How a GOLIATH Act Could Restore Consumer Rights
How a GOLIATH Act Could Restore Consumer Rights
Restoring Americans’ ability to hold companies accountable would rebuild consumer power and trust in government.
A year ago this month, David Dao, a then-69-year-old doctor, was forcibly removed by police from an overbooked United Airlines flight in Chicago. Graphic video footage of his severe injuries prompted an immediate backlash against the airline, changes to airline procedures across the industry regarding oversold flights, and an eventual settlement for Dao. In 2017, partly in response to customer complaints, the airline industry as a whole kicked the lowest rate of passengers off flights since 1995. Yet a single incident, even one as severe as what Dao endured, may not effectively change corporate policy; everyday incidents don’t always go viral and lead to relief. To that end, consumers rely on federal regulators to protect them from mistreatment by major companies that are only getting bigger and less accountable.
This lack of accountability can even extend to cases where consumers have no choice at all. Last year’s Equifax data breach is a prime example of a market that just doesn’t work for consumers. No one actually picked Equifax to store their data. In this particular case, consumers are not the customer—rather, lenders who provide and obtain personal credit information from Equifax are the company’s customers. Yet nearly 148 million Americans’ financial records were compromised in its data breach. Victims who sought the free monitoring services Equifax provided in the wake of the breach were initially told they would need to sign away their right to sue the company for damages, in favor of mandatory consumer arbitration: a process where the company picks and pays for a private judge and jury. Ultimately, this stuck victims between a rock and a hard place: They potentially could not get help from Equifax without committing to handle further complaints in arbitration, and as they weren’t customers, they could not choose to work with another company instead—but they still had to deal with the consequences.
For more than a century, the federal government has attempted to improve corporate accountability so that everyday consumers are protected from incidents like Dao’s forced removal off his flight or Equifax’s data breach. Congress created the Federal Trade Commission (FTC) in 1914 with power to restrict unfair methods of competition, and in 1938, Congress clarified that it also had the power to address unfair or deceptive acts or practices not involving competition; these two functions go hand in hand. Most recently, following the 2008 financial crisis, Congress created the Consumer Financial Protection Bureau (CFPB) to ensure that an independent agency would hold the financial industry accountable. During its first six years, the CFPB largely exceeded expectations, returning approximately $12 billion to 29 million wronged consumers. It even attempted to restore consumers’ ability to band together and take financial companies like Equifax to court—an effort overturned by Congress and President Donald Trump in fall 2017. Weakening the CFPB, as its acting director has proposed, would only turn back the clock to a time when consumers had to contend with greater financial recklessness with no federal oversight. Today, as industries become increasingly concentrated, federal regulation is more important than ever.
In recent decades, there has been a conspicuous lack of federal competition policy, which has allowed a wave of consolidations within major industries, including the airline industry. Of the planes that travel out of 93 of the nation’s 100 largest airports, the majority of airplane seats are on flights controlled by one or two airlines. At 40 of these airports, a single airline holds the majority of seats. And it’s not just airlines that are consolidating. An analysis by The Economist looked at approximately 900 different U.S. industries, concluding, “Two-thirds of them became more concentrated between 1997 and 2012.” This not only means that customers have fewer choices but also that companies have fewer incentives to do the right thing because they are unlikely to be held accountable. Part of the solution is for the government to play a greater role in antitrust enforcement by taking a more critical eye toward company mergers and other forms of concentration.
Reviving antitrust enforcement is important, but it is not enough. Policymakers should also expand consumer rights and enforcement to ensure that no matter how large a company may get, its obligation to treat customers fairly never goes away. Creating and passing legislation such as a GOLIATH Act—a Center for American Progress proposal that is short for Government Oversight of Large Industry Activities That Harm Americans—would do just that. Like David’s slingshot, which took down a power-hungry giant, the GOLIATH Act would protect individuals from mistreatment by concentrated corporations. While some provisions require federal investment and enforcement, others would simply restore the rights of individuals to take action themselves without requiring government intervention. A GOLIATH Act could start with the following four consumer rights:
- The right for consumer complaints to be heard, publicly posted, and responded to. Multiple agencies take complaints from the public, but only some agencies publish these complaints. Federal complaints to the Consumer Product Safety Commission about household products and to the National Highway Traffic Safety Administration about automobiles are publicly available. And the CFPB has made its complaint database public, including narratives of specific incidents, where possible. The CFPB’s public complaint database, and others, enables regulators, researchers, and even companies themselves to get detailed snapshots of problems in the marketplace. Yet the U.S. Department of Transportation’s monthly Air Travel Consumer Report only shows total counts of complaints by airline and category. Greater transparency is key to accountability.
- The right to take companies to court. Large companies should be prohibited from using pre-dispute arbitration clauses that prevent consumers from taking companies to court before they even have a complaint against the company. Additionally, statutes should explicitly create private rights of action so that consumers can take cases directly to court for legal violations. The courts play a crucial role not just in making victims whole but also in deterring future wrongdoing.
- The right to appeal to regulators in a public forum. Federal agencies should not shy away from meeting with the public. Agencies should be required to hold periodic public hearings around the country on unfair, deceptive, or abusive business practices. Again, in its early years, the CFPB set a positive example. From the time it opened its doors in 2011 to the end of 2016, the agency held 38 field hearings, meeting with and listening to communities.
- The right to efficient, meaningful, and data-driven rulemaking and enforcement. In order to truly protect consumers and respond to market development, agencies must be free to propose and consider rules featuring public input—but not public stonewalling. Yet current trends run in the opposite direction. This Congress has taken up legislation, such as the Regulatory Accountability Act, that creates new rulemaking hurdles and moves toward more delays and less responsiveness. The FTC’s experience shows the dangers of imposing these heavier procedural requirements. The Magnuson-Moss Warranty Act of 1975 and Federal Trade Commission Improvements Act of 1980 required the FTC to undergo a more lengthy rulemaking process involving extensive consultation and review. As American University Washington College of Law professor Jeffrey Lubbers notes, from 1964 to 1978, FTC rules on average took just less than three years to finalize; more recent FTC rules, except in cases where Congress waived these heightened requirements, could take 5 to 10 years or ultimately be dropped even after years of development.
The focus of these consumer rights should be on large companies in consolidating industries, not on small businesses, just as federal financial regulations are already tailored to have greater burdens for larger banks than smaller ones. Federal regulators could set thresholds based on revenue or market share so that these rules and rights primarily affect the largest or most concentrated firms in an industry. Customers of local, independent businesses already have many ways in which to make their voices heard and ensure that companies are responsive, including simply by taking their business elsewhere. But while they may be able to pick their coffee shop, they can’t always pick their supermarket, airline, or credit reporting agency. It is essential, then, that federal regulators keep concentrated corporations accountable to their consumers.
Restoring consumer rights is an uphill battle, but it is an important one in order to bring back both trust in business and trust in government. Antitrust policy must go hand in hand with enhanced regulation for the largest companies so that everyday Davids across America have a chance at successfully—and sustainably—taking on Goliath.
Joe Valenti is the director of Consumer Finance at the Center for American Progress.
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Director, Consumer Finance