Unfair Competition: Big Business Succeeds in Gutting California's Landmark Consumer Protection Law

By Balber, Carmen | Multinational Monitor, March-April 2005 | Go to article overview

Unfair Competition: Big Business Succeeds in Gutting California's Landmark Consumer Protection Law


Balber, Carmen, Multinational Monitor


CALIFORNIA'S UNFAIR COMPETITION LAW was the strongest consumer protection law of its kind in the United States when Proposition 64 drastically scaled it back this past November.

The initiative, which passed by a 59-to-41 percent margin, eliminated the ability of any Californian to use the Unfair Competition Law to prevent unfair, deceptive or illegal acts by a business. The law now requires an individual to have personally lost "money or property" in order to bring a company to court and stop an unfair practice. Proposition 64 also did away with suits to prevent any harm that is not measured in dollars, like loss of health, environmental damage or consumer deception.

One key question about the measure has not been answered: How were California voters convinced to cede these protections at the ballot?

THE SIDES

California's largest consumer, environmental, labor, attorney, senior and public health organizations united to oppose Prop 64. Seventy-five public interest groups formed the coalition opposing Proposition 64, including the American Civil Liberties Union, the Sierra Club, AARP, Consumers Union, the California Labor Federation--AFL-CIO, the California Nurses Association, Consumer Attorneys of California, the American Lung Association and the Foundation for Taxpayer and Consumer Rights.

The initiative's proponents were a "Who's Who" of Corporate America and included 43 companies and industry groups that have had, or now have, legal troubles under the Unfair Competition Law. These bad actors alone gave $5.2 million to Proposition 64, including:

* The Oil Industry--$465,000 donors to Prop. 64, was forced to clean up groundwater polluted with the gasoline additive MTBE, and stop air pollution from an oil refinery that was causing health hazards;

* Big Tobacco--$200,000 donor to Prop. 64, was held responsible for lying to the public about the health effects of cigarettes;

* Auto Manufacturers and Car Dealers--$2,116,100 donors to Prop. 64, have faced suits to stop dealers from charging illegal finance mark-ups, often to minority buyers;

* The Financial Industry--$365,000 donors to Prop. 64, has been charged with illegally seizing Social Security money from elderly and disabled clients, and predatory lending practices;

* Insurance Companies--$450,000 donors to Prop. 64, had to repay customers they fraudulently denied earthquake insurance benefits; and,

* Health Care Giants--$979,500 donors to Prop. 64, including pharmaceutical companies accused of illegally using consumers' private medical information, and HMOs who denied approval of medically necessary care to delay or avoid payment.

Most of the suits forcing these corporations to make amends for mistreating consumers or despoiling the environment would never have gotten off the ground if Proposition 64 had been law when they were filed.

HOW PROPOSITION 64 PASSED

The lessons of the campaign should influence how future battles are fought. Money, messengers and popular misconceptions gave the Proposition 64 victory to its big industry backers.

Lesson No. 1: TV works: The Yes campaign branded Proposition 64 the "Shakedown Lawsuit" initiative.

Proposition 64's big business backers had a critical advantage that only money can buy--advertising time. The No On 64 campaign was outspent five to one.

A $15 million war chest allowed Yes On 64 to begin airing statewide television ads early in September. The $3 million No campaign hit the airwaves with less than three weeks before Election Day. Trial attorneys were the primary funders of the No TV ads, in coalition with public interest groups, including the Consumer Federation of California, Sierra Club California and the California Nurses Association.

An extra month on television branded Proposition 64 the "Shakedown Lawsuit" initiative before voters ever saw an opposing view. …

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