agencies has any sort of populist tinge. The polices seem to be being designed to deregulate existing sectors, and to prevent regulation of new ones.
In distinction to Republican perspectives, for example eliminating environmental and OSHA regulations, and with the possible exception of his promise to allow interstate insurance sales, the major consumer impact of Donald Trump on consumers is likely be imposing border taxes –which increase consumer prices; restricting immigration– which will increase labor costs and increase consumer prices; and increasing the deportation of undocumented residents which will increase consumer prices.
Random final thoughts:
It may be that consumer groups can use the notice and comment procedures of the APA, which up to now have mainly been effective at swamping regulators, to the advantage of consumers, for a change.
We are returning to a world in which states again assume a primary role in consumer protection. It would be hard to enact “little CFPB” credit rules due to the preemption cases, but perhaps in areas including mortgages this is worth considering.