Consumer Watchdog Wednesday called on the Federal Trade Commission to ask Congress to pass Do Not Track legislation because “the self-regulatory effort to design Do Not Track is virtually dead in the water.”

In a letter to FTC Chairman Jon Leibowitz John M. Simpson, the nonpartisan nonprofit public interest group’s Privacy Project Director wrote:

“Almost a year ago with great fanfare in the media you said a Do Not Track mechanism would be in place by the end of last year.  You and you colleagues opted to rely on a self-regulatory process to implement Do Not Track, but alluded to the possibility of legislation if that process failed.  Not surprisingly the self-regulatory effort to design Do Not Track is virtually dead in the water.  After a year nothing has changed for the consumer.  You tried to use the bully pulpit, but the advertising industry did not heed your call. The time for words has passed; if you expect Do Not Track to be implemented, the Commission must endorse Do Not Track legislation now.”

Read Consumer Watchdog’s letter here

“As the Commission advocated in its report, Protecting Consumer Privacy in an Era of Rapid Change, a Do Not Track mechanism would offer people control over whether data about them was collected,” Simpson wrote.

Consumer Watchdog noted that the World Wide Web Consortium (W3C), an Internet standards setting organization, has been trying to develop specifications about how the Do Not Track message would be sent and what the obligations would be for a website that receives it.  “Talks have dragged on more than a year with weekly conference calls and six face-to-face meetings, while the W3C’s Tracking Protection Working Group has grown to 102 members,” Simpson wrote. “Another round of meetings is scheduled next month. Talks can at best be charitably described as stalled.”

“You and the Commission repeatedly put faith in self-regulatory efforts and predicted that a Do Not Track mechanism would be in place by the end of the year,” Simpson wrote.  “Unfortunately that optimism has proved to be unwarranted.”

The letter concluded:

“The end of the year as passed. Your words have gone largely unheeded by the advertising industry. The bully pulpit has not brought about a Do Not Track standard. Lest your words be taken as empty threats and given the logjam in the World Wide Web Consortium process, the time for decisive action by the FTC has arrived.  Sen. Jay Rockefeller, (D-WV) introduced a Do Not Track bill in the last session of Congress.  We understand he intends to re-introduce the bill this session.  We call on you and the entire Commission to endorse the urgent need for Do Not Track legislation.  If nothing else, the threat of legislation could be the stick that prompts a recalcitrant advertising industry to stop its foot dragging and re-engage in real negotiations.”

The letter cited numerous times that Leibowitz had predicted the implementation of Do Not Track by the end of last year and raised the possibility of legislation if the effort failed.  For instance, the letter noted:

“‘We are definitely at a critical point in whether folks will be able to come together and develop a real Do Not Track option for consumers,’ you told Politico in October. You said the lack of consensus was ‘encouraging the possibility of legislation — maybe not today, maybe not in the lame duck, but soon.’ You also told The New York Times, ‘It is time to drop some of the bluster and work toward compromise.’

“In November you used the bully pulpit again to tell Politico, ‘If by the end of the year or early next year, we haven’t seen a real Do Not Track option for consumers, I suspect the commission will go back and think about whether we want to endorse legislation.’ ”  

Comedy is funnier when it hits you in the gut. That’s what made a famous skit by Lily Tomlin about the phone company’s abuse of customers so memorable, one tag line being “We are omnipotent.”

AT&T is still at it. As columnist James Temple writes in the San Francisco Chronicle Friday:

In August 2006, the California Public Utilities Commission voted unanimously to allow AT&T and other companies that provided local telephone service to raise prices at will.

Then-Commissioner Rachelle Chong, a Republican, credited as the driving force behind the deregulation plan, argued that growing competition from Internet phone service and cell phones would keep prices low.

“By the end of the 2010, these rate caps will no longer be necessary,” Chong said when the new rules were being phased in. “The market will be so competitive it will discipline prices.””Price discipline?” That should have ’em rolling in the aisles. Temple goes on to report that AT&T’s flat-rate plan for local calls is up 118 percent and services such as call waiting up nearly 180% since 2006. U.S. median household income is down 8.1% since 2007.

Tomlin’s original crack about omnipotence wasn’t much exaggerated. AT&T’s stranglehold on the California Legislature and the state Public Utilities Commission is near-legendary.

Chong, the AT&T cheerleader on the commission, took  a luxurious junket to Tokyo, funded and run by the telecom industry. Other commissioners and legislators went as well, as reported by Consumer Watchdog, without an ethical qualm.

Also on that 2007 Tokyo trip was the state Assembly’s Utilities and Commerce committee chair Lloyd Levine, who co-authored 2006 legislation sponsored by AT&T and Verizon in 2006 that allowed the telecom companies to to get into the cable and video business with one unregulated statewide franchise, while eliminating local control and consumer protection of all cable services.


Consumer Watchdog fought the legislation, predicting that prices would rise, not fall, customer service would degrade, companies would cherry-pick the richest markets for their much-touted new services and local public-access TV, previously funded by the cable companies, would disappear.

The other co-sponsor of the cable deregulation was then-Speaker of the Assembly Fabian Nunez, who received the language of the proposed bill directly from a corporate/right-wing think tank called the American Legislative Exchange Council, or ALEC, described thusly by SourceWatch:

ALEC is a corporate bill mill. It is not just a lobby or a front group; it is much more powerful than that. Through ALEC, corporations hand state legislators their wishlists to benefit their bottom line. Corporations fund almost all of ALEC’s operations. They pay for a seat on ALEC task forces where corporate lobbyists and special interest reps vote with elected officials to approve “model” bills. Learn more at the Center for Media and Democracy’s ALECexposed.org

After the cable deregulation passed, AT&T partner Verizon took out full-page ads to thank Nunez personally. Nunez kept on benefiting from telecom donations and sponsorships, even as our predictions about price, service and public access came true.

AT&T is also the sponsor of the legislative Democrats’ chief yearly fund-raising event, the Pebble Beach Speakers Cup, and was a major donor to former Gov. Arnold Schwarzenegger. Every penny of that lavish spending has gone to legislation and deregulation that boost AT&T’s bottom line at the expense of consumers. And neither the 2013 Legislature nor the governor’s office seems moved to undo the wreckage of AT&T’s deregulatory spree.

No wonder we’re not laughing.

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Posted by Judy Dugan, former research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

Google may have only received a tap on the wrist from the Federal Trade Commission when the agency closed the U.S. antitrust investigation without taking action against the Internet giant for skewing search results to favor its services, but it’s looking increasingly likely that Google will face strong action on the other side of the Atlantic.

The Financial Times reports that Google will have to change the way it presents search results or face antitrust charges for “diverting traffic.” Competition Commissioner Joaquin Almunia told the newspaper:

“We are still investigating, but my conviction is [Google] are diverting traffic. They are monetizing this kind of business, the strong position they have in the general search market and this is not only a dominant position, I think – I fear – there is an abuse of this dominant position.”

Almunia has told Google that it must make changes to address European concerns or that it will face a formal statement of objections.  Late last year he warned that Google would have to offer remedies this month.

I think you can take Almunia’s strong statements Thursday to The Financial Times as a sign that the European Commission is serious.  While he says he’d prefer a settlement, European law gives the antitrust enforcer a huge stick.  After filing a formal statement of objections, the Commission  can impose a fine amounting to 10 percent of Google’s revenue or about $4 billion. That’s almost as effective to getting executives attention as sending them to the slammer. Unlike the FTC, the European Commission doesn’t have to make its case in Court.  It can simply impose the fine.

As The Financial Times headline read on one story about the situation, “EU Antitrust Chief Holds All the Aces.” Almunia hinted that the antitrust settlement may play out differently in Europe because the law is different.  It’s also true that the Internet giant’s dominance in search is even greater in Europe at 90 percent of the market than the 70 percent share it commands in the United States.

And there is still a strong possibility of meaningful action in the United States.  Texas Attorney General Greg Abbott is actively pursing a case.  His staff has appropriately worked to obtain key Google documents that Google tried to claim were privileged and did not need to be turned over in response to Civil Investigative Demands. From all appearances the FTC staff was nowhere near as diligent in its investigation.

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Posted by John M. Simpson. John is a leading voice on technological privacy and stem cell research issues. His investigations this year of Google’s online privacy practices and book publishing agreements triggered intense media scrutiny and federal interest in the online giant’s business practices. His critique of patents on human embryonic stem cells has been key to expanding the ability of American scientists to conduct stem cell research. He has ensured that California’s taxpayer-funded stem cell research will lead to broadly accessible and affordable medicine and not just government-subsidized profiteering. Prior to joining Consumer Watchdog in 2005, he was executive editor of Tribune Media Services International, a syndication company. Before that, he was deputy editor of USA Today and editor of its international edition. Simpson taught journalism a Dublin City University in Ireland, and consulted for The Irish Times and The Gleaner in Jamaica. He served as president of the World Editors Forum. He holds a B.A. in philosophy from Harpur College of SUNY Binghamton and was a Gannett Fellow at the Center for Asian and Pacific Studies at the University of Hawaii. He has an M.A. in Communication Management from USC’s Annenberg School for Communication.

Says Action Necessary To Restore Faith in Agency As Effective Antitrust Enforcer

Consumer Watchdog today called on the Federal Trade Commission to release the 100-page staff report on the 19-month Google investigation as the only way to “restore a modicum of public trust in the Commission’s ability to serve as an effective antitrust enforcer.”

“I call on you to release the FTC staff report to help make clear what was behind the Commission’s otherwise unfathomable action,” wrote John M. Simpson, Consumer Watchdog’s Privacy Project director in a letter to Commission Chairman Jon Leibowitz and Commissioners Julie Brill, Edith Ramirez, Maureen Ohlhausen and Joshua Wright.

“Media reports suggest that the Commission’s tap on the Internet giant’s wrist was the result of a ‘calculated and expensive charm offensive,’ ” Simpson wrote.

Read Consumer Watchdog’s letter here.

“Put another way, by all appearances, the Internet giant played an insiders’ game and bought its way out of trouble,” Simpson wrote. “Perhaps, the Commission managed to ignore the charm offensive and decide the case on the merits.  Sadly, we cannot know the true situation because we don’t have the details of the 19-month staff investigation.”

Consumer Watchdog’s letter quotes articles in Politico and The New York Times about the Internet giant’s $25 million lobbying campaign and its efforts to cozy up to the Obama Administration and other Washington insiders. “It was a multiyear campaign focused on this very moment, knowing as the company grew these issues were going to come up,” Alan Davidson, Google’s former top lobbyist, told Politico.

Read the Politico article here.

Read The New York Times article here.

The best course of action, Consumer Watchdog said, would have been to file an antitrust suit and bring the case to trial. All the evidence would have been part of the public record.  In a November letter to the FTC Consumer Watchdog warned that a negotiated settlement would inevitably invite cynicism about the results.

Consumer Watchdog’s letter to the Commission today continued:

“Opting to avoid a trial and filing a formal consent agreement would at least have required a complaint, spelling out the violation. Instead you have settled for promises from a company that has a demonstrated record of repeatedly breaking its word.  And it’s not even clear what they did wrong.

“Your only chance of re-establishing the FTC’s credibility on its handling of the Google investigation is to release the 100-page staff report about the inquiry. Releasing the report would put the Commission’s decision in context.

“Moreover, the public has the right to know what the staff recommended and to understand the reasoning of the professionals who conducted the lengthy investigation and the quality of their work.  It could be possible that the staff botched the investigation and you were left with no other choice.  If the report contains Google trade secrets, they could be redacted.”

What an inspiring 2012! Together, we exposed and stopped false MPG claims by automakers, shamed health insurance companies into lowering outrageous rate hikes and moved closer to the day when technology companies can’t collect and sell our private information online and on our phones without consent. This year we’ll continue these fights, and more.

Big things are going to happen in 2013, and we’re glad you’re here with us to see them through. We’ll be asking in the coming days your thoughts on what Consumer Watchdog’s priorities should be in 2013.

For now, here are some of our pledges for this year. We will:

• Turn up the heat on health insurance companies to stop unjustified rate hikes for families like Karyn Mor’s, who has seen her premiums jump over $800 a month in just two years. Californians will have a chance to vote at the next general election on the ballot initiative to require companies to publicly justify and get their rates approved.
• Win our three-year campaign to give consumers the right to say “Do Not Track Me” online. The more companies collect information about what we read, search for and buy online, the more they abuse that knowledge – as privacy project director John M. Simpson discusses in this news story about companies that change prices based on your browsing habits.
• Expose oil companies’ continued Enron-like manipulation of gas prices, which brought gasoline to $5.00 a gallon on the West Coast this summer. When gas prices spiked in May and August, oil refiners blamed reduced capacity because of outages and maintenance. But new evidence in November suggested that refineries were running as usual. Consumer Watchdog has called for a criminal investigation, joined by 7 US Senators, into whether oil companies faked the supply shortage.
• Protect patients from the kind of dangerous medicine practiced by doctors like Dr. Carlos Estiandan, who the LA Times exposed as a reckless over-prescriber of narcotics. Eight of Estiandan’s patients died of overdoses or related causes while the Medical Board of California dragged its feet on a 4-year investigation before finally pulling his prescription pad. It’s time the Medical Board got serious about disciplining bad doctors.
• Save California consumers hundreds of millions more on their auto and homeowners insurance premiums. Since 2002, our challenges to excessive rate hikes have saved policyholders over $2.2 billion.
• Prosecute our suits filed on behalf of drivers to hold car companies accountable for their fuel economy promises. Louis Bird bought a Hyundai Elantra that advertised 40 MPG, but the car never came close to that promise. A Consumer Watchdog complaint led to an EPA audit finding the company’s MPG claims were false, and to the first-ever multi-vehicle recall of MPG window stickers. The state and federal cases on behalf of owners of the Hyundai Elantra and three other models are heading to court.

What do you think of our resolutions? At Consumer Watchdog we know that when public opinion is on our side, we can make big things happen. So be on the lookout for our survey next week, and let us know your opinion on what our priorities should be in 2013.

Your ideas, actions and complaints were behind some of our biggest consumer protection victories. We need your input again to make this year as big as the last.

Happy New Year!

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Posted by Carmen Balber, Executive Director of Consumer Watchdog.

Department of Justice, State Attorneys General Must Press To End Search Bias

The Federal Trade Commission’s settlement with Google fails to end its most anticompetitive practice, Consumer Watchdog said today and the public interest group called on the Department of Justice and state attorneys general to press forward to end the Internet giant’s monopolistic behavior in search results.

“Google clearly skews search results to favor its own products and services while portraying the results as unbiased. That undermines competition and hurts consumers,” said John M. Simpson, director of the group’s Privacy Project. “The FTC rolled over for Google.  They’ve accepted Google executives’ promises that they will change two practices without even requiring a consent agreement, but Google has a track record of broken promises.  Don’t forget, this fall the FTC fined Google $22.5 million for violating its most recent consent agreement. Why would the FTC take Google at its word?”

The new Assistant Attorney General for the Department of Justice Antitrust Division, William J. Baer, should make Google’s abuse of search a top priority, Consumer Watchdog said.

The FTC’s settlement does require a consent agreement regarding so-called Standards Essential Patents held by Google’s Motorola subsidiary.  Google is now required to license these patents to any company on “fair, reasonable and non-discriminatory” terms – known as FRAND terms.

“This will help ensure competition in the manufacture of smartphones and tablets,” said Simpson, “but that was never the heart of the issue. Biased search and Google’s favoring its own properties do real consumer harm. Google is the gateway to the Internet for most people. When Google rigs the game, we all suffer. They need to be stopped.”

Consumer Watchdog expressed concern that FTC Chairman Jon Leibowitz, who is expected to step down from the commission soon, may have rushed to finish the investigation so it could be concluded under his chairmanship.

The nonpartisan, nonprofit public interest group noted that Google’s monopolistic business practices are under investigation by a number of state attorneys general including Texas, California, New York and Ohio. European Union competition officials are also investigating Google.

In its quest for more profits, Anthem Blue Cross has begun telling patients who have very serious diseases and need so-called “specialty drugs” that they cannot use their local pharmacy where many have long term relationships, but must instead order their life-saving medications from a mail-order pharmacy.

As Los Angeles Times Consumer Columnist David Lazarus recently noted, specialty drugs are used for complex conditions and can cost thousands of dollars a month. Patients suffering from chronic diseases like HIV, cancer, and hemophilia use such medicines.

In the Los Angeles area HIV patients are particularly hard hit by Anthem’s unilateral decision that after Jan. 1, patients needing specialty drugs to treat their conditions must buy them from mail-order pharmacy CuraScript.

In a letter to patients, the insurance giant wrote:

“Using a retail pharmacy will be considered going out-of-network. And your plan doesn’t have coverage for that. So you’ll have to pay the full price of the drug.”

According to Lazarus Jacques Liberman, 57, of Cathedral City received one of the letters the other day. He is HIV-positive and takes a drug called Atripla to help prevent his condition from transforming into full-blown AIDS.

“Who is Anthem to tell me where I have to buy my medicine?” Lazarus quoted him as saying. “Why should I have to buy it from some mail-order company instead of the drugstore that I have been going to for a long time?”

But it’s more than just an in infringement on personal freedom. Patients who need specialty medicines suffer from complex disease that require complex treatment. The pharmacist is virtually a member of the treatment team offering advice and closely monitoring the patient’s condition.

David Balto, a Washington attorney who represents some of the specialty pharmacies, explains the relationship like this:

“Specialty pharmacies, the pharmacies that carry these rare, expensive drugs, build strong personal and clinical relationships with their patients, making sure that they receive the drugs they need when they need them. Most also provide a full slate of advising and counseling services to help patients and their families navigate the challenges of living with a chronic and often debilitating condition. Many specialty pharmacies also have programs to help low-income patients afford their ever rising co-pays.”

Anthem proposes to replace that relationship with an 800 number. Anything for a buck, I suppose.

What’s not clear yet is what can be done to stop this abuse. Consumer Watchdog is investigating.  If you’ve been affected by the change please let us know.

If you’re a fan of the Godfather, you have to love any book that says all you have to know about managing a crisis you already learned from Vito Corleone.

We don’t recommend many books, but Masters of Disaster is the perfect playbook for how to respond when you’re under enemy fire and armed with little more than a cannoli.

The team that advised President Clinton, celebrities and corporate titans have broken down the commandments of crisis management, whether you accidentally hit “reply all” to an embarrassing email, or are fending off a real crisis in your life or business. You can get their hard knuckle advice and funny real life stories at bookstores or online at BarnesAndNoble.com.

Penned by fixers Chris Lehane and Mark Fabiani, and filmmaker Bill Guttentag, Masters of Disaster is a vital and fun read full of back-room tales for those who want to learn from America’s greatest corporate and political scandals. You’ll understand the big mistakes made by companies like Toyota and BP, politicians like Mitt Romney and celebrities like Roger Clemons and Tiger Woods.

The book argues for full and rapid transparency in a crisis: “If the mistake fits, be quick to admit.”

The masters also recommend the cool disciplined approach to crisis that made Michael Corleone the Godfather when he decided to kill the corrupt cop that shot his dad: “It’s not personal, Sonny. It’s strictly business.”

America’s greatness, like its greatest historical failures, has come from the fact that public opinion can rule. Masters of Disaster shows those who face crisis can only survive by respecting public opinion and those who don’t will quickly fall.

At Consumer Watchdog, we create a lot of crisis for big corporations and politicians when they stray from the path. If more of them heeded this book’s advice, there would be a lot fewer scandals and more pro-consumer companies.

Go to your mattress with a copy of Masters of Disaster and enjoy the book.

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Posted by Jamie Court, author of The Progressive’s Guide to Raising Hell and President of Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

Reporters largely missed the point of a Commonwealth Fund study released this week, that looked at consumer savings under Obamacare’s 80-20 rule, the rule making insurance companies spend at least 80% of your premiums on health care, not overhead.

The authors started with a fact we already knew — that health insurance companies had to pay $1.1 billion in rebates for missing the MLR requirement in 2011 — and that big shiny number distracted the news media. But the authors zeroed in on a much more important fact. Insurance companies successfully reduced administrative costs by $1.184 billion in 2011, but they used those savings to increase profits instead of passing them on to consumers.

Clearly the 80-20 rule isn’t working to contain profits and hold down premiums, especially in states that don’t have tough regulation of insurance premiums.

California Insurance Commissioner Dave Jones launched an audit this week of the state’s largest health insurers to determine if consumers paid too much when insurers were actually saving money and boosting profits. The Commonwealth study found that in California, insurance companies increased profits for individual plans by $88 per member or about $90 million, even though administrative costs went down and every major insurance company imposed rate increases.

These results are more evidence that states need the ability to say no to rate manipulation. Otherwise, insurance companies will keep premiums artificially high to make sure profit numbers stay high too. As we warned HHS Secretary Sebelius more than two years ago:

“In the same way that a Hollywood agent who gets a 20 percent cut of an actor’s salary has an incentive to seek the highest salary, insurers will have incentive to increase health care costs and raise premiums so that their 15 percent or 20 percent cut is a larger dollar amount.”

As Jones said when announcing the audit:

“I have long pushed for the authority to reject excessive health insurance rate increases and this study provides further evidence of why this change in the law is long overdue in California. Health insurers and HMOs continue to impose double-digit premium increases each year and are making larger profits when selling to individuals and families even during these tough economic times.”

Californians will finally have the chance to stop them, by voting at the next ballot on an initiative measure to require health insurance companies to publicly justify rate increases and get approval before they take effect. Learn more at justifyrates.org

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Posted by Carmen Balber, Washington DC Director for Consumer Watchdog and Consumer Watchdog Campaign