Protect music and sports fans from ticket industry abuses

Originally posted on the Public Citizen Consumer Law & Policy Blog.

By John Breyault, Vice President of Public Policy, Telecommunications and Fraud

When Beyonce recently announced her highly-anticipated “Mrs. Carter Show” tour, fans waited eagerly for the moment tickets went on sale. But at the magic moment, thousands of fans were disappointed to learn the show had sold out in seconds.

Was this just a simple case of too much demand for too little supply, just luck of the draw since not everyone could “win” in the contest for a limited number of tickets?  But the reality of today’s ticket marketplace is neither that simple nor that fair.

In fact, the ticketing procedures for the multibillion dollar sports and entertainment industry have become the antithesis of the fair marketplace that consumers have a right to expect, especially when so many concerts and games take place in taxpayer-subsidized facilities.

Instant sellouts like Beyonce’s occur in part because a large number of tickets are set aside for paid fan club and premium credit card “pre-sales” and for industry insider VIPs, leaving thousands of regular fans disappointed each time.  Sometimes, those pre-sale and VIP tickets are the ones that end up on resale websites. And ordinary fans are left with the sinking feeling that they never did have a chance to buy those tickets at face value in the first place.

Consumers have many choices to save money on prescription drugs

From 2011 to 2012 prices for brand name drugs increased in price by an average of 13 percent. As healthcare costs continue to rise, all indications are prescription drugs will rise in cost as well. The good news is consumers have more resources than ever to help them save money on their prescriptions. The easiest way consumers can save money is by finding out whether a generic or non-brand name drug is available.  Generic drugs contain the same active ingredients in the same dosages as brand name drugs, but they cost far less.

Another resource available to consumers is co-pay cards. The co-pay on any prescription is a fixed amount of money that insurance companies ask consumers to pay for a specific drug. By using a co-pay card that sum of money can be greatly reduced or eliminated. There are a variety of co-pay cards available. Consumers can also save money using drug discount cards which are often available online. These cards are offered by state governments, pharmacies, non-profit groups, pharmaceutical companies or large retail chain stores. To compare prices and see which medications are covered by which cards you can visit freecopay.com, needymeds.org, or familywize.org.

To find out more about discount and co-pay cards visit the National Consumers League Web site at nclnet.org. Be wary of any discount card that requires a fee up front because those fees may cost more than the prescription itself.

Political conventions feature impressive speakers, lack some important discussion

By Sally Greenberg, NCL Executive Director

This past week I attended the Democratic Convention in Charlotte. President Barack Obama and Vice President Joe Biden were nominated once again on the Democratic ticket. Charlotte laid out the red carpet for delegates and attendees at the convention. I especially enjoyed meeting seven of America’s Olympic championship girls, including gymnast Gabby Douglas and Soccer player Abby Wambach, who were signing autographs at a special event for kids in downtown Charlotte.

I should note that I also had the opportunity to attend the Republican Convention this month, which I blogged about earlier. So now that I have had the privilege of attending both of the national parties’ conventions, I thought I’d discuss some of my impressions.

First, the focus of both campaigns is decidedly on middle-class voters. It’s all about how tax cuts will affect the middle class, jobs for the middle class, whether the middle class is better off today than it was 4 years ago when President Obama was elected. What I missed was any mention of how people who make minimum wage and are the working poor are doing. They number, according to the National Employment Law Project (NELP), an astounding 47 million. And middle-class jobs are disappearing at an alarming rate, so how do our leaders think we can lift people who are forced to live on low wages out of poverty – because minimum wage workers usually live below the poverty line. As NELP notes, these low wages are “driven in part by the steep erosion of wage standards throughout our economy.”

VP Joe Biden talked about the importance of good, middle-class jobs, but that’s as close as anyone got to the issue.

My Labor Day post addressed the condition of those 47 million low-wage workers. These are the people who are behind counters at airports, train stations, fast food restaurants, and convenience stores. What’s the plan to get American companies to give these folks a path to a better life, and why is no one talking about those millions of workers?

This disappearing middle class is a national crisis, but our politicians don’t talk about it.

I also heard precious little at either convention about global warming and the environmental crisis we face. Senator John Kerry, who ran for President in 2004 on a platform robust with concerns about—and solutions to address—global warming, mentioned the crisis exactly once in his speech at the Democratic Convention. And yet, the Wall Street Journal reported this week (“Record Ice That in Arctic and Greenland”): “The Northern Hemisphere’s largest expanses of ice have thawed faster and more extensively this year than scientists have previously recorded. And the summer isn’t over.” The consequences for climate across the world are enormous; changes in the ice of the far North can raise sea levels and affect weather throughout the hemisphere by altering wind currents, heat distribution and precipitation. But to listen to politicians over the last two weeks, you’d never know we are facing an environmental crisis.

On a more positive note, the conventions gave us a chance to see some amazing people in action. I was struck by the number of articulate and compelling women who spoke at the Conventions.

Ann Romney was smart and thoughtful and an accomplished speaker. I had never before seen her in action, and I was very impressed with her poise. Though I didn’t much care for what South Carolina Governor Nikki Haley had to say about Voter ID laws (she supports them), she is an equally effective and attractive speaker.

The Democratic Convention featured a riveting talk by First Lady Michelle Obama, who caused a few commentators to say the next day, “SHE should be running for President.” Jill Biden talked warmly about her VP husband’s lifelong devotion to making life better for the middle class, and Michigan Governor Jennifer Granholm provided a theatrical performance that won’t soon be forgotten as she described the jobs that were preserved as a result of auto industry loans. All these women—Republican and Democrat—should be a great source of pride for both parties. They are in some ways the best news the parties have to offer and both Republicans and Democrats are smart to give them center stage.

In addition to my list above, there are a number of other issues of national significance neither party chooses to address; consumer protection issues were largely overlooked, as was sensible gun regulation. As we count down the next two months until the election, I hope we can count on voters to ask the politicians some of the tough questions that got short shrift during the Conventions.

Good way to start the New Year

By Michell K. McIntyre, Director of NCL’s Special Project on Wage Theft 

What a way to start the New Year! This week saw three exceptional events that signal an optimistic outlook for 2012.  President Obama not only decided to use his executive power to make recess appointments but he used them to appoint Richard Cordray to the head of the Consumer Financial Protection Bureau (CFPB) and filled the three vacancies at the National Labor Relations Board (NLRB).

With Cordray’s appointment to the CFPB, the Bureau can finally begin its vital mission of standing by consumers, demanding greater transparency about consumer financial products and pursing enforcement actions against financial firms who have defrauded consumers or otherwise violated federal rules. Without a director, the CFPB could not have moved forwarded with its critical work and consumers would be left at the mercy of financial institutions.

Later that same day, President Obama appointed three very qualified individuals to the NLRB – Sharon Block, Terence F. Flynn and Richard Griffin. With these appointments the NLRB can continue to police employers, unions, and workers. Without these bipartisan appointments the five seat NLRB would not have had a quorum, having only two seats filled as of January 3rd, and would have been paralyzed until the Senate confirmed the nominees.

None of these events could have happened without President Obama taking the step to stop the nullification of these federal agencies by the minority in the Senate.  According to USA Today, when the Senate minority filibustered Cordray’s nomination last month, it was the first time in history the Senate blocked an appointment in an effort to effectively shut down an agency.  Senate Minority Leader Mitch McConnell stated, “We won’t support a nominee for this bureau – regardless of who the president is.” While Senate Majority Leader Harry Reid called it “the first time in Senate history a party blocked a qualified nominee solely because it disagrees with the existence of an agency that was created by law, through a bipartisan vote.”

When President Obama stepped up to the plate on Wednesday and used his executive power to make recess appointments, he not only hit it out of the ballpark but he hit a grand slam for American consumers and workers.

A big welcome to Mr. Cordray, the new head of the Consumer Financial Protection Bureau!

By Sally Greenberg, NCL Executive Director  

A big thumbs up to President Obama for his bold recess appointment of Richard Cordray as head of the Consumer Financial Protection Bureau.  This is a federal agency created by and Act of Congress no less – that sets up a bureau of protection for consumers in their financial transactions with banks, pay day lenders, student loan companies, and many more entities. NCL strongly supported the establishment of the CFPB and we were enthusiastic supporters of its first interim director, Elizabeth Warren. The conservatives in Congress wouldn’t vote to confirm her so she left town and returned to Massachusetts, where she is running for Senate.

Richard Cordray delivering his speech at the Brookings Institute Yesterday

Cordray, however, believes in the same simple goals that Warren was so adept at articulating. I was fortunate to be in attendance yesterday when the Brookings Institution hosted Mr. Cordray’s “virgin” speech shortly after his appointment as he spoke on importance of the new bureau: “Consumer finance is a big part of our economy and it plays a large role in the daily life of almost every American,” said Cordray. “We are rightly concerned about these things because consumer finance clearly has become more complicated and more risky in recent years.  Hidden fees and exploding interest rates have infected more products and services, novel and exotic mortgages, battered housing markets, and triggered the financial crisis that wrecked the economy and hurt millions of people,” he continued.

It’s as simple as that – consumers are faced with myriad financial decisions as a fact of daily life in America; unfortunately, the instruments they must sign, and the documents they agree to are far too complicated – indeed, they are a minefield. The Bureau aims to reduce these overly complex documents to a few pages of understandable prose and keep consumers out of trouble and financial institutions on the up and up.

I like Cordray; he’s a “steady-Eddie,” and though I must say that he lacks charisma or charm, he is utterly solid and thoughtful. How Congress gets away with not even holding a hearing on this very accomplished public servant and lawyer—Cordray’s a former Ohio States Attorney General, a former state treasurer, clerk to two Supreme Court justices, and a partner at a white shoe law firm—is beyond me. All consumers – left, right or center – will benefit from Cordray’s leadership at the Bureau to help set a model for uncomplicated financial documents and oversee financial institutions, from banks to pay day lenders.

If it has to be a recess appointment, so be it. We’re glad to have a leader at the Bureau and we wish him all the best in this tough but critically important new role.

Airline industry disappoints consumers. Again.

$25 for one checked bag? Another $20 to choose your seat? Is it any wonder that the airline industry consistently scores the lowest in consumer satisfaction surveys? Earlier this summer, the American Customer Satisfaction index reported that, out of the 47 industries evaluated, airlines tied newspapers for the lowest-satisfaction rating, and airline satisfaction only continues to spiral downward.

The airline industry’s actions over the past few months will do nothing to improve consumer confidence. When the government failed to reauthorize the FAA in July, several federal taxes were discontinued, which could have meant a 15-percent break on airfare for passengers. Instead of passing the money saved from the tax holiday on to consumers, most airlines actually raised prices–allowing them to collect nearly $70 million a day, almost $500 million in total, before the FAA’s taxing authority was reinstated.

NCL, along with a coalition of consumer interest groups, condemned airline executives in a letter to the CEO of the Air Transport Association for their greed and lack of transparency in ticketing fees.

If airlines continue to exhibit this type of anti-consumer behavior, it’s a fair bet that the industry can expect a permanent spot on the bottom of the consumer satisfaction scale.

Resale Price Maintenance should be illegal

By Sally Greenberg, NCL Executive Director

I recently  received a call from a staffer for Congressman Hank Johnson (D-GA) who has been a leader in opposing a practice that organizations like ours regard as very anti-consumer: “Resale Price Maintenance (RPM).” RPM is the practice whereby a manufacturer and its distributors agree that the latter will sell the former’s product at certain prices (resale price maintenance), at or above a price floor  (minimum resale price maintenance) or at or below a price ceiling (maximum resale price maintenance). If a reseller refuses to maintain the price set by the retailer, either openly or covertly, the manufacturer may stop doing business with it.

In 2009 five groups – NCL, Consumers Union, Consumer Federation of America, American Antitrust Institute and US PIRG – asked Congress to overturn the 2007 Supreme Court case, Leegin Creative Leather Products, Inc vs. PSKS, Inc. that made RPM legal. RPM used to be “per se” illegal under the antitrust laws but this case overturned 100 years of precedent.

Resale price maintenance prevents resellers from competing too fiercely on price. According to Wikipedia, RPM exists because: “ resellers worry it could drive down profits for themselves as well as the manufacturer. Some argue that the manufacturer may do this because it wishes to keep resellers profitable, and thus keeping the manufacturer profitable. Others contend that minimum resale price maintenance, for instance, overcomes a failure in the market for distributional services by ensuring that distributors who invest in promoting the manufacturer’s product are able to recoup the additional costs of such promotion in the price they charge consumers. Some manufacturers also defend resale price maintenance by saying it ensures fair returns, both for manufacturer and reseller and that governments do not have the right to interfere with freedom to make contracts.”

The 2009 consumer letter to Congress said that “it is unequivocal that RPM agreements raise consumer prices, prevent efficient retailers from passing on the benefits of their lower costs to consumers, and tend to retard the development of new forms of retailing. At the same time, the purported benefits to consumers of RPM agreements are dubious and even if such benefits exist, they can be achieved by less restrictive business practices.”

These words are true today, as they were in 2009 when we wrote the original letter. We urge members of Congress to overturn this unfortunate Supreme Court decision and applaud Congressman Hank Johnson for renewing his efforts to make RPM illegal once again.

We should have listened to Sheila Bair

By Sally Greenberg, NCL Executive Director

The New York Times Magazine recently ran a profile of outgoing Federal Deposit Insurance Corporation (FDIC) Chair Sheila Bair. Its written by a business columnist whom I’ve come to revere – Joe Nocera. I blogged a while back about Nocera’s wistful interview with a heroic banking CEO who believes that his industry has become greedy and exclusively interested in making money by engaging in transactions for fees, and not by ending money.

In this piece, Nocera talks about why Bair played a heroic role in the finance world over her five-year term. “Alone among the regulators… the FDIC began to home in on subprime lending. By 2006 the subprime industry was running amok, making loans – many of them fraudulent – to just about anyone with a pulse. Most subprime loans had adjustable interest rates, which started low but then jumped significantly after a few years, making the monthly payments unaffordable for many homeowners. The lenders didn’t care because they sold the loans to Wall Street, which bundled them into mortgage-backed bonds and resold them to investors.”

I don’t think I’ve read such a clearly stated, short, and concise description of what caused the collapse of our financial system. Nocera makes all the critical points in the span of a few sentences:

a) none of the regulators but FDIC were paying attention to subprime loans

b) there was fraud involved in many subprime loans – for eg, paperwork altered to make the buyer appear to have a higher salary and take out a bigger loan

c) the adjustable interest rates that kicked up high after a year or two and made the mortgages unaffordable

d) no one had skin in the game – or cared that the loan couldn’t be paid back – because the risk-riddled mortgages were sold to Wall Street almost as soon as the loan was issued

But Sheila Bair and her staff at FDIC knew and they tried to blow the whistle. They called industry players together, pushing them to raise their standards. They wouldn’t do it. She opposed new rules that that allowed reduced capital requirements to cushion against losses. She lost that battle. Bair tried in a number of ways to stem the tide of subprime loans.

Sheila Bair has always stood out to me as a lone voice for strong oversight and regulation of the markets. You cannot live in capitalist economy without strong regulation. Bair maintained her standards and never tired of raising her concerns, even though she often lost her battles. Her term expired on July 8 and she is moving on. With her departure, we lose a highly skilled, outspoken and principled public servant; had we listened to her from the beginning, we might have avoided the terrible economic calamity of the last three years.

Committee investigation confirms advocates’ worst fears about “cramming”

By Alex Schneider, NCL Public Policy Intern 

For more than a decade phone bill cramming has been costing consumers millions of dollars.  But until the recent release of the Senate Commerce Committee’s report on cramming, few knew just how pervasive and insidious this problem has become.

“Cramming” is defined as the placement of unauthorized third-party charges on a consumers’ monthly phone bill.  The charges could be for anything from yoga classes to fax or voice services to credit protection plans.  But overwhelmingly, they have one thing in common: consumers were charged without ever asking to be signed up for the service.

Since the mid-1990s, third parties have crammed these illegal charges onto monthly phone bills, relying on the concept that consumers will pay their bill without painstakingly analyzing each and every line item.  The phone industry said it would clean up its act, but, as Senator John Rockefeller made clear at a hearing of the Senate Commerce Committee last Wednesday, these voluntary fixes just haven’t worked.

“I plan to introduce legislation that will a put a stop to this,” Rockefeller said. “I simply cannot find any grain of sense in us having to have a hearing like this.”

Astonishing findings

The committee report extends 50 pages and reveals that cramming hurts individuals, government agencies, and businesses of all kinds (including the phone companies themselves!).  The following are a sampling of the committee’s new findings:

• Verizon, AT&T, and CenturyLink/Qwest earned $650 million since 2006 in $1 and $2 incremental fees as a kickback for permitting third-party phone bill fees.

• Crammers have doctored authorization forms to charge consumers in egregious ways, including listing deceased relatives as those who signed up for the services and charging unlikely phone numbers, including dedicated lines used for ATMs, alarm systems, modems, and emergency calls.

• Companies allegedly offering third-party services operated out of fake mailboxes, fake offices, and fake residences.  In one case, the president of a company had no involvement in the business and had been asked to sign some forms by a friend.  In another instance, the address of a cramming company was listed as “Suite #237,” but the ‘suite’ turned out to be a mailbox at a UPS Store, not the greatest of places to host an office meeting.

• A gaming service charged to customers by a “company” called EZPhoneBill provided the same games as another free website and had no users despite enrolling 20,000 customers at $14.95 per month.

• Bill blocking procedures initiated by customers did not 100% guarantee they would not be billed.

Solutions To Cramming Are Within Reach

In a letter to the Senate Commerce Committee, NCL urged Congress to follow the lead of Vermont and pass legislation ban third-party charges on landline phone bills.  As we wrote, the findings of the Commerce Committee as well as those of various state Attorneys General, the FCC, and the FTC highlight that there is little legitimate reason why a consumer would want to be billed for a third-party service on their wireline telephone bill.

Indeed, a FCC investigation released last month found that only 20 out of 17,384 consumers actually used the third-party service for which they were billed, a usage rate of roughly 0.1%.

As assistant Attorney General of Vermont, Elliot Burg, noted at last week’s hearing, consumers don’t expect that they can be billed for unrelated products and services on their phone bills.  Thus they aren’t likely to be on the lookout for cramming charges. Lawmakers in Vermont concurred, took action to ban third-party charges, thus saving consumers in that state from future aggravation due to cramming.

Cramming is a Significant Crime with Real Victims

The Commerce Committee estimates that third-party charges on landline phone bills cost consumers $2 billion every year.  That doesn’t include the time and energy that goes into calling customer service to rectify a bill or the losses to businesses that might be required to take precautionary measures to review employee phone bills for potential fraud.

Cramming is not going away.  The fact that AT&T itself has been crammed 80 times, according to Commerce report, is indicative of a larger problem that requires an aggressive solution.  We believe that banning third-party charges on landline phone bills is just that solution.

Consumer Tips for Avoiding Cramming

Until third-party charges are banned, here are some basic steps you can take to avoid falling victim to cramming:

1. Contact your phone company and ask to opt-out of third-party billing.
2. Watch for any changes in your monthly phone bill.  Even a change of a few dollars could indicate a cramming charge.
3. Be careful about answering phone surveys or Internet surveys that ask for your phone number, or participating in online sweepstakes.  If you do participate, make sure you understand any charges you may incur.
4. Before paying your phone bill, scan for a “third-party” charges section.  If you do not recognize the charge and if you have any questions, immediately call your phone company.
5. Learn more from the FTC and FCC about filing a complaint or file a complaint directly with NCL at www.fraud.org.

New bill addresses confusion over meaning of “4G”

By Larry Rose, NCL Public Policy Intern

You’ve probably heard the term “4G” being mentioned a lot recently. And, if you’re like most consumers, you probably have no clue as to what that means. In theory, a fourth generation, (4G) wireless network is a network that offers significantly greater speed than the third generation (3G) wireless networks that most smartphones run on.  The International Telecommunications Union (ITU) used to define 4G services as broadband technology that has a speed exceeding 100 M bit/s.  ITU later changed the definition of 4G to any form of mobile broadband that marks a meaningful improvement over 3G services. This definition is vague and allows the telecommunications industry to refer to many different types of mobile broadband as “4G.”

The four largest members of the telecommunications industry all provide services that are advertised as being “4G.” However, these four companies use the term “4G” to refer to three different types of mobile broadband technology. AT&T and T-Mobile advertise their Evolved High Packet Speed Access (HSPA+) networks as being “4G” despite the former company considering its HPSA+ network to be a mere “transition” to “true” 4G technology.  On the other hand, Verizon uses the term to refer to its Long Term Evolution (LTE) network, which typically provides faster speeds than the HPSA+ network. Sprint markets its WiMax technology as “4G” despite being somewhat slower than Verizon’s LTE network. These three services are considerably different from one another from a technological point of view, but they all operate under the same marketing label.  This creates difficulties for consumers who are trying to determine which wireless service to purchase.

Fortunately, consumers have found themselves a champion in Congress. Last month, Representative Anna Eshoo of California introduced H.R. 2281, the Next Generation Wireless Disclosure Act.  This bill requires wireless service providers to disclose information about the speed, reliability, price, network management policies and the terms of the wireless service, as well as costs for the service that are not included in the stated price and the technology used to provide the service. The bill would also direct the Federal Communications Commission (FCC) to create a side-by-side comparison of the speeds and prices of the 4G services provided by the top 10 U.S. wireless carriers.

The telecommunications industry isn’t pleased with this bill. According to the CTIA, the bill adds unnecessary regulation at a time that Congress should be focused on finding more spectrum to devote to 4G technology.

A study from Nielson found that only two out of five consumers understand what the term “4G” actually means. 27% of respondents incorrectly believed that Apple’s iPhone 4 offers 4G technology . That false assumption was most likely aided by the fact that a previous version of the iPhone was called “iPhone 3G,” after the type of mobile broadband that it used.

Last week, NCL, joined the ranks of Consumers Union, Public Knowledge, Media Access Project and the New America Foundation’s Open Technology Initiative in endorsing the Next Generation Wireless Disclosure Act. In an economy where many consumers rely on mobile broadband for Internet access, it is essential that consumers know what type of mobile broadband service they are purchasing.