Category: Consumer Protection Law


Eric Muller on the Lies of Hirabayashi

Professor Eric Muller (U. North Carolina School of Law) has posted a new paper, Hirabyashi: The Biggest Lie of the Greatest Generation on SSRN. From the abstract:

This Article presents newly discovered archival evidence demonstrating that government lawyers told a crucial lie to the United States Supreme Court in the case of Hirabayashi v. United States, 320 U.S. 81 (1943), which upheld the constitutionality of a racial curfew imposed on Japanese Americans in World War II. While the government’s submissions in Hirabayashi maintained that the curfew was a constitutional response to the serious threat of a Japanese invasion of the West Coast, new archival findings make clear that military officials foresaw no Japanese invasion and were planning for no such thing at the time they ordered mass action against Japanese Americans. Even more disturbingly, the archival record demonstrates that at the time that Justice Department lawyers filed their brief in Hirabayashi emphasizing a threatened invasion, they knew this emphasis was false.

The Article seeks to understand what might have led otherwise ethical Justice Department lawyers to present such a big and consequential lie, suggesting that the then-prevalent racial schema of the “Oriental” as an invading horde may have overpowered the lawyers’ evaluation of the facts. And perhaps more importantly, the Article demonstrates that the Hirabayashi decision – which has never been repudiated in the way that the more famous Korematsu decision has been, and which remains a potent precedent for race-conscious national security measures – deserves to be installed in the Supreme Court’s Hall of Shame, alongside Korematsu, Dred Scott, and the Court’s other biggest mistakes.

According to Eric’s blog post about his article: “My article documents all of this from primary archival sources, and then goes on to speculate about what might have led Justice Department lawyers to such a large and consequential deception.”


Banning the Big Mac and More

Los Angeles, California, is famed for odd approaches to the world that then catch on. According to the Wall Street Journal, L.A. is now trying to ban fast-food in a specific portion of the city where obesity rates are at 30%, nine points above the rest of the city and about four and half points above the national average. In this case L.A. is not the leader in banning fast food but it may be a leader in invoking health issues for such a ban. The usual nanny state criticisms are in play, and the head of the California Restaurant Association points out that sedentary lifestyle and poor nutrition education are part of the problem. Of course the article points out that ordinances requiring to restaurants to post nutrition information (dare we say nutrition education information) are being challenged by, guess who?, yes! the restaurant industry as forced speech (required delivery of a government message).

The article also notes that many in the area affected think it may be a good idea because alternatives are few and maybe other restaurants will enter the market. That may be, but the proposed ban does not seem to address local establishments that may be offering wonderfully fat and/or salt filled but in that sense worse food. (Yes I will happily indulge in an occasional foray to a local restaurant (or food shack as it may be) for the bad-for-me but oh so blasted good tasting food). In addition, WSJ does a great job reporting that bans on transfat that affect all restaurants changes all behaviors and seems to have fueled shifts in menus like salads and fruit appearing even at fast food venues.

Given the rising cost of food, fast food restaurants could become the best way to deliver healthy food at lower cost. Changing the desires for or increasing the knowledge of why the bad stuff is bad then is a vital piece of that puzzle.

So the efforts to address obesity through building parks and better education are great. This ban seems to be onto something too. But the ban as reported seems to attack a lever (of course folks go to the place that is known and advertised as the comforting, inexpensive food we love (the Big Mac attack) that is part of the problem while leaving gaps for others to offer similar food. If the restaurant industry wants to play ball fairly, they give up the fight on the nutrition data posting issue, SPEND more on educating folks, and then sell the better food from their restaurants. The fast food chains have the scale so that they can be leaders in that space rather than fighting the trend to hold onto an ill-advised approach to their business at least from a public health view.

Postrel on Positionality: “Just a Phase”

Montblanc.jpgI was intrigued by Virginia Postrel’s latest article on conspicuous consumption. In her book The Substance of Style, Postrel seemed eager to discredit Veblen-inspired thought by claiming that it failed to “credit [luxury] goods’ intrinsic sensory appeal.” Now her position is more nuanced:

An African American family with the same income, family size, and other demographics as a white family will spend about 25 percent more of its income on jewelry, cars, personal care, and apparel. . . .African Americans spend much less on education, health care, entertainment, and home furnishings. (The same is true of Latinos.)

[E]conomists [have] compared the spending patterns of people of the same race in different states—say, blacks in Alabama versus blacks in Massachusetts, or whites in South Carolina versus whites in California. [A]ll else being equal . . . an individual spent more of his income on visible goods as his racial group’s income went down. African Americans don’t necessarily have different tastes from whites. They’re just poorer, on average. In places where blacks in general have more money, individual black people feel less pressure to prove their wealth.

The same is true for whites. Controlling for differences in housing costs, an increase of $10,000 in the mean income for white households—about like going from South Carolina to California—leads to a 13 percent decrease in spending on visible goods. “Take a $100,000-a-year person in Alabama and a $100,000 person in Boston,” says Hurst. “The $100,000 person in Alabama does more visible consumption than the $100,000 person in Massachusetts.” That’s why a diamond-crusted Rolex screams “nouveau riche.” It signals that the owner came from a poor group and has something to prove. . . . Rich people in poor places want to show off their wealth. And their less affluent counterparts feel pressure to fake it, at least in public. Nobody wants the stigma of being thought poor. [emphasis added]

Nevertheless, Postrel is at pains to convey that positional pressures are but a temporary problem. . . .

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Making Americans Less European

How do we explain the divergence between the US and so many other developed countries when it comes to social welfare issues? I looked at the issue last year, noting Spencer Overton’s conclusion that “Less than one percent of the U.S. population makes financial contributions over $200 to federal candidates, and . . . [o]f those who contribute over $200, approximately 85 percent have household incomes of $100,000 or more. . . .” Now Scott Ganz and Kevin Hassett propose that youth sports may actually be driving the difference:

A recent scholarly paper by economists Alberto Alesina and Edward Glaeser of Harvard University and Bruce Sacerdote of Dartmouth College found that countries tend to build large welfare states when citizens believe that success in life is largely determined by luck. . . . Americans are remarkably different from Europeans in this regard. If you ask Americans whether the economically disadvantaged are poor because they are lazy or unlucky, 60 percent say lazy. If you ask Europeans, only 26 percent finger laziness. Alesina and his colleagues argue that these attitudes shape society by shaping governmental and social institutions.

But why do these attitudes exist? A big part of the answer may be found in sports. A 1999 study by developmental psychologists Françoise D. Alsaker and August Flammer found American children spend more time participating in athletics than Europeans. In certain cases—America compared with France, for instance—the gap is quite substantial. A 1996 study by Michigan State University sports psychologist Martha E. Ewing and Vern D. Seefeldt, former director of the Institute for the Study of Youth Sports, found that 45 percent of all eligible American youths play in an agency-sponsored league, like Little League baseball or Pop Warner football. That is 22 million children each year who get an infusion of the American work ethos.

I am so glad that US children are spending more time on sports and less on trivialities like physics, foreign languages, or math. Otherwise they might subscribe to such troublingly European ideals as the difference principle, global warming, or the four freedoms.

Admittedly, I have to attribute my own distrust of cultural explanations to time spent at Oxford, where the dons cautioned against resorting to culture as an explanatory variable until you understood the politics, economics, and institutions it’s surrounded by. To begin thinking about why the US is such an outlier in social welfare policy, we might want to look at the work of international scholars (like Kieke Okma) who’ve done much to enhance our understanding of comparative health systems. We might also want to revisit the scorched earth politics of the 1990s.

How Inequality Drove the Subprime Mess

A few months ago I worried that many subprime borrowers were concerned parents terrified of losing a bidding war for places in good school districts. Today Robert H. Frank, with his usual perspicuity, explains that dynamic in a concise and convincing op-ed:

In a well-intentioned but ultimately misguided move to help more families enter the housing market, borrowing restrictions were relaxed during the [decades leading up to the subprime meltdown]. Down payment requirements fell steadily, and in recent years, many houses were bought with no money down. Adjustable-rate mortgages and balloon payments further boosted families’ ability to bid for housing.

The result was a painful dilemma for any family determined not to borrow beyond its means. No one would fault a middle-income family for aspiring to send its children to schools of at least average quality. (How could a family aspire to less?) But if a family stood by while others exploited more liberal credit terms, it would consign its children to below-average schools. Even financially conservative families might have reluctantly concluded that their best option was to borrow up.

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Financial Products Safety Commission

As we deal with the consequences of housing and consumption arms races, Elizabeth Warren’s article on “Making Financial Products Safer” is a must-read. Warren notes:

It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house. But it is possible to refinance your home with a mortgage that has the same one-in-five chance of putting your family out on the street—and the mortgage won’t even carry a disclosure of that fact. Similarly, it’s impossible for the seller to change the price on a toaster once you have purchased it. But long after the credit-card slip has been signed, your credit-card company can triple the price of the credit you used to finance your purchase, even if you meet all the credit terms. Why are consumers safe when they purchase tangible products with cash, but left at the mercy of their creditors when they sign up for routine financial products like mortgages and credit cards?

Warren proposes that a new federal agency start regulating credit from a consumer safety perspective:

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Does the Case Affect CDA § 230 Immunity for JuicyCampus?

Roommates2.jpgThe U.S. Court of Appeals for the Ninth Circuit (en banc) has just issued a very interesting opinion interpreting a federal law providing immunity from liability for online speech — the Communications Decency Act (CDA), 47 U.S.C. § 230. The case is Fair Housing Council v., LLC, 2008 WL 879293 (9th Cir. April 3, 2008) (en banc).

The CDA § 230 states: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” Most courts have interpreted § 230 to immunize the operators of websites or blogs against distributor liability for comments posted by others.

I have been critical about the way that this statute has been interpreted:

Unfortunately, courts are interpreting Section 230 so broadly as to provide too much immunity, eliminating the incentive to foster a balance between speech and privacy. The way courts are using Section 230 exalts free speech to the detriment of privacy and reputation. As a result, a host of websites have arisen that encourage others to post gossip and rumors as well as to engage in online shaming. These websites thrive under Section 230’s broad immunity.

juicycampus3.jpgWebsites such as JuicyCampus, which encourage and facilitate gossip and rumors about college students, exploit § 230 immunity.

The case suggests a limit to § 230 immunity that some might believe creates a way to hold sites like responsible for the gossip and rumors they solicit. In the end, I don’t believe that will save the day and penetrate § 230’s armor for sites like JuicyCampus. allows users to post listings for roommates. When a user creates a listing, requests particular information from users, requesting preferences for gender, sexual orientation, and kids. Much of this information is solicited via drop down menus which list the various choices. Users can also put additional comments in a section that allows for an open-ended narrative. Two Fair Housing Councils in California sued Roommates contending that the site violated the Fair Housing Act (FHA), 42 U.S.C. § 3601 and state housing discrimination statutes. The FHA prohibits any “statement . . . with respect to the sale or rental of a dwelling that indicates . . . an intention to make [a] preferenc,e limitation, or discrimination” based on certain categories (such as gender or sexual orientation). California law has a related restriction. contended that it was immune under the CDA § 230. It claimed that it just provided options for its users and is not the “information content provider.” But the Ninth Circuit concluded that § 230 immunity didn’t apply. According to the statute, an “information content provider” is one who is “responsible, in whole or in part, for the creation or development of” the content. Writing for the court, Chief Judge Kozinski noted:

The FHA makes it unlawful to ask certain discriminatory questions for a very good reason: Unlawful questions solicit (a.k.a. “develop”) unlawful answers. Not only does Roommate ask these questions, Roommate makes answering the discriminatory questions a condition of doing business. This is no different from a real estate broker in real life saying, “Tell me whether you’re Jewish or you can find yourself another broker.” When a business enterprise extracts such information from potential customers as a condition of accepting them as clients, it is no stretch to say that the enterprise is responsible, at least in part, for developing that information.

The court also held that was not immune for its search system, which allowed users to search according to discriminatory criteria:

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The Neuroimaging of Persuasion: Selling Babies

800px-Baby_playsaucer.jpgI’ve argued (here, here, & here) that there is a gap between how jurists generally imagine that consumers behave (and should be protected) and the technological tools available to clever marketers. The slogan I’ve come up with is total persuasion: “a society in which most speech that you hear is designed to persuade you to consume.”

Today’s W$J offers an interesting article along this line. According to researchers at Oxford, we’re hard-wired to respond to baby faces in positive ways:

Using a technique called magneto-encephalography that measures brain signals, the Oxford researchers found that a baby’s face can seize our attention in milliseconds, activating an unusual mental organ called the fusiform gyrus that responds to human faces. Moreover, these distinctive infant features, unlike the mature features of an adult, trigger a sense of reward and good feeling in a seventh of a second. Picture Bambi’s saucer-size eyes or those of Mickey Mouse.

And from later in the article:

Through brain-scanning experiments, researchers have located the neurochemical essence of our face expertise in a strip of temporal-lobe tissue about two inches long and three-quarters of an inch wide. Studying this face recognition area in macaque monkeys, neurobiologist Doris Tsao at the University of Bremen, Germany, reported in Science that the tissue consisted almost entirely of neurons that responded just to faces.

To understand how the tissue develops, Yoichi Sugita at Japan’s Neuroscience Research Institute raised infant monkeys for two years without ever showing them a face. Lab workers wore hoods. When faces were finally revealed to them, the monkeys could readily tell them apart, Dr. Sugita reported in January in the Proceedings of the National Academy of Sciences.

“It is mind-blowing,” Dr. Kanwisher said. “If you had to bet, you would bet it is innate.”

What can/should the law do about these findings, which, after all, confirm common intuitions. See Steven Jay Gould’s A Biological Homage to Mickey Mouse, in The Panda’s Thumb.


Lipson on The BS That Didn’t Bark: Why Didn’t (Doesn’t) Bear Stearns Go Into Bankruptcy

lipson.JPGMy colleague, Jonathan Lipson, is an incredibly astute observer of bankruptcy law and practice. I was talking with him the other day about Bear’s bailout, and he offered some characteristically interesting thoughts. I invited him to share them in written form with our audience, and will be posting his comments in two parts today and tomorrow.

What’s so bad about bankruptcy?

Today’s New York Times reports that both shareholders and lock-up acquiror JP Morgan-Chase have threatened to put the financial firm into bankruptcy if the other doesn’t blink.

But, if bankruptcy is the only thing both sides agree on, why doesn’t the board authorize a chapter 11 filing?

Two classes of arguments have been made against a BS bankruptcy, one about market disruption, the other about value maximization. The cost, delay and uncertainty of bankruptcy could bring the whole system down, the theory goes. In any case, it would wipe out shareholders’ entire interest.

These are, of course, possible outcomes. But they’re not as likely as people think. In any case, the important question is not whether bankruptcy would do this, but whether ex ante we think bankruptcy would be worse than the current deal.

There is some reason to think bankruptcy might actually be better. If so, then something else may explain why BS, JPM and the Fed would rather spend the next couple of years in Delaware Chancery Court than the U.S. Bankruptcy Court for the Southern District of New York.

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Facebook Banishment and Due Process

facebook3.jpgRecently, I was talking with David Lat, author of the blog Above the Law, and he was complaining about being banished from Facebook. David was an active user of Facebook, and he suddenly and inexplicably found himself banned from the site. Facebook didn’t supply him with any reason.

I found the issue quite intriguing, and David said I could blog about it. In particular, what makes this issue of interest to me is how it applies more generally to Web 2.0 applications. With Web 2.0, people invest a lot of time creating profiles, uploading information, and so on. And they start to depend upon these applications in their lives.

lat-david-2.jpgDavid also said he has a lot of important information on his Facebook profile. He uses it as a way to communicate with people, and he uses it to help him gather information for use in his blogging. So being kicked off Facebook is a big deal to David. It can impact his job. It can also impact his friendships and professional relationships. For example, David told me he received emails from several friends who wondered where he had gone. They thought David might be ignoring them or might no longer be their “friend” on Facebook.

As more of our lives become dependent on Web 2.0 technologies, should we have some sort of rights or consumer protection? Is Facebook the digital equivalent to the company town?

David checked Facebook’s website, which has a FAQ about disabled accounts. Facebook states:

Your account was disabled because you violated Facebook’s Terms of Use, to which you agreed when you first registered for an account on the site. Accounts can either be disabled for repeat offenses or for one, particularly egregious violation.

Facebook does not allow users to register with fake names, to impersonate any person or entity, or to falsely state or otherwise misrepresent themselves or their affiliations.

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