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The Great American Gyp

Last January a confidential nationwide survey by the Opinion Research Corporation spread considerable alarm among its corporate subscribers. The poll concluded “that seven Americans in ten think present Federal legislation is inadequate to protect their health and safety. The majority also believe that more Federal laws are needed to give shoppers full value for their money.” To many businessmen, this finding merely confirmed what speakers had been telling them at trade gatherings during the previous year—that consumers were beginning to fall prey to “consumerism.”

Consumerism” is a term given vogue recently by business spokesmen to describe what they believe is a concerted, disruptive ideology concocted by self-appointed bleeding hearts and politicians who find that it pays off to attack the corporations. “Consumerism,” they say, undermines public confidence in the business system, deprives the consumer of freedom of choice, weakens state and local authority through Federal usurpation, bureaucratizes the marketplace, and stifles innovation. These complaints have all been made in speeches, in the trade press, and in Congressional testimony against such Federal bills as truth-in-lending, truth-in-packaging, gas pipeline safety, radiation protection, auto, tire, drug, and fire safety legislation, and meat and fish inspection.

But what most troubles the corporations is the consumer movement’s relentless documentation that consumers are being manipulated, defrauded, and injured not just by marginal businesses or fly-by-night hucksters, but by the US blue-chip business firms whose practices are unchecked by the older regulatory agencies. Since the consumer movement can cite statistics showing that these practices have reduced real income and raised the rates of mortality and disease, it is not difficult to understand the growing corporate concern.

That the systematic disclosure of such malpractice has been so long delayed can be explained by the strength of the myths that the business establishment has used to hide its activities. The first is the myth of the omniscient consumer who is so discerning that he will be a brutal taskmaster for any firm entering the market. This approach was used repeatedly to delay, then weaken, the truth-in-packaging bill. Scott Paper Co. ran an advertising campaign hailing the Amerian housewife as “The Original Computer”: “…a strange change comes over a woman in the store. The soft glow in the eye is replaced by a steely financial glint; the graceful walk becomes a panther’s stride among the bargains. A woman in a store is a mechanism, a prowling computer…. Jungle-trained, her bargain-hunter senses razor-sharp for the sound of a dropping price….” John Floberg, Firestone’s General Counsel, has been even more complimentary, arguing that consumers can easily discriminate among 1,000 different brands of tires.

However, when companies plan their advertising, they fail to take advantage of the supposed genius of the consumer. Potential car buyers are urged to purchase Pontiacs to experience an unexplained phenomenon called “wide-tracking before you’re too old to know what it is all about.” Sizable fees are paid to “motivation” experts like Ernest Dichter for such analysis as this: “Soup…is much more than a food. It is a potent magic that satisfies not only the hunger of the body but the yearnings of the soul. People speak of soup as a product of some mysterious alchemy, a symbol of love which satisfies mysterious gnawings…. The term ‘pea soup’—mystery and magic—seem to go together with fog. At the same time we can almost say soup is orgiastic. Eating soup is a fulfillment.”

A second myth is that most American businesses perform honorably but are subjected to underserved notoriety because of a few small, unscrupulous merchants and firms. This notion is peddled by so-called consumer protection agencies as well as by the business-dominated Better Business Bureaus. But the detailed Congressional hearings on drug hazards, unsafe vehicles, vicious credit practices, restraints on medically useful or dollar-saving innovations, auto insurance abuses, cigarette-induced diseases, and price-fixing throughout the economy have made it clear that this argument will not hold up.

Most misleading of all is the myth that irresponsible sellers are adequately policed by local, state, and Federal regulatory agencies. Years ago, corporations learned how to handle these agencies, and they have now become apologists for business instead of protectors of the public. First, the agencies are made to operate on a starvation budget. The combined annual budget of the Federal Trade Commission and the Antitrust Division of the Justice Department in 1968 is $23 million, the highest amount yet appropriated. With this sum, they are supposed to collect data, initiate investigations, and enforce the laws dealing with deceptive and anticompetitive practices of a $850 billion economy.

Secondly, political patronage has undermined local and state consumer protection agencies; it has, for example, helped to make the Federal Trade Commission as ineffectual as it is. Third, business lobbying—including campaign contributions, powerful law firms, trade associations, and public relations—works against vigorous enforcement. Finally, so many regulatory officials resign to go into high-paying jobs in the industries they were once supposed to regulate that these government posts are viewed as on-the-job training by cynical appointees.1 The Federal Aviation Agency, Interstate Commerce Commission, and Federal Communications Commission all carry on a tradition that inhibits officials from action and attracts appointees who are temperamentally reluctant to act.

The increasing irrelevance of these older agencies was made apparent by the unprecedented consumer legislation enacted under the Johnson Administration. After the dismal spectacle of the cigarette labeling act of 1964—which foreclosed action by the states and the FTC in return for a paltry warning on the package that could serve as a company’s defense in liability suits—Congress passed a string of important bills and has other legislation near passage. A shift of responsibilities for consumer protection to the Federal government now seems to be taking place: state and local governments have for years defaulted on these obligations to the consumer.

In no other period of history have the safety and prices of marketed products and services received remotely comparable legislative treatment. Sensing this climate, President Johnson has allowed his consumer adviser, Betty Furness, to speak openly to business groups. In 1964, her predecessor, Esther Peterson, could not get White House clearance even to make a public statement about rigged odometers which misled motorists about the accuracy of mileage traveled, enriched car rental companies to the amount of $4 million a year, and encouraged automobile sales. In 1968 Miss Furness was urging appliance manufacturers to tell their customers how long they can expect their products to last. This spring, President Johnson established the post of Consumer Counsel in the Justice Department—a first small step toward the creation of a Federal office which would have powers to intervene in cases before the courts and regulatory agencies as the representative of consumer interests.2 In July, Vice-President Humphrey said he favored enlarging the counsel’s powers to include making complaints about dangers to public health. He also became the first government official to endorse public disclosure of information about consumer products now in the files of the General Services Administration and the Department of Defense. These agencies test hundreds of consumer products—from light bulbs and bed sheets to washing machines—in order to determine which have the best value. But they have refused thus far to release the data that would rank products by quality—a refusal naturally supported by the business community.

The business world, meanwhile, has become increasingly adept in dealing with the rising pressures for consumer legislation. Tutored by their well-connected Washington lawyers, the large corporations and their trade associations can sense the critical moment at which it is wise to stop opposing a bill and begin to cooperate with Congressional committees in order to shape legislation to their liking. For example, after opposing the passage of any auto safety bill whatever, the auto manufacturers relented in the spring of 1966 and hired Lloyd Cutler, an experienced Washington lawyer, who succeeded in weakening the disclosure provisions of the bill and in eliminating all criminal penalties for willful and knowing violations of the law.

Although consumer measures may be weakened in this way, they do at least commit the government to the idea of consumer protection and they lay the groundwork for the stronger legislation that may be feasible should the consumer movement gain more strength. The attack on corporate irresponsibility which produced the recent flurry of legislation in Congress has not, it must be said, been the work of a broad movement but rather of tiny ad hoc coalitions of determined people in and out of government armed with little more than a great many shocking facts. They have gotten important support from Senator Warren Magnuson, Chairman of the Senate Commerce Committee, whose interest in consumer problems set in motion a little-noticed competition with the White House to promote legislation.

What has taken place during the last few years may be seen as an escalating series of disclosures. The charges made by independent Congressmen and people like myself almost always turn out to be understatements of the actual conditions in various industries when those industries are subsequently exposed in Congressional hearings and investigations. As these charges get attention, demands for new legislative action increase. This, at least, has been the case with the exposure of defects in vehicles, industrial and vehicle pollution, gas pipelines, overpriced or dangerous drugs, unfair credit, harmful pesticides, cigarettes, land frauds, electric power reliability, household improvement rackets, exploitation in slums, auto warranties, radiation, high-priced auto insurance, and boating hazards. How many people realized, for example, that faulty heating devices injure 125,000 Americans a year or that poorly designed stoves, power mowers, and washing machines cause substantial injury to 300,000 people annually? Or that, as Rep. Benjamin Rosenthal recently revealed, the food rejected by Federal agencies as contaminated or rotting is often re-routed for sale in the market? These abuses are now starting to be discussed in the press and in Congress.

One result of the detailed Congressional hearings has been a broader definition of legitimate consumer rights and interests. It is becoming clear that consumers must not only be protected from the dangers of voluntary use of a product, such as flammable material, but also from involuntary consumption of industrial by-products such as air and water pollutant, excessive pesticide and nitrate residues in foods, and antibiotics in meat. A more concrete idea of a just economy is thus beginning to emerge, while, at the same time, the assortment of groups that comprise the “consumer’s movement” is moving in directions that seem to me quite different from the ones that similar groups have followed in the past. Their demands are ethical rather than ideological. Their principles and proposals are being derived from solid documentation of common abuses whose origins are being traced directly to the policies of powerful corporations.

This inquiry is extending beyond the question of legal control of corporations into the failure of business, labor, and voluntary organizations to check one another’s abuses through competition and other private pressures. It is becoming apparent that the reform of consumer abuses and the reform of corporate power itself are different sides of the same coin and that new approaches to the enforcement of the rights of consumers are necessary. There are, I would suggest, at least ten major forces or techniques that now exist in some form but greatly need to be strengthened if we are to have a decent consumer society.

  1. 1

    The last two chairmen of the Interstate Commerce Commission are now President of the National Association of Motor Business Carriers and Vice-President of Penn-Central. Both industries are supposedly regulated by the ICC.

  2. 2

    The first appointee to this job was Mr. Merle McCurdy who died in May. His successor has not been appointed.

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