On November 9th, the Supreme Court will hear oral argument in a very important case that if wrongly decided will allow powerful special interests to use small print in standard ("take-it-or-leave-it") contracts to ban consumers from banding together against unfair corporate practices. This limit on class actions - which also would affect employee claims against, for example, discrimination -- would cut off the only meaningful method to redress widespread discrimination, fraud, or other violations of the law.
The case is known as AT&T v. Concepcion. The powerful wireless company claimed to Vincent and Liza Concepcion that its product was free, then charged each and every customer 30 bucks. It now tells the Court this is ok, because the small print said they could do it.
Along with dozens of consumer groups, law professors and state attorneys general, U.S. PIRG has urged the Court to rule for respondents Vincent and Liza Concepcion and hold that AT&T's and similar small print denies essential consumer protections under state law and perpetuates unfair and harmful practices.
The problem is serious. As Bonnie Robin-Vergeer, the attorney for the DC Legal Aid Society, U.S. PIRG and several other amici argues: "Legal Aid and its fellow amici are gravely concerned that if the Court accepts AT&T's position, businesses could effectively strip consumers of their right to pursue small claims in any forum because, for small individual claims, class-wide proceedings often offer the only effective means for consumers to obtain redress and to force businesses to halt illegal practices."
Indeed, a 2004 Federal Trade Commission study said that as many as 25 million adults were victimized by consumer fraud in one year. The median loss of money per adult was a relatively modest $220. How could those consumers afford to individually pursue their claims? The FTC found that combined losses for consumers and illegal gains for perpetrators of fraud each year could amount to hundreds of millions or even billions of dollars. Without the class action remedy, that crime will continue unabated.
In over 30 years as a consumer advocate, I've learned a lot of things. One of the most important is that the marketplace needs rules; otherwise, consumers cannot be guaranteed either fairly priced or safe products. Some of the flaws in the marketplace can be solved by having more sellers, which means more competition and choices. Transparent information for consumers to take advantage of those choices also helps.
But I've also learned that that's not enough. To prevent allowing the worst rip-offs or most dangerous products into the marketplace you also need strong laws enforced by layers of protection. Ideally, Congress should conduct strong oversight and enact good federal laws, which will then be enforced by tough federal regulators. We saw what happened in the mortgage crisis when Congress and the federal regulators not only failed to protect us, but affirmatively took state cops off the beat. The federal layer of protection needs to be supplemented by states being allowed to respond to local conditions by passing even stronger laws and then by state attorneys general enforcing the state laws, and when necessary, the federal laws, too.
Yet, I've also learned that even those two layers of protection are not even enough to guarantee that even "blue-chip" companies - like, for example, AT&T -- won't break the law. That's why consumers also need to have their right to a day in court to hold powerful corporations accountable.
But it is expensive to go to court, so when a lot of consumers are harmed by the same bad practice, they should have the right to go to court together and spread the costs by banding together into a class action. Then, when a big bank or wireless firm cheats millions of consumers out of as little as 30 dollars each, it can be brought to justice. The threat of paying back millions of dollars in ill-gotten gains should also deter other firms from similar cheating practices.
Yet, just as powerful special interests have urged passage of weak federal laws and lax enforcement coupled with taking state cops off the beat, you probably won't be surprised to learn that they've also sought to demonize consumer lawyers and taken other steps to eliminate consumer access to the courts.
Led in the 1990s by the banks and phone companies, companies inserted forced arbitration clauses into consumer contracts, even though non-court arbitration was never intended for disputes between two parties of unequal, David vs. Goliath, size. That's a problem in itself. But now AT&T is asking the U.S. Supreme Court to allow it to hide class action bans -- bans which 20 states have ruled unconscionable (one-sided and unenforceable) -- inside those arbitration clauses where they would function as "get out of jail free" cards for corporate wrongdoers. Every federal appellate court that has considered the issues here has also rejected AT&T's views.
Yet, how will the U.S. Supreme Court rule? Will it choose to protect consumers in the public interest or rule for powerful special interests? After all, the current Supreme Court led by Chief Justice John Roberts has been called the Supreme Court, Inc. Its Citizens United decision earlier this year allowed a flood of corrosive and largely hidden corporate donations to influence this year's elections. Similarly, a decision in favor of AT&T would allow a flood of unfair corporate practices to harm consumers.
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