Business Gears Up for Assault on Consumer-Protection Laws

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That low rumbling you hear is the business lobby revving its engines for an assault on state consumer-protection laws. The corporate-funded American Tort Reform Association gave fair warning at an event in Washington on Wednesday, when it announced “a multiyear, multistate campaign to reform such laws.”

By “reform,” ATRA means water down, roll back—choose your metaphor—but it ain’t good news for plaintiffs’ lawyers who file mass suits over allegedly misleading food labels, defective cars, and the like. Whether reforming consumer statutes would be good or bad for consumers is a matter of dispute.

Peter Holland, a Maryland-based consumer-side lawyer who attended the Washington session, warned that the coming corporate lobbying effort would leave ordinary folks vulnerable to hazardous products and sleazy marketing. “You are basically creating a race to the bottom,” he said during a panel discussion. (ATRA deserves credit for inviting a skeptical foe to its otherwise business-friendly launch event.)

Reform proponents, although making no bones about representing corporate interests, insisted that abuse of consumer-protection laws has actually harmed consumers by driving up product costs and cluttering courts with frivolous claims that give a bad name to legitimate injury suits. A lot of the discussion in Washington focused on recent litigation over potato chips and granola bars marketed as “healthy.” (See my recent article “California’s Food Court: Where Lawyers Never Go Hungry.”)

“Though some dietary activists may be happy to see snack-food prices rise as a result of such speculative, no-injury litigation, most consumers are not,” said Sherman Joyce, ATRA’s president. “Prices for products and services all across the retail spectrum are being similarly affected by runaway litigation, which is why state policymakers should begin to revisit their respective consumer-protection acts.”

Emulating federal statutes that empower the Federal Trade Commission, the state laws generally prohibit “unfair” or “deceptive” business practices. Some of the state laws, such as California’s, are more expansive and allow private parties to seek larger damage amounts with reduced evidence of wrongdoing. Some of the state laws also make it easier for plaintiffs’ attorneys to seek to force defendants to cover their fees. Corporate advocates argue that the plaintiffs’ bar has exploited the state laws to bring class-action suits on behalf of hundreds or thousands of putative victims whose actual injuries range from slight to nonexistent.

For what it’s worth, here’s my take on the coming clash over consumer-protection laws: The statutes play a vital role in cases where people are actually injured— maimed by faulty cars, for example, or poisoned by bad medicine. In instances of snake-oil advertising or high-pressure telemarketing, state attorneys general can and do use the statutes productively to stop abuse, especially of the elderly and the unsophisticated.

But the plaintiffs’ bar, as it so often does, has overreached in high-profile examples, such as the health-food labeling cases, and thereby opened the door for a broad corporate counterattack. State lawmakers ought to proceed cautiously as they tinker with laws that, when properly applied, help insulate consumers from commercial abuse.

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