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Local governments' role in consumer protection
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Content
LOCAL GOVERNMENTS*
ROLE IN CONSUMER PROTECTION
A Thesis
Presented to
the Faculty of the School of Public Administration
University of Southern California
In Partial Fulfillment of
the Requirements for the Degree
Master of Public Administration
by
Glyn Davies
June 1973
UMI Number; EP64855
All rights reserved
INFORMATION TO ALL USERS
The quality of this reproduction is dependent upon the quality of the copy submitted.
In the unlikely event that the author did not send a complete manuscript
and there are missing pages, these will be noted. Also, if material had to be removed,
a note will indicate the deletion.
Dissaitaïien Pumisnmg
UMI EP64855
Published by ProQuest LLC (2014). Copyright in the Dissertation held by the Author.
Microform Edition © ProQuest LLC.
All rights reserved. This work is protected against
unauthorized copying under Title 17, United States Code
ProQuest LLC.
789 East Eisenhower Parkway
P.O. Box 1346
Ann Arbor, Ml 48106- 1346
This thesisj written by
GLYN DAVIES
under the direction of the undersigned Guidance
Committee, and approved by all its members, has
been presented to and accepted by the Faculty of
the School of Public Administration in partial f u l
fillment of the requirements fo r the degree of
MASTER OF
PUBLIC ADMINISTRATION
D a te.....
Guidance Committee :
' • a .
Chair m
TABLE OF CONTENTS
INTRODUCTION i
I THE CONSUMER MOVEMENT IN THE UNITED
STATES TO 1972 1
Consumer Problems in the Late 19th
Century 1
First Consumer Era: Early 1900*s 2
Second Consumer Era: 19 30*s 4
Third Consumer Era: 1960 to Present 8
Ralph Nader and the Third Consumer Era 11
Consumer Movement and Its Marriage to
the Environmental Movement 15
II THE HISTORICAL ROLE OF FEDERAL, STATE AND
LOCAL GOVERNMENTS IN THE CONSUMER
MOVEMENT 16
First Official Recognition of the Need
for Consumer Protection: 1870 16
First Federal Consumer Agency - Interstate
Commerce Commission : 1887 16
Pure Food Bill: 1906 17
Birth of the Federal Trade Commission :
1915 19
FTC from 19 30 to 1950 19
FTC in the 1970's 20
President's Consumer Advisory Council 22
Major Consumer Legislation of the 1960's 23
State of California Attorney General 2 7
California State Department of Consumer
Affairs 2 8
City of Los Angeles Bureau of Consumer
Affairs 31
III THE NEED FOR CONSUMER PROTECTION 35
Magnitude of Consumer Abuse 35
Consumer Abuses and the Low Income
Consumer 35
Examples of Consumer Fraud 36
Door-to-Door Consumer Fraud 38
Consumer Fraud in the Auto Repair
Industry 41
Credit and the Low Income Consumer 4 4
Magnitude of Consumer Complaints 48
IV THE FUTURE ROLE OF FEDERAL, STATE, AND
LOCAL GOVERNMENT 55
Jurisdictional Problems in Los Angeles
County 55
The Business Community and Consumer
Protection 57
The Criminal Justice System and Consumer
Protection 61
Deficiencies of Existing Federal
Agencies 6 4
A Super Federal Consumer Agency 6 8
Deficiencies of California State Agencies 69
The Success of the City Bureau of
Consumer Affairs? 72
Los Angeles County and Consumer
Protection 74
Responsibilities of a County Agency 76
Consumer Education 78
Consumer Protection and the Ghetto 79
Summary of Recommendations 82
APPENDIX A 86
11
INTRODUCTION
This paper is designed to produce: 1) a chronologi
cal discussion of the evolution of what has been termed
the "consumer movement;" 2) an investigation of the
historical role of federal, state and local governments
in the consumer movement; 3) a review of the many types
of consumer problems and an assessment of the need for
additional protection for consumers; 4) an analysis of
the ongoing programs of federal and state and local
governments in protecting the consumer; 5) a determination
of the need for revision of protection systems with
particular attention at the local government level
including specific recommendations for consideration by
local agencies interested in protecting citizens of their
environs.
A study of government and consumer protection is
significant because of current trends and developments
in government's role in protecting the consumer. Once
it is determined that additional consumer protection is
required, the question becomes, "How should federal,
state and/or local governmental agencies protect the
consumer?" This paper is intended to present some
recommendations and to serve as a guide that would
enable a local government, with a population of at least
iii
250,000, to initiate an effective program to protect
consumers.
Although the guide is designed for any large
metropolitan area, particular attention is devoted to
the Los Angeles metropolitan area. This results from
two considerations: 1) much of the research, including
interviews and literature search, was conducted in the
Los Angeles area where noted consumer protection experts
are available and 2) the Los Angeles area presents a
significant cross-section of all types of consumer pro
blems. In addition, the Los Angeles area contains a
tremendously diversified government structure with almost
eighty incorporated cities and a meandering county
unincorporated area. This government structure presents
special enforcement and educational problems not neces^
sarily found in all local government agencies of the
size the guide is intended to assist.
There are numerous government programs in existence
designed to protect the consumer. For example, a
defrauded consumer in the Los Angeles metropolitan area
is faced with over 125 agencies that have some partial
responsibility for consumer protection. The guide pays
particular attention to the prevention of a duplication
of effort among federal, state, and local agencies.
iv
CHAPTER I
THE CONSUMER MOVEMENT
IN THE UNITED STATES TO 19 72
It is difficult to pinpoint the start of the consumer
movement in the United States, if indeed there was a
definite start. The first recorded recognition of a need
to protect consumers was the passage in 1872 of the
Criminal Fraud statute by the United States Congress.^
The first major era of consumer unrest occurred in the
early 1900*s. The next era can be considered as the
19 30*s. The current movement, which started in the
early 1960*s, is the third such period of massive public
awareness and concern.
In the early days of the republic, a consumer's
welfare depended in large part on the honesty and buying
skill of the local storekeeper. Neither the consumer
nor the storekeeper had much choice in either the source
or variety of their goods. Toward the end of the 19th
century, with the advent of the industrial revolution,
the problems of consumers increased. The rapid growth
of the cities and of industrialization, produced a new
Harold S. Burson and William A. Marsteller.
Consumerism: A New and Growing Force in the Marketplace
(Third Edition, March 1970).
2
and unfamiliar set of problems — urban poverty, tene
ment housing, immigrant ghettos, municipal corruption,
hazardous working conditions, sweat shops, child labor,
2
and rampant consumer fraud. Between 1800 and 1900, a
variety of local reform organizations were formed. One
such group, formed in New York City, was known as the
Consumers' League. The League prepared a "white list"
of shops which paid minimum fair wages, had reasonable
hours and decent sanitary conditions.
In 1898, a number of local leagues similar to the
Consumers' League in New York joined to form the National
Consumers' League. By 19 03 the National organization had
grown to 64 branches in 20 states. The initial inves
tigations of the organization centered around conditions
in garment, food and textile manufacturing. The leagues
relied primarily on moral pressure and refrained from
actual consumer boycotts, in seeking to improve working
conditions.
The "first era of the consumer movement" was moved
into full swing by deaths and illness attributable to
poor quality foods and drugs. The movement was given
2
Robert O. Hermann, The Consumer Movement in Histor
ical Perspective (Department of Agricultural Economics
and Rural Sociology Agricultural Experiment Station, The
Pennsylvania State University, University Park, Pennsyl
vania, February 19 70), p. 2.
3
further impetus by a publication in 1906 of Upton
Sinclair's, The Jungle, an expose of the working con
ditions in the Chicago packing houses during the early
1900's:
The public was nauseated by the graphic
descriptions of adulteration techniques
and the unsanitary conditions : "These
rats were nuisances, and the packers would
put poisoned bread out for them and they
would die, and then rats, bread and meat
would go into the hoppers together . . .
Men, who worked in the tank rooms full of
steam . . . fell into the vats; and when
they were fished out, there was never enough
of them to be worth exhibiting— sometimes
they would be overlooked for days, till all
but the bones of them had gone out to the
world as Durham's Pure Leaf Lard]"3
The publication of Sinclair's book and the results
of two independent investigations and the general public
uproar over the unsanitary conditions of the food
processing industry resulted in the passage of important
federal legislation. In 1906, the first federal food and
drug act was passed creating the Federal Food and Drug
Administration; shortly after,a federal program of meat
inspection was initiated.
Consumer groups across the nation moved to aid in
enforcement of the Act and to push for more consumer
protection for the consumer. The interest of the groups.
^Ibid., p. 6.
4
however, shifted rapidly to such subjects as prices. In
1912, the Housewives League in Chicago sold eggs on street
corners at ten cents below the prevailing price, in
order to break the retail price of storage eggs which
were being advertised and sold as fresh eggs.^ This
idea quickly spread across county to Philadelphia
where similar sales were held. Housewives' militancy
regarding prices has been a continuing indication of
consumer awareness.
The first era of the consumer movement drew to a
close with the advent of World War I. The war, postwar,,
readjustment and the Roaring Twenties diverted attention
away from the consumer movement until the economic
troubles of the late twenties and early thirties.
The second era of the consumer movement, while
actually occurring during the thirties, began in the
late 1920's. Consumers were involved in making purchases
of new and unfamiliar goods in vast quantities. This
was due to the postwar economic prosperity which made
available products heretofore not within the purchasing
power of the general public. The 1920's saw the advent
of mass advertising, frequently deceptive, which
"^Ibid. , p. 8.
5
encouraged consumers to make purchases. The consumer's
frustration found expression in a number of publications.
One of the most widely read was Your Honey' s Worth,
written by Stuart Chase and F. J. Schlink and published
in 192 7. It sold over 100,000 copies. The book, sub
titled "A Study in the Waste of the Consumer's Dollar,"
vigorously attacked advertising and high pressure
salesmanship. The authors recommended programs of
scientific testing and product standards to provide
consumers with technical information required to make
intelligent decisions. The interest generated by the
book was so great that in 1929 Schlink formed Consumer's
Research Incorporated. The company specialized in the
scientific testing of consumer goods.
Problems of consumers worsened during the 19 30's.
Not only were the majority of consumers faced with a
drastic drop in personal income, but the marketplace
was flooded with poor quality merchandise. This poor
quality merchandise bolstered the public's desire for
product testing.
Another activity on which the consumers' wrath was
spent is one which even today, forty years later, is
the cause of much public mistrust and consumer fraud—
advertising. Consumer protection advocates claimed that
advertising encouraged wasteful proliferation of brands.
6
increased unnecessarily the cost of consumer goods, and
provided little useful information. A book by Arthur
Kallet and F. J. Schlink of Consumer's Research, entitled
100,000 Guinea Pigs, was published in 19 33 and sold over
a quarter of a million copies. It voiced concern over
advertising and the misconceptions associated with it.
This book was followed by others and the series became
known as the "Guinea Pig Books."
The second era of the consumer movement spawned a
new and lasting organization. Consumers' Union, which was
formed by a group of Consumer Research subscribers.
Consumers' Union (CU) concerned itself with a broad range
of consumer and social problems. CU grew rapidly and is
still an active organization. Its publication. Consumer
Reports, is one of the most widely read consumer publica
tions. CU in Consumer Reports states that:
The purposes of Consumers' Union are to provide
consumers with information and counsel on con
sumer goods and services, to give information on
all matters relating to the expenditure of the
family income, and to initiate and to cooperate
with individual and group efforts seeking to
create and maintain decent living standards.5
The second consumer era continued through the 1930's
with increasing vigor, so much so that the business
^Consumer Reports, Volume 37, Number 4 (New York:
Consumers' Union of the United States, Inc., April 1972).
7
community, through the Advertising Research Foundation,
commissioned a national survey by Dr. George Gallup to
determine consumer awareness of the pursuit for better
products. In 19 40, Gallup reported that about a quarter
of those questioned in this study had read one of the
guinea pig books and about half of this group said they
had changed their buying habits as a result of what they
had read.
Gallup found that the movement had developed its
greatest strength among teachers, higher income people,
the more intelligent, and the young. He concluded that
the movement had made considerable headway and was
likely to continue to grow because of its strength among
influential groups.^
Like the first consumer era, the second was ended
by the involvement of the United States in a world war.
The attention of the nation was directed away from
consumer issues to the greater concern for national
survival.
The late President John F. Kennedy is frequently
credited with starting the third era of the consumer
movement. On March 15, 1962, in a historic consumer
message to Congress, President Kennedy declared that
^Robert O. Hermann, The Consumer Movement, p. 17.
8
every consumer has four basic rights: (1) the right to
safety, (2) the right to be informed, (3) the right to
choose, and (4) the right to be heard. He urged that
strong legislation be initiated and approved to protect
7
these rights.
The increasing interest in consumer problems was
fanned in the 1960's by a number of books critically
examining the nation's social and economic problems.
Some of the most popular were: Michael Harrington's
The Other America (19 62); Rachel Carson's The Silent
Spring (1962); Jessica Mitford's The American Way of
Death (196 3); David Caplovitz's The Poor Pay More (196 3);
and Maurine Neuberger's Smoke Screen: Tobacco and The
Public Welfare (1963).
Consumers' Union continued to flourish in the
1950's and to an even greater extent in the 1960' s. By
1961, CU's 25th anniversary. Consumer Reports had a paid
circulation of almost one million per issue, and an
estimated readership of four million. By the early
1960's. Consumers' Union not only increased in circula
tion , but also in its scope of operation. CU began to
view itself as an organization to promote consumer
7
Harold S. Burson and William A. MarsteHer,
Consumerism, p. 5.
9
education rather than simply as a product testing agency.
Within the context of this new role, CU has sponsored
conferences on consumer problems throughout the country,
and has supplied expert testimony at numerous government
hearings. The Union has also been working with a variety
of adult education groups in developing consumer education
programs. CU is following this trend in the 1970's by
publishing in each issue a section called "The Docket"
which is a rundown of government actions taken to enforce
consumer protection laws.
As occurred in the two previous consumer movement
eras, an attempt was made in late 1967 to create a new
viable national consumer organization. The new organiza
tion, The Consumer Federation of America, is a national
federation of organizations with consumer interests. It
includes labor unions, state and local consumer organ
izations, the National Council of Senior Citizens, and
the National Consumers* League. Its activities include :
# Encouraging the creation of local, regional,
and state consumer organizations;
e Providing services to and working cooperatively
with city, county, regional, state and national consumer
groups ;
# Stimulating and coordinating consumer programs
and activities in such areas as product pricing; product
10
quality; servicing and guarantees ; regulatory agencies;
credit and insurance ; home improvements; cost of food,
drugs and medical care ; safety ; development and conser
vation of energy and other natural resources;
• Serving as a clearinghouse for the exchange of
information, ideas and experiences among members at the
city, county, regional, state and national levels;
• Providing a responsible and articulate voice for
consumers by gathering facts, analyzing consumer issues,
and making this information available to the public and
to lawmakers ;
• Providing consumer information and, education;
• Maintaining continuing liaison with members of
Congress and decisionmakers in Federal departments and
agencies ;
• Preparing legislative fact sheets ; preparing and
presenting testimony on consumer issues;
• Coordinating legislative activities of consumer
organizations ;
• Sponsoring Consumer Assembly, the annual consumer
forum in the nation's capitol, which focuses attention on
consumer issues by bringing together members of consumer
g
groups from across the nation.
Q
Harold S. Burson and William A. Marsteller.
Consumerism, p. 9.
11
The third era of the consumer movement continues
into 19 73 and to date has shown no sign of waning.
Ralph Nader, one of the most influential leaders of the
consumer movement who was at one time a "one man gang"
now has an expanding staff and a nationwide organization.
The thrust of this consumer era is different from its
predecessors. To quote Nader, "Its not just enough to
expose conditions, you have to follow through and press
for change. Thatfs the difference between us and the
9
muckrakers."
Nader and his organization have received both criti
cism and praise. One of Nader's most ardent admirers at
the Capitol is Senator William Proxmire (Democratic
Senator from Wisconsin), before whom Nader has testified
several times.
"I think he's invaluable, one of the best things
that's happened to this county in the last 25 years,"
Proxmire, in a recent interview, said. "He comes just
at the right time, when we really need someone with his
capacity to organize the idealism we have on the one
hand and to check the unbridled technology on the other."
Paul Houston, "Ralph Nader: The Man and His
Crusaders," Los Angeles Times (November 3, 1971), Sec. 1,
pp. 1, 20 and 22.
^°Ibid., p. 20.
12
Proxmire said that Nader "really puts to shame
members of Congress. He's doing the job we ought to be
doing, and it's being done with very little money, very
few people and without the capacity we in Congress have
to call on the Government Accounting Office and its
thousands of investigators."^^
One of Nader's critics is Jess Unruh who stated,
"Apparently the same thing is happening to Ralph Nader
that happened to General Motors: he's getting too big
12
and losing quality control." In spite of both his
critics and admirers, Ralph Nader has undoubtedly been
one of the most influential forces in this consumer era.
One of the most interesting questions about this
most recent consumer era is, "How long will it last?"
There are diverse opinions on the subject.
Nader recently has stated that "the assortment of
groups that comprise the 'consumer's movement' is moving
in directions that seem . . . quite different from ones
that similar groups have followed in the past," and
that the demands of the consumer movement are based
increasingly on ethical rather than ideological arguments.
The leaders of the consumer movement of the Fifties and
13
early Sixties were the veterans of the consumer movements
of the Thirties. Because of their experiences then and
the fact that many are economists, many of them tend to
view the consumer movement as a class struggle between
consumers and business. This group now is reaching
retirement age and a younger group is assuming the
leadership of the movement. This group, it appears, is
less interested in the issue of relative economic power,
and instead thinks more in terms of justice and fairness.
As the influence .of Nader and the number of attorneys
involved in the consumer movement continue to grow, such
a view of the role of the consumer movement seems likely
to win more adherents.
Many factors that created the massive consumer
awareness of the first and second eras continue in the
current era. For example, consumer safety and quality
of construction have always influenced the consumer and
continue to do so today. Robert C. Cozens, director
of the California Department of Motor Vehicles, addres
sing the Spring business conference of the Motor Car
Dealers Association of Southern California, said:
The trend to consumerism can't be shrugged
off as a passing fad or a Ralph Nader
syndrome. We are dealing with a profound
realignment of sentiment among consumers.
14
Too long has the individual citizen felt
helpless in the face of a complex, nonfunc
tioning TV set, household appliance, or motor
vehicle and the man who claims he can fix it.
Cozens predicted that the American love affair with
smaller cars will continue. And he said that pressures
for more damage-resistant vehicles will lead to better
14
bumpers — soon.
From the above historical review, it seems that the
consumer movement is destined to be a recurring if not
a permanent feature of the American scene. The movement
has arisen as a reaction to three persisting problem
areas: (1) ill-considered applications of new technology
which result in dangerous or unreliable products, (2)
changing conceptions of the social responsibilities of
business and (3) the continual operations of a dishonest
fringe, and the occasional lapses of others in the
business community. There is little reason to believe
that any of these problem areas will ever disappear
completely. Historically, consumers have been most
sensitive to these problems in periods when consumer
purchasing power is under pressure from rising prices.
13
Dan Fisher, "Consumerism Ride Won't Ebb, Says
Official," Los Angeles Times (April 13, 1971) part 1,
p. 3.
, p. 3.
15
and when there is an absence of attention-diverting
factors such as wars.
Perhaps one of the most important phenomena in
this consumer era is the marriage of the consumer move
ment with the "environmental movement." Whereas consumer
problems hit hardest at the poor and uneducated, the
concern over the degradation of environmental quality
has a far more wide reaching impact. Environmental
degradation affects rich and poor alike and many middle
income persons who live in metropolitan areas with
environmental problems. The concern over environmental
quality has attracted many who heretofore could turn
their backs on the consumer problems of the poor. As
the environmental movement continues— and with the
continuing degradation of air, land, and water, the
consumer movement has a powerful ally.
CHAPTER II
THE HISTORICAL ROLE
OF FEDERAL, STATE AND LOCAL GOVERNMENT
IN THE CONSUMER MOVEMENT
The creation in 1870 of the Department of Justice
was perhaps the first official recognition by the U. S.
Congress of the need for consumer protection. The
Department of Justice provides a means for the enforce
ment of federal laws, furnishes legal counsel in federal
cases, and interprets laws under which other departments
act. The Justice Department today enforces federal
laws for consumer protection through cases referred to
it by other government agencies. Since the creation of
the Department of Justice, the role of the federal, state
and local levels of government have sporadically
increased to the point where there are over 12 5 consumer
protection agencies in the Los Angeles metropolitan area.
This chapter will provide a review of the major mile
stones of this increased government involvement.
The creation of the first of many federal consumer
oriented agencies occurred in 1887 with the establishment
of the Interstate Commerce Commission, The Commission
was created as a result of charges of rate discrimination
against the expanding railroads. In reality the Com
mission served the cause of the railroads and not the
16
17;
public. (This problem will be covered in some detail
in Chapter IV).
The next major piece of consumer legislation took
over twenty years to come to fruition. The first
official attention to the problem of providing pure
food occurred when Dr. Harvey W. Wiley joined the
Division of Chemistry of the Department of Agriculture
in 1883. Already aware of the adulteration of "fresh"
food. Dr. Wiley and his staff cataloged 1400 pages of
documented cases. Dr. Wiley was, however, unable to
arouse enough concern either among the public or the
Congress to pass controlling legislation.
The first general pure food and drug measure was
introduced in the Senate in the early 1890*s. It passed
the Senate in 1892 against pressure from business and
regional interests, Southern Democrats and those members
who thought other legislative matters were more important.
The House failed to take action and the bill died. A
second attempt at passage was begun in 1902. The bill,
called the Pure Food Law, was killed but support had
increased over previous attempts. In the next two years,
the Piire Food Bill passed the House, but Republican
opposition kept the bills from being voted on by the
Senate. In 1906, three actions resulted in passage of
the Pure Food Bill and a meat inspection amendment.
(1) President Theodore Roosevelt, appalled by unsanitary
conditions in the food packing and processing industry,
pushed for passage; (2) the American Medical Association
applied all its influence; and (3) Upton Sinclair’s book
The Jungle was published. Thus, after some 25 years, a
Pure Food Law creating the Food and Drug Administration
was passed.
While it is not a governmental agency, the National
Better Business Bureau (BBB) and its local affiliates
have had, until recently, an aura as the most effective
consumer protection "agency." The BBB was founded in
1912 to prevent or correct fraudulent or deceptive
advertising and selling practices and to promote industry
self-regulation. Today there are 140 BBB * s and 900
affiliated Chambers of Commerce in cities across the
country.
Another federal agency created allegedly to protect
the consumer public was the Federal Power Commission.
It was formed in 1920 to regulate interstate aspects
of the electric power and natural gas industries. The
Power Commission has license issuance power by which
permission to construct hydroelectric power projects on
federal land or navigable waters of the U. S. is granted.
One of the most important and active federal govern
ment consumer protection agencies had its birth in the
19
early 1900*s. The Federal Trade Commission (FTC) was
set up in 1915 to maintain "free competitive enterprise"
and to prevent the free enterprise system from being
"stifled or fettered by monopoly or corrupted by unfair
or deceptive trade practices."
While no major consumer protection agencies were
created in the second consumer era, some of those created
in the early 1900*s became more active. It is informative
to follow the evolution of the FTC into the 1970*s. The
FTC was particularly active in the 1930*s in the field
of credit transactions.
...the Commission brought its earliest cases in
volving misrepresentations of interest rates as
early as 1936, when it filed a series of complaints
against the major automotive companies charging that
their so-called 6 per cent financing plans were being
deceptively advertised. The Commission*s complaints
alleged that the representation of a 6 per cent in
terest rate constituted a representation of a simple
interest rate per annum and that on this basis the
automotive companies * representation of a 6 per cent
interest rate was false. They alleged that in fact,
the actual interest rate being charged was between
11 and 12 per cent as a simple annual rate and that
the 6 per cent figure had>been inproperly based upon
the original principal for the full duration of the
loan without taking into account the periodic reduc
tion in the principal effected by the payments. The
Commission sustained the allegations of the complaint
and was upheld on appeal by the court of appeals.
15
Harold S. Burson and William A. Marsteller,
Consumerism, p. 5.
^^Mary Gardner Jones, "The Inner City Marketplace :
The Need for Law and Order," The George Washington Law
Review, Volume 37, Number 5, (July, 196 9) , p. 1018.
20
The FTC continued to be an active consumer protec
tion agency into the 1950 * s.
In 1950, the Commission held a public hearing
on the problems of possible misrepresentations
in the advertising of automotive financing
programs and followed these hearings in 1951
with the promulgation of trade practice confer
ence rules concerning the Retail Installment
Sale and Financing of Motor Vehicles. These
rules required affirmative disclosure of
essential information about the finance costs
of these transactions and prohibited the
execution of contracts signed in blank as well
as any other misrepresentations respecting
the financing charges required. Following the
promulgation of the Commission * s trade practice
rules, a series of state laws were enacted to
regulate these same practices, and as a result
the Commission announced that by and large it
would leave regulation of these practices to
the states.17
The FTC has continued into the 197;0 ’ s as one of
the most active federal consumer protection agencies. It
faces problems that have been magnified in recent years
by an increase in citizens alleging that it has been
unable to service their complaints. As Philip Schrag
pointed out in a recent Yale Law Journal article.
Protecting the consumer against fraud has
been the job of the Federal Trade Commission
and various state consumer protection offices
or Attorney General* s offices. Unfortunately,
the records of most of these offices have been
abysmal. Inadequate funding, understaffing,
weak legislation, lack of public support.
^^Ibid., p. 1018.
21
overbureaucratization and the absence of any
real sense of mission conspired to render
government agencies ineffective or, in some
cases, servants of industry, while consumer
fraud flourished.18
Others have commented on deficiencies in the operations
and charter of the FTC. William D. Warren, in his
analysis of the direct selling industry in Los Angeles,
states ;
First, the Commission generally only acts
when a problem or practice is of large magni
tude . The commerce which it may regulate must
be "interstate," but this jurisdictional
requirement is not as difficult to overcome
as is the fact that the FTC just does not
have the manpower to concern itself with
problems that are primarily of a local nature.
Thus, the vendor who advertises and merchan
dises only locally is virtually immune from
FTC control.
Second, the machinery of the FTC is, by and
large, too cumbersome to effectively deal
with the problems raised by door-to-door
sales. Partially because the Commission
is not empowered to ask for preliminary in
junctions , and partially because of the rela
tively slow-to-respond administrative apparatus
of the FTC, the Commission is unable to act
quickly to halt misleading sales practices.
Steps have been taken to speed the process,
but there is still considerable delay between
the first complaint and the final order. Not
counting the time that may elapse prior to
issuance of a formal complaint, usually about
one year passes before there is a hearing and
an order is handed down. If the order is
1 A
Philip G. Schrag, "On Her Majesty’s Secret
Service: Protecting the Consumer in New York City,"
The Yale Law Journal, Volume 80, Number 8 (July, 19 71),
p. 1529.
22
appealed, another three to five years may pass
before the question is settled.19
While the above comments by Warren deal specifically
with door-to-door sales, they are valid for many other
areas of the FTC’s involvement in consumer protection.
Suggestions for improving the Commission’s capacity to
cope with consumer fraud have been many and varied.
Some of the suggestions are covered in Chapter IV of
this paper.
The third era of the consumer movement has spawned
more governmental agencies than the two other eras
combined. Perhaps an explanation is the one cited by
Burson-Marsteller, that "ordinarily this type of
protest originates at the grass roots level and even
tually converges on Washington to seek passage of a
legislative program. The current consumer crusade
started in the nation’s capitol and has fanned out over
the country."
In July 1962, President Kennedy appointed ten
private citizens to the newly created Consumer Advisory
Council. The Council was the first step in the imple-
19
William D. Warren, "The Direct Selling Industry:
An Empirical Study," UCLA Law Review, Volume 16, No. 5,
(September, 1969), p. 955-956.
20
Harold S. Burson and William A. Marsteller,
Consumerism, p. 14.
23
mentation of the President’s consumer message of the
Spring of 196 2. The Council, which was chaired by Dr.
Helen Canoyer, undertook a comprehensive study to
determine consumer needs. While the Council had
limited impact on the Congress and the public, its
creation was a significant step, because the consumer
interests had never before been represented at such a
high level of government.
In 1964, President Johnson expanded the Council
to 12 members and formalized it by executive order.
President Johnson also created the position of Special
Assistant to the President for Consumer Affairs. Today
this post exists as the Office of Consumer Affairs,
Executive Office of the President. Its present director
is Virginia H. Knauer. The Officer of Consumer Affairs
is charged with conducting a regional consumer conference
with state and local officials, conducting investigations,
21
conferences and surveys on the problems of consumers.
While it is not the purpose of this paper to
provide a complete index of all existing federal consumer
protection laws, the following table provides a listing
of major consumer legislation passed within the last
decade.
21
Consumer News, Volume 1, Number 1 (Office of Con
sumer Affairs, Executive Office of the President, April
1971).
24
Year
Passed
1962
Law
Kefauver-Harris Drug
Amendments
1966 Fair Packaging &
Labeling Act
1966
1966
National Traffic
& Motor Vehicle
Safety Act
Child Protection
Act
1966
1966
Drug Abuse
Amendments
Cigarette Labeling
Act
1967 Wholesome Meat Act
Major Provisions
Requires drug manufactur
ers to file all new drugs
with the FDA and to label
all drugs by generic
name. All drugs must
be pretested for safety
and efficacy.
Regulates the packaging
and labeling of consumer
goods. Provides that
voluntary uniform pack
aging standards be estab
lished by industry.
Authorizes the Dept, of
Transporation to estab
lish compulsory safety
standards for new and
used tires and automobiles.
Strengtbens Hazardous
Substances Act of 1960
and prevents the market
ing of potentially
harmful toys. Permits
FDA to remove inherently
dangerous products
from the market.
Regulates the sale of
amphetamines, barbiturates.
Requires cigarette
manufacturers to label
cigarettes : "Caution:
Cigarette smoking may be
hazardous to your health."
Requires states to up
grade tbeir meat inspec
tion system to stringent
Federal standards and
clean up unsanitary meat
plants.
1967 National Commission
on Product Safety
1967 Flammable Fabrics
Act Amendments
1967 Clinical Laboratories
Act
1968 Fire Research &
Safety Act
1968 Truth-in-Lending
1968 Automobile Insurance
Study
25
Establishes a seven-
member commission to
review products that
represent hazards to
public health and file
recommendations for
necessary legislation.
Extends scope of 1953
Flammable Fabrics Act
to allow the Secretary
of Commerce to establish
regulatory standards for
clothing, bedding,
draperies and other
interior furnishings.
Requires all clinical
laboratories operating
in interstate commerce
to be licensed by the
federal government.
Provides funds to collect,
analyze and disseminate
information on fire
safety, to conduct fire
prevention education
programs and conduct
projects to improve
efficiency of fire
fighting techniques.
Requires full disclosure
of annual interest rates
and other finance charges
on consumer loans and
credit buying including
revolving charge accounts.
A two-year comprehensive
study and investigation
by the Department of
Transportation to focus
on the adequacy of state
regulation of auto
insurance and to evaluate .
industry rates, compensa
tion , sales and>^pol%cy
discrimination practices.
26
1968 Natural Gas Pipe
line Safety
1968 Poultry Inspection
1968 Fraudulent Land
Sales
1968 Radiation Control
for Health & Safety
1969 Child Protection
and Toy Safety Act
of 1969
1970 Public Health
Smoking Act
Authorizes the Secretary
of Transportation to
develop minimum safety
standards for the design,
installation, operation
and maintenance of gas
pipeline transmission
facilities.
Requires states to develop
inspection systems which
meet Federal standards
for poultry and poultry
products.
Requires Federal regis
tration of all land
offered for sale through
the mail to protect
consumers against
fraudulent or unscrupu
lous practices.
Directs Secretary of HEW
to set and enforce stan
dards to control hazardous
radiation from television
sets, X-ray equipment and
other electronic devices.
Establishes a committee to
advise him on perfor
mance standards for
electronic products
capable of emitting
radiation.
Amends the Federal
Hazardous Substances
Act to protect children
from toys and other
articles which contain
thermal, electrical or
mechanical hazards.
Bans cigarette commercials
on radio and television
effective Jan. 2, 1971.
Requires all cigarette
packages to be labeled:
27
19 7 0 Public Health "Warning; The Surgeon
Smoking Act General has determined
(continued) that cigarette smoking
is dangerous to your
health."
In lieu of attempting to discuss the functions of
the many government agencies involved in consumer pro
tection, a reference to a publication of the Office of
Consumer Affairs titled Guide to Federal Consumer Ser
vices is appropriate. The publication lists many of the
federal consumer government protection oriented agencies,
their main purposes, principal laws administered, major
functions for consumers, how to obtain service and other
pertinent information.
On the state level, and specifically in California,
the Attorney General’s consumer fraud unit has been one
of the most active consumer protection organizations.
To cite William D. Warren;
The California Attorney General’s Consumer
Fraud Unit effort began in 1959. The Office
did not, however, find itself in a position to
achieve significant results until 1963. At
the present time, the Unit still operates with
a limited staff, a makeshift budget, and without
specific statutory authority. Nevertheless,
its accomplishments have been significant and
the leadership it has provided important. For
the first time it has b ecome evident that
aggressive, affirmative action can result in
positive g a i n s . 22
^^William D. Warren, "Direct Selling Industry," UCLA
Law Review, pp. 956-57.
28
The State Attorney General continues to provide active
leadership and has in fact shown the usefulness of the
injunctive action. There exists a popular misconception
that the way to solve the problem of consumers is to
pass additional local, state, and federal legislation.
This view is contradicted by Hershel Elkins, Deputy
Attorney General, who indicated,
...with minor exceptions, the existing legisla
tion is currently adequate to prosecute almost
all cases of consumer fraud. Additional legisla
tion is required, however, in the direct selling
industry or door-to-door sales, and to provide
for a "cooling-off" period.23
The most significant consumer protection program in the
State of California could result from the passage and
signing of Assembly Bill No. 2366, known as the Consumer
Affairs Act, which became effective July 1, 1971. This
Act added Chapter 4 (Consumer Affairs) to Division 1 of
the Business and Professions Code.
The following is Article 3 of the Consumer Affairs
Act. The Act provides the Director of the new Department
of Consumer Affairs with rather broad responsibilities
in carrying out the interest of consumers:
23
Hershel Elkins, California Deputy, Attorney
General, Consumer Fraud Unit, Private Interview held
in Los Angeles, May 5, 19 70.
29
POWERS AND DUTIES
310. The director shall have the following
power and it shall be his duty to:
(a) Recommend and propose enactment of such
legislation as necessary to protect and promote
the interests of consumers.
(b) Represent the consumer’s interest before
federal and state legislative hearings and
executive commissions.
(c) Assist, advise, and cooperate with federal,
state, and local agencies and officials to
protect and promote the interest of consumers,
(d) study, investigate, research, and analyze
matters affecting the interest of consumers.
(e) Hold public hearings, subpoena witnesses,
take testimony, compte the production of books,
papers, documents, and other evidence, and call
upon other state agencies for information.
(f) Propose and assist in the creation and
development of consumer education programs,
(g) Promote ethical standards of conduct for
business and consumers and undertake activities
to encourage public responsibility in the pro
duction , promotion, sale and lease of consumer
goods and services.
(h) Advise the Governor and Legislature on all
matters affecting the interests of consumers.
(i) Exercise and perform such other functions,
powers and duties as may be deemed appropriate
to protect and promote the interests of con
sumers as directed by the Governor or the
Legislature.
311. The director may create an interdepart
mental committee to assist and advise him in
the implementation of his duties. The members
of such committee shall consist of the heads
of state departments, or their designees.
Members of such committee shall serve with
out compensation but shall be reimbursed for
30
the expenses actually and necessarily incurred
by them in the performance of their duties.
312. The director shall submit to the Governor
and the Legislature during the month of December
prior to each regular session of the Legislature
a full and accurate report of the activities of
the department relating to consumer affairs. Such
report shall include recommendations, when appro
priate, for legislation which will protect and
promote the interests of consumers. A copy shall
be filed with the Secretary of State.
The Director is also charged with representing con-
\ sumers before proceedings which may affect substantially
the interests of consumers within California. In addi
tion, the Director shall receive complaints from
consumers and process such complaints.
To assist local governmental agencies in their
consumer protection programs, the Federal Trade Commission
has organized a coordinating group called the Southern
California Joint Law Enforcement Consumer Protection
Committee (FTC Committee). The FTC has as part of this
program started, both in Los Angeles and Chicago, a
computer-assisted tabulation of consumer complaints.
The tabulation includes the input of all of the member
agencies. Each agency receives a monthly report for its
use.^^' The report enables each agency to ascertain
2 4
John Wilcox, Attorney, Federal Trade Commission,
Private Interview held in Los Angeles, July 30, 1972 and
other dates.
25
Captain F. J. Beeson and Lieutenant S. Arabian,
31
which type of complaints are most prevalent and to obtain
various other pattern information. The Coordinating
Committee holds monthly meetings at which current problems
are discussed, and which provide a forum for the coor
dination of the education and enforcement programs of
the participating agencies. The Committee also endorses
proposed legislation and in some instances initiates
legislative proposals.
An active participant on the FTC Coordinating
Committee has been the Los Angeles Police Department
Bunco-Forgery Division. This Division is responsible
for the investigation of reported and suspected cases of
consumer fraud violations and other violations. The
Division has also provided considerable leadership in
the Los Angeles area in the field of consumer protec-^
tion.^^ Until the creation of the City of Los Angeles
Department of Consumer Affairs, the Bunco-Forgery Division
was the most active City agency in the field of consumer
protection.
(con )Los Angeles Police Department Bunco and
Forgery Unit, Interviews held August 12, 1970 and other
dates.
^^Casper W. Weinberger, Chairman, Federal Trade
Commission, "Where is the Consumer Revolt Taking Us?"
Speech at Mayor’s Consumer Protection Symposium, Century
Plaza Hotel, Los Angeles, July 17, 19 70.
32
"A bold and ambitious new experiment in City govern-
2 7
ment regulation gets underway today..." This statement
referred to an event which occurred on Monday, the third
of April, 197 2. On that day, the City of Los Angeles
opened its Bureau of Consumer Affairs. The creation of
the Bureau ended nearly two and one half years of debate
over the subject of the creation of a consumer protec
tion agency in the City of Los Angeles. The Bureau was
created by City Ordinance No. 143, 083. The possible
effectiveness of the City Bureau of Consumer Affairs
will be discussed in Chapter IV. The following is
Article 4 of the creating ordinance:
ARTICLE 4
BUREAU OF CONSUMER AFFAIRS
Sec. 22.408. The Bureau of Consumer Affairs is
hereby created within the Department. Said Bureau
shall be under the control and management of the general
manager of said Department.
Sec. 22.40 8.1. Except as may be prohibited by
provisions of the Charter, State and Federal laws,
the Bureau of Consumer Affairs shall have the follow
ing powers and duties:
(a) To receive and investigate, with community
assistance, complaints from consumers concerning any
deceptive or any unconsc:ionabvle trade practice.
(b) To recommend and propose to the City Council
and its committees the enactment of such legislation as
necessary to protect and promote the interests of
consumers.
2 7
Erwin Baker, "City Opens New Office to Protect
Consumers" Los Angeles Times, (April 3, 19 72) Part II,
p. 1.
33
(c) To appear at hearings held by Federal, State,
or local bodies and agencies for the purpose of repre
senting the interests of consumers including recommend
ing and proposing the enactment of legislation consis
tent with the legislative program of the City,
(d) To promote ethical standards of conduct for
business and consumers and undertake activities to
encourage public responsibility in the production,
promotion, sale and lease of consumer goods or services,
and the extension of consumer credit.
(e) To study, investigate, and analyze matters
affecting the interests of consumers.
(f) To propose and assist in the creation and
development of consumer education programs and to
investigate the availability of existing programs.
(g) To advise the Mayor and members of the City
Council on all matters affecting the interests of
consumers.
(h) To coordinate the enforcement activities of
City employees'in the field of consumer affaits.
(i) To exercise and perform such other functions,
powers and duties as may be deemed appropriate to
protect and promote the interests of consumers.
Sec, 22,402,2. The general manager of the
Department shall have, in addition to any other power
or duty, the power and duty :
(a) To promulgate, amend, and modify rules and
regulations to protect the consumer from unfair or
unethical business practices. ^uch rules and regula
tions shall be adopted, amended or modified after public
hearings; approval of the Mayor and City Council; and
publication in a newspaper of general circulation.
Violations of adopted rules and regulations shall be
a misdemeanor.
(b) To adopt rules of procedure, subject to the
City Attorney’s approval, for the conduct of public
hearings in the field of consumer affairs.
(c) After rules are adopted pursuant to Subsection
(b), to hold public hearings in the field of consumer
affairs, administer oaths and affirmations, examine
witnesses under oath and compel the attendance of
witnesses and the production of evidence before him
by subpoena to be issued in the name of the City of
Los Angeles and to be attested by the City Clerk.
The City Clerk shall, upon the demand of the general
manager, issue said subpoena in the name of the City
and attest the same with the corporate seal thereof.
34
and shall in such subpoena direct; and require the
attendance of the witness and the production of the
evidence before the general manager at the time
and place specified in the subpoena. At such hearing
the general manager may receive evidence relating to
unfair or unethical business practices and violations
of the rules and regulations of the Bureau.
(d) To provide the necessary investigation and
coordination to recommend the filing of criminal or
civil actions.
As previously noted, the various governmental
consumer protection agencies operating in the Los
Angeles metropolitan area number in excess of 125.
Obviously, it is impossible even to comment on them
individually. Appendix A" is a partial listing of
the agencies, providing some form of consumer protec
tion in the Los Angeles area.
This proliferation of agencies is not unique to
the Los Angeles area. In August 19 71, Mrs. Betty Bay,
Director of Federal-State Relations for the Office of
Consumer Affairs, reported that 43 states, 10 counties
and 13 cities had created some form of consumer protec
tion unit. The units varied from advisory commissions
to staffed law enforcement agencies.
CHAPTER III
THE NEED FOR CONSUMER PROTECTION
"Modern Americans may be too smart to buy the
Brooklyn Bridge, but they still get bilked of 70
2 8
billion dollars or more every year," Consumer abuses
raise many questions. Who gets bilked? How does
consumer fraud occur? The President’s Commission on
Law Enforcement and the Administration of Justice reports
that :
Most people pay little heed to crimes of this
sort (consumer sales abuses) when they do
worry about "crime in America" because these
crimes do not, as a rule, offer an immediate
recognizable threat to personal safety. How
ever, it is possible to argue that, in one sense,
these crimes are the most threatening of all...
because of their corrosive effect on the moral
standard by which American business is conducted
...(and because they) promote cynicism toward
society and disrespect for the law.29
Consumer abuses have traditionally hit hardest at
the low-income consumer.
Nowhere is this sense of failure and frustra
tion more evident than in the efforts of our
inner-city residents to cope with the problems
2 8
Clyde H. Reeves, "Consumer Protection," Council
of State Governments Report (January, 1971), p. 3.
29
President’s Commission on Law Enforcement and
Administration of Justice, The Challenge of Crime in a
Free Society, 4-5 (1967).
35
36
which daily confront them in the marketplace.
While for some Negroes their sense of powerless
ness and self-hate is beginning to yield and be
ameliorated— at least to some extent--by a newly
found pride in being black, such growing self-
esteem as is beginning to develop still collides
headlong with the material realities of slum
living--dilapidated and deteriorated housing,
underemployment, lack of basic skills, over
crowded 'schools and a marketplace which is a
daily reminder of the inequalities of American
life and of the breakdown of law and order for
the protection of the poor and the disadvantaged.
The Kerner Commission Report found that one of
the 12 most deeply felt grievances of the inner-
city resident concerned the sales and credit
practices encountered by the poor in their
communities.30
Additional supportive findings are supplied by the
District of Columbia Office of the FTC.
In its study, the Commission found that consumers
patronizing low-income market retailers pay a
higher purchase price and higher interest charges
then they would if they purchased the identical
merchandise in the general market. Product for
product, the Tow-income market retailer studied
by the Commission charged cash prices from two
to three times higher than general market re
tailers. Nearly half of the installment credit
sales by low-income market retailers were at
effective annual financing rates ranging from
26 per cent to 33 per cent, in contrast to the
finance rates imposed by general market retailers
which averaged 20 per cent or less. The Commission
found that a consumer purchasing a Motorola por
table television set from a low-income market
retailer will pay almost twice the weekly amount
which would be charged for the same set by the
general market retailer.31
^^Mary Gardner Jones, "Inner City Marketplace," The
George Washington Law Review, p. 1013.
^^Ibid., p. 1026.
37
The Los Angeles City Administrative Officer in his
report on consumer protection in the City of Los Angeles
stated that :
While the middle-income consumer may be confused
by the numerous agencies and consumer protection
programs, the low-income, less sophisticated,
consumer is at an even greater disadvantage.
For purposes of our study, we have considered
the low-income consumer to be comprised of those
persons living primarily in the low-income
Alack and Méxican-American communities of Los
Angeles. The low-income consumer is generally
either not as familiar with governmental organi
zations as the mid-income consumer, and/or has
a language problem that hinders him in resolving
his problems. In addition, the lack of adequate
transportation in many low-income areas makes
shopping difficult; thus, it leaves this consumer
vulnerable to fraudulent sales in his own commun
ity, In these areas, the public transportation
facilities, which are inadequate at best throughout
the City of Los Angeles, are insufficient. The
low-income consumer is most in need of consumer
protection to preserve his limited income and
protect himself from e x p l o i t a t i o n .32
It is apparent, then, that authoritative sources believe
that low income consumers are subject to more consumer
abuses than are middle and upper income consumers. It
is necessary, however, to attempt to determine both the
magnitude and variety of consumer abuses, especially
those committed in large metropolitan areas.
Consumer problems are astoundingly varied. This
variety has no doubt made the solution so difficult as ^
32
C. Erwin Piper, "Consumer Protection in the City
of Los Angeles ," (February 24, 19 71) , p. 4-5.
38
to create the monster before us. The problems include:
door-to-door sales utilizing high-pressure methods/
fraudulent sale, low quality goods for high prices;
nuisance selling; automobile and television repairs,
false, fraudulent or incompetent advertising via radio,
television, magazines, newspapers, and telephones ; high
interest ; deceptive packaging; low quality merchandise;
non-dating of perishables ; fraudulent magazine sales ;
automobile construction quality and safety ; and on and
on . . . One could spend years investigating cases
of fraud in any of the above subject areas. Even then
many consumer frauds would go unnoticed except by those
who we're bilked.
One of the most frequent sources of consumer com
plaints in the Los Angeles area results from the activi
ties of the door-to-door sales industry. Between 2 5
and 60 per cent of all consumer complaints received by
selected active consumer protection agencies in the
33
area result from door-to-door sales, or as it is
sometimes called, direct selling.
33
Federal Trade Commission - John Wilcox stated that
direct selling is one of the three major consumer problem
areas confronting the FTC. (The other two areas are mail
order houses and new and used automobile dealers).
Los Angeles Police Department, Bunco-Forgery, Division
- Lt. Arabian reports that the Department receives approx-
39
The Los Angeles Times carried the following report
Jim S. is a handsome, kid-next-door kind of
guy, with a friendly face, a soft Southern
drawl and unruly blond hair. If he came to your
door selling magazines, you’d probably give him
a chance to make his pitch.
Until recently Jim was part of a traveling
crew of magazine subscription solicitors who sell
door-to-door in one city after another. He quit
in Los Angeles because his job, he says, "was a
cheat and a fraud."
Federal investigators have turned up thousands
of cases across the nation of fraud, gross
deception, forgery and intimidation by magazine>
subscription peddlers. - ^
The problem continues, despite attempts by
the industry to regulate itself and by federal
agencies to root out the worst offenders.
California’s attorney general is prosecuting
cases involving magazine subscription sales, and
the state’s legal assistance programs report a
surge of complaints involving subscription
contracts for up to $150 and more signed by
persons who cannot read English.
Similar problems are reported in New York,
Pennsylvania, New Jersey, Michigan, Illinois,
Wisconsin and Kansas.
Dozens of companies use traveling crews, some
with hundreds of solicitors, and local companies
imately 250 door-to-doOr complaints each
year. He further stated that experience indicates that
this is only 1 or 2% of all door-to-door annoyances that
occur in the City of Los Angeles.
Neighborhood Legal Service - Gary Manulkin states
that direct selling complaints comprise approximately
60% of all consumer complaints received by his office.
Public Defender - Morton G. Levy indicated that
direct selling accounts for approximately 25-30% of
all consumer complaints received by the Public Defender.
State Attorney General - Herschel Elkins stated
that direct selling is one of three major problems
confronting his office (the other two are mail fraud
and automobile repair complaints).
40
often conduct massive door--to-door "sweeps" with
temporary crews. Youngsters on summer vacations
beef up some crews for a few months, while others
travel all year round. The result is that on any
day in a major city there is almost bound to be
a crew working some neighborhood and small towns
are not immune to a brief "sweep."
Here, as described by Jim, are some of his
former associates who might turn up at your door:
— A beguiling young lady with a British accent,
who tells you she needs to sell magazines to
support herself .and keep her visa to stay in
this country.
— A clean-cut black youth who says the proceeds
of the subscription sale will help support a
Martin Luther King school in Alabama.
--An amputee who claims to be earning points
toward an artificial limb.
The "British" girl is a native of Chicago.
The school will get nothing. The amputee is after
cash, not an artificial limb. There are endless
variations on these pitches, says Jim.
Consider some of the experiences uncovered
during an investigation of the industry by Rep.
Fred B. Rooney (D-PA.)
In August, 1969, a crew for a Virginia company
traveling through Massachusetts approached a woman
and demanded she buy a subscription, adding, "How
would you like your house burned down?"
The terrified woman collapsed and died of a
heart attack. The crew member was fined $50 on
a misdemeanor charge and released.
Just a week ago, an elderly woman in Denver
was sold a 42-year subscription to Farm Journal
by two belligerent youngsters who said they were
from a minority self-help program. She gave
them a check for $130, $9 in cash, and got a
bill for $42 more. The check was cashed within
half an hour.
A Pennsylvania college student paid $10 9 for
a 10-year subscription to Life magazine and 10
years of the Wall Street Journal. When he got
his statement from the company the solicitor
worked for, he found he was signed up for 20 years
of Look magazine instead of Life, and only four
months of the Journal.
41
The consumer is frequently victimized, but so
are the youngsters who are duped into working
for unscrupulous crew leaders, according to
California Dept. Atty. Gen. Herschel T. Elkins.
"The kids are promised $125 a week, or maybe
a big percentage, plus travel and all kinds of
fun.
"They’re flown here, 2,0 00 miles from their
home, and if they don’t sell they’re stranded
here without getting paid. The crew leaders
charge them for food, for travel, for lodgings,
for everything, never tell them what they/re
supposed to make, and they end up owing the company
money."24
Another frequent source of consumer complaints is
fraud involving the auto repair industry. In fact, one
citizen consumer group considers it the most significant
consumer problem in the Southern California area;
Clearly the primary problem in the Southern
California area, as shown by the computer
tabulation of all consumer complaints of the
Southern California Joint Law Enforcement
Consumer Protection Committee, is auto repair
fraud.35
This opinion is echoed by Los Angeles radio station
KABC, An editorial supporting control of the auto repair
industry was aired on May 14, 1971. The following is
a portion of that broadcast :
^^Alexander Auerbach, "Complaints Rise on Door-to-
Door Magazine Sales," Los Angeles Times, Part 1 (August
28, 1970), pp. 1,24, 25.
35
Report to the Public Health and Welfare Committee
of the City Council of Los Angeles (Association of
California Consumers, May 1971), p. 4.
42
Auto repair is a two-and-one-half-billion
dollar a year business in California. It’s
also the number one source of consumer com
plaints received every month by the State
Attorney General’s Office, and a major assignment
for the KABC Ombudsman. Nearly everyone who
drives a car has a gripe about the cost of auto
repairs.36
Fraudulent magazine sales and automobile repairs
are only the beginning of the almost endless variety of
consumer abuses. It is informative to briefly review
some of the most recently reported cases of other types
of consumer fraud.
On April 5, 1972, the results of a study by three
Pepperdine University action program students reported
results of drug price surveys in East Los Angeles and
Watts.
The prices of 10 widely used drugs in East
Los Angèles showed wide variations in 12 phar
macies. For example, penicillin G ranged from
$2.70 to $6.30.
When the prices were compared to those at
six pharmacies in adjacent communities, it was
found that seven of the 10 items were more
expensive in East Los Angeles, according to
Robert Gomez, Manual Cons and Tim Evans.
At Watts pharmacies, nine of the drugs were
priced higher than at adjacent community stores,
they said. In some cases, according to the
students, prices were 100% higher in the Watts
and East Los Angeles pharmacies.
The initial surveys were made by visiting
the stores and asking for the price data. Three
The High Cost of Driving," KABC Radio Editorial,
May 14, 1971.
43
days later students returned to the same phar
macies with prescriptions to learn whether there
was a difference in the quoted price.
In Watts, three of four pharmacies charged
the same price as quoted during the survey and
one charged a lower price. Conns said.
In East Los Angeles, seven out of nine stores
charged a higher price— one of them a 110% increase,
he said.37
The students * report was presented at a hearing on
legalizing the advertising of prescription drugs.
Supporters of the advertising ban argue that "there are
no benefits (in advertising) to the public, in fact,
3 8
it is contrary to the public's best interest." Sup
porters of legalizing advertising claim that advertising
would enable consumers to get the best buy for their
money. Donald G. Livingston, Director of the State
Department of Consumer Affairs, stated that :
The hearing was in response to numerous
complaints from consumers. Some said the ban
on advertising "is a veil of secrecy which
allows the pharmacist to charge whatever the
marketplace will a l l o w . "29
Another area of consumer abuse was detailed on March
7, 19 72 in the Los Angeles Times;
37
Harry Nelson, "Prescription Drug Study Finds Poor
Pay More," Los Angeles Times, Part II (April 5, 1972),
p. 1.
^^Ibid.,
44
The teen-age girl■s mother wag convinced
her daughter had a great fnture making TV
commercials, and willingly paid $3,50 0 to a
Los Angeles "talent agent."
What the agent neglected to inform the
woman, says Richard Lavine, is that there isn't
a terrific demand for 196-pound 16-year-olds
in the glamorous world of Hollywood,
Lavine, the new director of the Federal
Trade Commission field office in Los Angeles,
said at a press conference Monday that an inves
tigation of phony talent agencies would be only
one part of the office's stepped-up activity in
consumer protection.
"These agencies deliberately seek out gullible
and unsophisticated persons and convince them that
if they pay money to the agency, they— or their
children— will obtain acting and modeling roles,"
he said.
"In fact, these agencies have neither the
intention nor the ability to follow through on
their grandiose promises."
These agencies, preying particularly on the
poor, minority groups and returning veterans,
"use the Hollywood glamor gimmick and the aura
surrounding the movie and TV industries here"
to bilk thousands of consumers of up to $6 million
per year, Lavine estimated.
The FTC, working with the State Department of
Consumer Affairs, the state attorney general,
various district attorneys and the bunco squad
of the Los Angeles Police Department, expects -
to bring its first formal action against a talent
agency within a fèwwmonths, Lavine s a i d . 40
The credit area provides a particularly rich field
for consumer abuses. On June 7, 1971, The Wall Street
Journal carried the following account :
Alexander Auerbach, "FTC Plans to Display Talent
to Phony Acting, Modeling Agents," Los Angeles Times,
Part III, (March 7, 1972), p. 7.
45
Last year Hector Garcia, a 42-year-old cook,
bought a used 1969 Subaru on credit from a
Phoenix car dealer. But the car kept breaking
down, and the dealer couldn't seem to fix it.
Finally, Mr. Garcia gave it back and refused
to make any payments.
He soon discovered the matter couldn't be
settled so easily. The car dealer had passed
the credit contract on to a local bank. Legally,
the bank wasn't liable for Mr. Garcia's claims
against the dealer; it just demanded its money
and moved to get it.
The bank repossessed the Subaru/ sold it and
legally attached Mr. Garcia's mobile home to
satisfy a remaining $833 judgment. Sheriff's
deputies came to tow away the trailer. Mr.
Garcia resisted with a gun. There was a shoot
out, and he and two deputies were killed.
It was a tragic ending to a common consumer
credit dilemma involving what's known in legal
terms as the "holder-in-due course doctrine,"
a credit procedure enforced in most states.
The procedure works like this : You buy an
appliance from a local dealer on credit. The
retailer then sells the credit contract to a
third party, usually a bank or finance company.
The third party is the holder in due course and
isn't responsible for any commitments the dealer
made. If your appliance is defective, or even
worthless, you must continue to pay for it.
Your only recourse is to sue the dealer, which
would probably cost more than the appliance
is worth.41
The following discusses another credit-related
problem frequently encountered by low-income consumers;
A good example is provided by the case of the
New York Jewelry Company before the Federal
Trade Commission. A typical customer profile
cited in that case will help to set the stage :
Ronald G. Shafer, "Moves Gain to Halt Some Credit
Practices Assailed by Consumer," Wall Street Journal,
Part 1 (June 7, 1971), p. 1.
46
John Edward Freeman ; 20 years old, single,
Negro, employed by A & P Food Store as a stock
boy earning $72 per week. Mr. Freeman had no
driver's permit, no bank account and no other
store accounts. He was walking by respondent's
store when a man sitting in front of the store
invited him in for a free eye examination.
He entered and had his eyes examined. He was
shown some merchandise and selected a ring for
$79.50. Respondent's salesman then told him
that his eyeglasses were ready. He explained
that he did not want any eyeglasses. He was
finally persuaded to take the glasses for $59.50
when the salesman said they had been made to
fit Mr. Freeman and could not be sold to anyone
else. Mr, Freeman later defaulted on his payments,
was sued by respondent, and his wages attached.
Evidence showed that the New York Jewelry
Company followed a rigorous collection policy.
During the 14-month period ending with February
1967, it filed 411 garnishment proceedings.
Compared to only 91 garnishment proceedings for
the C & P Telephone Company; 127 by the Hecht
Company; and 202 by Kay Jewelers. All of these
businesses had many times the number of outstand
ing accounts held by New York J e w e l r y . 42
Garnishment is the legal procedure by which the earnings
of an individual are withheld from an employee and
applied to payment of a debt. Warren, in his previously
cited book, states :
In California, wages may be garnished by attach
ment before judgment as security for the scitis-
faction of any judgment that thereafter may be
rendered, or by execution after judgment. There
were 14 8,773 wage garnishments in Los Angeles
County alone during the year ending June 30, 196 8.
Robert W. Johnson, "The Uniform Consumer Credit
Code and the Credit Problems of Low-Income Consumers,"
Yale Law Journal, Volume 37, No. 5, (July 1969), pp.
1122-23.
47
Generally, debtors whose wages are garnished
prove to be relatively stable members of the lower-
middle- income stratum of society and of minority
groups. Most debts leading to garnishment or
other court action for default are for less than
$500.00 and were most often incurred through
purchases of durable goods made on credit in
relatively long-term arrangements. One-fourth
of these debts were found to have resulted from
door-to-door sales. It is not surprising, there
fore, that garnishment is a tool frequently made
use of by the direct sales industry.43
On July 29, 19 71, a Los Angeles Times editorial
discussed yet another credit related abuse:
Most of us, when we buy a car, make a cash
down payment and sign a sales contract pledging
to pay off the remaining amount due in regular
installments. If we default, the car can be
taken back by the dealer or finance company that
made the loan. That's fair enough, but what can
happen next is grossly unfair.
For under California law not only can a buyer
lose a car for missing payments, he can also be
required by a court to continue making payments
on the car for whatever is still owed on the
original sales contract, even after the car has
been resold. Moreover, the purchaser is liable
for any selling expenses, storage costs, collec
tion or legal fees involved in repossession.
This is called a deficiency judgment, and
it's all perfectly (Legal ,eeven if far from
proper. Studies, notably by Prof. Phillip
Shuohman of the University of Connecticut Law
School, show that the deficiency laws have been
outrageously abused. Typically, a repossessed
car is sold to a dealer— usually the original
dealer— for a fraction of its real value. That
sum is applied to reducing the debt of the first
buyer. But dealers can then sell the car again
for its actual retail worth. The money from this
^^William D. Warren, "Direct Selling Industry,"
U.C.L.A. Law Review, pp. 927-28.
48
sale, however, is not applied to the debt of the
original purchaser; it is kept by the dealer, and
the original purchaser must go on paying for a
car he doesn't have.
The deficiency judgment law was repealed years
ago as it applied to installment purchases other
than c a r s . 44
The foregoing are only a few of the hundreds of types of
credit problems encountered by consumers. One question
comes to mind in reading such recent examples: "Didn't
truth-in-lending end all that?" The answer is a sad
"no.
Many low-income consumers still have little
idea of how much they are paying for credit after
3 years of Federal enforcement of the Truth-in-
Lending law. This includes blacks and those
in other minorities. These findings were
revealed to Congress by the chairman of the
National Commission on Consumer Finance.
Overall, 38.8% of the buying public are aware
of rates on installment credit 15 months after
the law took effect, compared with 14.5% previously
The section which prevents creditors from attaching
more than 25% of an employee's paycheck is work
ing well in most States, the officials s a i d . 45
The variety of complaints is almost endless. In
March of 197 2, the results of a government survey of
vaccines on the market was released. The report called
many of the Vaccines worthless, even harmful.
^^"Auto Repossession Abuses," Los Angeles Times,
Editorial, Part II, (June 29, 1971), p. 5.
"Better Retail Selling," (May, 1972).
49
Sen. Abraham A. Ribicoff (D-Conn.), who asked
the General Accounting Office to make the report,
called its findings "an appalling chronicle of
omission and bureaucratic failure."
The GAO, which audits government spending
for Congress, also said the agency — the
Division of Biologies Standards — released
influenza vaccine between 1966 and 196 8, half
of which was too diluted to be effective. Some
of the doses, it said, were only 1 percent as
strong as government standards mandated.
Some of the report's findings:
— 2 8 percent of the 263 biological products
licensed by DBS, according to its director,
Roderick Murray, are "generally recognized"
as ineffective by the medical community.
— 3 2 products now on the market with DBS
blessing contain such ineffective agents, some
of them known to cause "adverse reactions" ranging
from high feveif^ to severe cramps and diarrhea.
— DBS has not required biological products
to be proved effective as a condition for licens
ing them and has not acted to remove ineffective
products from the market, even though it is
empowered to do so.
— 150 of the 221 lots of flu vaccines released
for use by the agency in 1966, 1967 and 1968 did
not meet DBS potency standards.
— DBS relied solely on manufacturers' tests
rather than its own in deciding whether to approve
vaccine lots and often released them even if
they flunked the tests.
Thousands of federal employees were urged to
have flu shots this winter, despite government
findings that such Vaccinations do little good.
The FTC has recently begun asking manufacturers to
back up their advertising claims. The nature of the
manufacturer's supporting data released to date has been,
to say the least, interesting.
^^"32 Vaccines Called Worthless, Harmful," Santa
Barbara News Press, Section A, (March 31, 1972), p. 4.
50
Seven auto makers were asked about their
advertising: American Motors, Chrysler, Ford,
General Motors, Nissan (Datsun), Toyota and
Volkswagen.
Each was sent a list of specific claims it
had made for its cars and was asked to back them
up.
The seven volumes of replies at the FTC offices
at 110 0 0 Wilshire Blvd. in West Los Angeles in
clude some eye-openers.
American Motors, for example, was asked to
justify its statement that, "The Hornet is the
lowest priced compact made in America." AMC ^
responded with a list of suggested retail prices
for compacts showing the Hornet at $2,174--
exactly $1 below the Maverick.
And there's Ford's claim that its LTD model
is "quieter than some of the world's most expen
sive cars." Back in 1965, it seems. Ford compared
brand-new 19 66 Fords with :
--a three-year old Daimler with 37,000 miles
on it.
— a .two-year old Jaguar with 20,000 miles.
— a year-old Citroen with 14,000 miles.
The Fords were quieter. To be fair, they were
also quieter than an almost-new Mercedes Benz
600 limousine and a Lancia, and were also quieter
than the competition when the test was repeated
in 19 70 with a 1971 Ford LTD and a 19 70 Mercedes
250.47
The FTC plans to continue this program. It has requested
similar information of manufacturers of television sets
and air conditioners.
While the preceding examples of consumer abuses
are interesting reading, they do not of themselves prove
a need for some form of massive consumer protection.
Alexander Auerbach, "When is a Claim 99 and
44/100% Pure," Los Angeles Times, Part III (November 22,
1971), pp. 12, 14. ”
51
To ascertain this need, it is necessary to determine the
volume of consumer complaints being registered.
The volume of complaints varies considerably between
4 8
agencies. In its first week of operation, the City of
Los Angeles Department of Consumer Affairs received more
than 2000 complaints. They ranged from 50<= grocery items
to $100,0 00 homes.Each month, the Federal Office of
50
Consumer Affairs receives over 2,500 complaints. The
Los Angeles Public Defender's Office receives over 7,000
51
complaints each year.
The State Attorney General has allocated nine attor
neys to protect the entire State against consumer fraud.
The Attorney General receives over 13,000 complaints each
52
year without publicizing his existence.
4 8
This variance is to be expected. It occurs for a
number of reasons which include: the public knowledge of
the agency and its programs, the ease of registering a
complaint (available staff and/or telephone lines) and
acceptability of agency with consumer (ex-low-income
consumers tend to not contact police agencies such as the
LAPD Bunco-Forgery Unit).
49
Irwin Baker, "Consumer Office: 1 week 2,000
Complaints," Los Angeles Times, Part 1 (April 9 , 1972)
p. B.
50
"Monthly Report" (Office of Consumer Affairs,
August 3, 1971), p. 1.
51
Interview with Morton E. Levey, Attorney, Public
Defender in Los Angeles, January 15,19 71.
52
Interview with Herschel Elkins, Calif. Deputy
Attorney General, Consumer Fraud Unit, in Los Angeles,
May 5, 19 70.
52
The Los Angeles Neighborhood Legal Services Society,
Inc. (a Federally-funded agency) is in un dated with
legitimate consumer complaints despite the fact that
it does not advertise its existence. An attorney at the
Service stated that if it publicized its existence, it
would need a staff of twenty attorneys instead of the
5 3
two currently on the staff.
The Southern California Joint Law Enforcement
Consumer Protection Committee, as one of its consumer
programs, provides guest speakers for radio and television
programs. As a part of the programs, the Committee
advertises a consumer complaint number. The first
several times a number was provided, it was the FTC
office number in West Los Angeles (824-7575). The
FTC office became so inundated with calls that the
Committee had to start rotating its advertising to
list alternately the LAPD Bunco-Unit number, the State
5 4
Department of Consumer Affairs, and the FTC number.
Based on the above discussed volume of consumer
complaints, it is apparent that the existing consumer
5 3
Interview with Gary H. Manulkin, Attorney,
Neighborhood Legal Services Society, Inc., in Los
Angeles, July 22, 1970.
5 4
Interviews with John Wilcox, Attorney, Federal
Trade Commission, in Los Angeles, July 30, 19 70 and other
dates.
53
education-protection programs, although making the public
aware that help is available, are not stopping consumer
abuses. Much dialog to that effect has occurred at the
National level and has received much press coverage, but
until recently the problems have not had many spokesmen
at the local level of government. Now, however, many
local leaders are either considering a need for consumer
protection at the local government level or at least
believe that there is considerable political benefit in
voicing concern over consumer problems. Mr. John
Gibson, President of the Los Angeles City Council, when
questioned about the need for consumer protection at
the local government level, said, "the City (Los Angeles)
must move into the consumer protection area, the consumer
needs help."
On May 28, 19 71, the Los Angeles Times carried a
report that the Mayor of Los Angeles had sent a letter
to the President of the Board of Education urging the
Board to include consumer education classes in its
curriculum. The Mayor said, "too many people don't
know how to read contracts or shop for prices, are
55
Interview v/ith Mr. John Gibson, President of
Los Angeles City Council, in Los Angeles (October 4,
1971).
54
unaware of the cost of credit, and of the various means
of obtaining it." Obviously, the Mayor believes a
consumer problem exists.The major unanswered ques
tion is what is the best method(s) to extend consumer
protection to the citizen other than simply saying
"Caveat Emptor."
"School Class on Consumer Laws Urged by Yorty"
Los Angeles Times (May 27, 19 71).
CHAPTER IV
THE FUTURE ROLE OF THE FEDERAL, STATE,
AND LOCAL GOVERNMENT
The problems associated with developing a "systems
approach" to consumer protection are more complex than
imagined by the average consumer who wants help nowI
Consider the Los Angeles metropolitan area. Los Angeles
County contains 7,03 2,075 residents who occupy 77
separate and distinct cities and 37 identified unincor
porated areas. Nearby areas of other counties, specifi
cally Ventura, Orange, and San Bernardino counties,
contribute many other cities and unincorporated areas,
5 7
and an added population of approximately 4,000,000.
The cities and unincorporated areas of metropolitan Los
Angeles defy any logical or rational pattern of develop
ment. Thus, efforts of any local government agency in
the so-called Los Angeles basin are frustrated by the
complex local jurisdictional problems encountered.
The jurisdictional problems associated with law
enforcement are enormous. The problem of a frustrated
unsophisticated consumer are overwhelming. The situa-
5^"1970 Census of Population," U. S. Department
of Commerce, Bureau of the Census, (February 1971)
pp. 5-6.
55
56
tion is not unique to Los Angeles. Confusion over
jurisdictional responsibility plagues the entire nation.
The 197 2 Municipal Year Book reported that "By 19 70
there were approximately 38,000 local governments in
existence in the United States.Carl W. Stenberg
of the International City Management Association, Ad
visory Commission on Intergovernmental Relation, stated
that :
During the 1960*s, the inability of many
municipalities to respond adequately to demands
for more and better public services resulting
from urbanization of our nation, and the
growing role of the federal government in
dealing with problems that were traditionally
local responsibilities, were accompanied by a
sense of citizen powerlessness and frustration.^^
The balance of this chapter will be devoted to
discussing first, deficiencies in the existing "consumer
education-protection system," and then specific recom
mendations for improvements. Every knowledgeable person
in the field has his own priorities for solving the
problems of the consumer. The comments of a panel of
Harold B. King, "Local Government and the 19 70
Census," The Municipal Yearbook, 19 72', Volume 39
(International City Management Association, 1972), p. 80.
59
Carl W. Stenberg, "Decentralization and the City,"
The Municipal Yearbook, 197 2, p. 88.
57
consumer experts are an excellent starting point.
These comments were provided at the conclusion of the
Mayor's (Los Angeles) Consumer Protection Symposium
conducted in July, 1970. The moderator. Dr. Edward
H. Barker, summarized the panel's findings as follows:
(1) Consumer problems are related to the fringes
of industry. Industry as a whole is perform
ing in an appropriate manner.
(2) There is a significant problem with respect
to the courts. Based on case history, once
a case goes to trial the potential for
receiving an appropriate penalty in the
instances where a fraudshas been proven
is extremely limited.
(3) The consumer needs to be educated.
(4) Governments, municipal, county and
state, are currently short of fiscal support
to provide consumer education and consumer
protection programs.^ 0
The findings of this symposium, while almost three ÿeats
old, are for the most part still valid. Finding number 1
Mayor's Consumer Protection Symposium, Century
Plaza Hotal, in Los Angeles, July 17, 19 70. Moderator;
Dr. Edward H. Barker, Graduate School of Business, Univ
ersity of Southern California. Participants: Don E.
Brewer, President, Brewer and Betancourt, Inc.; Ernest
E. Debs, Supervisor, Los Angeles County, Third District;
Treesa Drury, Consumer Affairs Editor, KFWB Radio 9 8
(since moved to Consumer Affairs Director KHJ TV Channel
9); Herschel Elkins, Deputy Attorney General, Consumer
Fraud Division, State of California; Alan Sieroty,
Assemblyman 59th District, State of California; and
George J. Zervas, Senior Attorney, Federal Trade
Commission.
58
is still appropriate; in fact, major corporations have
responded to the third consumer movement by providing
additional assistance to their customers. As reported
by Burson/Marsteller:
By the end of the sixties a major change had
taken place in the business attitude. One
indication was the appearance in late 1969 of
the Grocery Manufacturers of America (GMA)
before the Senate Appropriations Committee to
plead for more money to enforce the packaging
law. GMA president George Koch frankly stated
that if the law isn't made to work it might be
replaced by a more restrictive one.
Many corporate officials accept consumerism
— it is here to stay— and in several instances
have made significant concessions to it. Mr.
Koch, like a number of other industry executives,
is trying to preserve the remaining options in
the buyer-seller relationship. Other examples
of this attitude include :
# GÎ4A has set up a consumer-is sues committee and
a Consumer Research Institute to do research
studies to discover what consumers really
want.
• Most major appliance manufacturers— Sears,
Roebuck & Co., and Whirlpool Corp., for
example— have "translated" the engineering
terminology of their warranties into read
able English.
e Whirlpool has gone a step further and installed
a "cool line"— a special phone at the firm's
Benton Harbor, Mich., headquarters. Anyone
in the U. S. can call collect with his com
plaints. The company has also "gone on the
road" with a musical show— "Care-A-Van"— that
entertains and at the same time tells con
sumes how to buy, use and get service for
major home appliances. There is no sales
pitch.
59
• Federated Department Stores and Maytag, an
appliance manufacturer, are experimenting
with "tel-tags" which explain not only what
to do with an appliance, but also what not
to do.
• Safeway Stores has introduced unit pricing on
some of its grocery items in several super
markets in the metropolitan Washington, D.C.
area and other selected stores throughout
the country.
• To give consumers a listening post at Burlington
Industries, the giant textile firm has created
a special corporate ombudsman slot. Miss
Letitia Baldrige was given the responsibility
of keeping company management and technical
experts informed on consumer views and
complaints about Burlington products. She
is also developing educational programs to
assist consumers in buying and caring for
their goods.
On the local level, a group of San Fernando Valley
garage owners has formed an organization to go to bat
for car owners who believe that they have been cheated
by unscrupulous auto repairmen.
The service, provided free of charge, was
launched with little fanfare two months ago
by the Independent Garage Owners (IGO) committee
on auto repairs and service.
The committee evaluates complaints and, if
they appear to be legitimate, intercedes with
the accused garage on the car owner's behalf.
If the complaint is not voluntarily rectified
by the garage, the committee will supply expert
technical testimony should the case go to court.
So far, only four complaints have come to the
committee's attention, according to Steve McDonough
of Sepulveda, a member of the garage owners*
organi zation.
^^Harold S. Burson and William A. Marsteller.
Consumerism, p. 38.
60
"But," he added, "we expect to hear from a lot
more people once our program gets known."
One of the four complaints was leveled against
a member of the IGO organization.
The case, according to McDonough, involved a
customer who had his car engine repaired. Forty
miles later, the engine gave out. The Committee
investigated and concluded that the engine - should
have been replaced rather than repaired.
"The case went to court," said McDonough, "and^2
we testified in behalf of the customer. He won."
On the other side of the coin, a report by Mr.
Milan D. Smith, Executive Vice President of the National
Canners Association, is not quite as charitable to the
new ways of "consumer protection." To quote :
Political intervention in the guise of "consumer
protection" have come through legislation, the
appointment of consumer advisors and counsel,
and encouragement in the formation of additional
consumer g r o u p s . 53
Mr. Smith 'also commented on a particular piece of
legislation which was at the time of his writing being
considered by Congress ;
As provided in this Bill, there would be within
such a Department an Office of Information, a
National Consumer Information Foundation, which
would test products, an Office of Consumer Safety,
and an Institute of Consumer Research which would
conduct scientific research valuable to consumers.
You will note that two of these proposed activities
would clearly be in conflict with private enter-
^^"Garagemen Form Aid Unit for Car Owners," Los
Angeles Times (May 4, 19 71).
^^Milan D. Smith, The Significance of Consumerism
( April 7, 1967), p. 15.
61
prises in that government would attempt to con
duct research and to check products and evaluate
them for consumers. How can we be sure that the
criteria employed in these tests would be fair,
objective, and in harmony with the different value
systems of millions of American consumers?
It is abundantly clear that one of the most
pronounced expressions of the current ways of
consumerism is "consumer protection." To
allegedly serve this end, we see an acceleration
of government and political intervention.5 4
While the efforts of some business organizations
are moving to protect the consumer, it is unrealistic
to hope that their efforts will adequately protect
consumers from the fraudulent fringes of their industry.
In spite of efforts of the Better Business Bureau for
over 60 years, and of the Chamber of Commerce, deceptive
business enterprises continue to thrive. Clearly,
industry self-regulation, while a welcome effort, is
not the complete answer to the consumer's problems.
The Los Angeles Mayor's Consumer Symposium referred
to earlier identified the criminal justice (court)
system as an area requiring special attention. Perhaps
one of the most informed reviews of the criminal justice
system is the dissertation, previously cited in this
paper, by Philip G. Schrag. The dissertation was based
upon Schrag's fifteen-month tenure with the then newly
Ibid., pp. 16, 17.
62
formed New York City Department of Consumer Affairs.
Attorney Schrag discusses the frustration of developing
a number of well-researched, documented consumer fraud
cases, trying the cases in the criminal court system,
and seeing the fraudulent operators in many cases go
free with a miniscule fine. It is interesting to
review some of Schrag *s comments:
In reaction to the countless frustrations
encountered in "judicial" model cases, we
gradually evolved a "direct action" model,
by which the agency, instead of or in addition
to going to court, made a determination that
a company was engaging in very bad practices
and then sought out non-litigious methods of
pressuring the company into changing those
practices.65
In general, the Law Enforcement Division (of
the Department of Consumer Affairs) has been most
successful when it has sought to prevent fraud
or obtain refunds on its own rather than in
court.66
Schrag provides one of his most thought-provoking
comments when discussing the enforcement divisions
decision against litigation:
Of course, we did not initially perceive that
we might pursue distinct, alternative approaches.
This option dawned on us only gradually, as did
the awareness of our greater effectiveness when
we chose not to go to court. Those of us who
^^Philip G. Schrag, "On Her Majesty's Secret Service,"
The Yale Law Journal, p. 1534.
p. 1597.
63
were lawyers were immensely saddened by this
perception, on a theoretical level, because a
model of law enforcement which we respected
did not work— it let swindlers continue to swindle
— and on a practical level, because if could
feel the courts driving us out of the normal
channels into a kind of street warfare, we imag
ined that the police must feel the pressure a
hundredfoId.67
We were driven to direct action and to use
unpleasant investigative techniques, by sympathy
with the victims of consumer fraud and by vdiat we
regarded as a breakdown in the system of civil
justice.^ ^
The purpose of Schrag's dissertation is not to
develop a new consumer fraud criminal justice system.
However, in the last paragraph of his paper, he does
provide some centralized recommendations;
Obviously, the puzzle should be avoided rather
than solved. We should streamline and liberalize
the law enforcement process so that backlogs are
eliminated, delay made impossible, bureaucracy
suppressed, and judges sensitized to justice.
Meanwhile, conscientious law enforcement agencies
will continue to be stretched between their
concepts of service and their devotion to the
judicial system. It's a hell of a choice to
have to make.6 9
Schrag and the Mayor's Symposium Panel members are
not alone in their criticism of the courts. Warren, in
investigating the operations of the State Attorney
^^Ibld., p. 1597,
®®Ibid., p. 15 99.
^%bid. , p. 1600.
64
General and the Los Angeles County District Attorney
found that:
...Criminal cases are usually referred to the
District Attorney, criminal convictions are
difficult to obtain and are an inefficient
way to regulate consumer fraud. Enforcement
agencies do not have enough time and manpower
to devote to criminal fraud cases; the time which
is spent is less likely to result in a convic
tion. If someone is convicted, the penalty will
probably be too small to act as a deterrent.
Even when efforts are concentrated to combat
a particular sales scheme, such as they were
in an action against aluminum siding salesmen
in 1963-64, it is often the person least res
ponsible for the crime who is p u n i s h e d . 70
A problem obviously exists with the court system
that was created to provide "justice." The system as
currently operating is now providing protection to the
defrauded consumer. In failing to provide such pro
tection in the form of appropriate judgment and sen
tences, it renders ineffectual much of the government
bureaucracy created to protect consumers.
Much has been said about the need for criminal
justice reform. One caution about any such reform
should be expressed. As Schrag has stated, to go
outside the criminal justice system is hazardous to
our criminal justice system. To create a system that
70
Warren, "The Direct Selling Industry," U.C.L.A.
Law Review, p. 959.
65
obviates the checks and balances provided by functioning
court system would be dangerous and should be considered
71
only as an interim measure.
The existing complex system of federal, state and
local consumer protection agencies has not fulfilled
the consumer protection needs of the general public
or, to even a lesser extent, the needs of the low-
income consumer. To pretend to know exactly how to
revise the system to make it streamlined, efficient
and effective would be folly. It is possible, however,
to observe some fundamental deficiencies in the exist
ing system.
Many of the federal agencies involved in consumer
protection were created many years before a majority
of the problems that today confront consumer even
existed. In most cases, these agencies were created
in a haphazard manner to provide a quick solution to
a particular problem. Many agencies have similar
71
It is beyond the scope of this paper to comment
on the kinds of reforms that will result in a more
responsive criminal justice system. For further infor
mation on the kinds of problems that exist in the system
see Reports of Public Safety Systems Incorporated of
Santa Barbara (Project No. 11200, Reports 1-9, Study
of the Ventura County Criminal Justice System) .
66
protection responsibilities and yet they do not
converse with one another. Sometimes the agencies
don't transmit information even as far as to their
72
own employees. Milton Friedman in the introduction
to Mary Bennett Peterson's book. The Regulated Consumer,
discusses how federal bureaucracies are created:
a real or fancied evil leads to demands to
"do something about it" a political coalition
forms consisting of sincere high-minded reformers
and equally sincere interested parties; the
incompatible objectives of the members of the
coalition (e.g., low prices to consumers and high
prices to producers) are glossed over by fine
rhetoric about "the public interest," "fair
competition," and the like ; the coalition succeeds
in getting Congress (or a state legislature) to
pass a law ; the preamble to the law entombs the
rhetoric and the body of the law grants power to
governmental officials to "do something;" the
high-minded reformers experience a glow of triumph
and turn their attention to new causes ; the
interested parties go to work to make sure that
the power is used for their benefit and generally
succeed; success breeds its problems, requiring
the scope of intervention to broaden; bureaucracy
takes its toll so that even the initial special
interests no longer benefit ; ultimately, the
effects are precisely the opposite of the noble
objectives of the high-minded reformers without
achieving the more mundane objectives of the
special interests; yet the activity is so firmly
established and so many vested interests are
72
In Chapter 3 of this paper, reference is made to
the fact tJiat thousands of federal employees were urged
to have flu shotsr, despite government findings that
such Vaccinations do little g&od, and in some cases
are harmful.
67
connected with it that repeal of the initial
legislation is nearly inconceivable; instead, new
governmental legislation is called for to cope with
the problems produced by the old; and a new cycle
begins.73
All too frequently the prime interest of an agency becomes
its own survival. This occurs as a result of several
factors, not the least of which is the human instinct for
self-preservation and security through continued employ
ment. Ralph Nader discusses another factor:
I originally came to Washington with a
great deal of hope that the regulatory agencies
would champion the consumers' interests, but
it didn't take me very long to become disillusion
ed. Nobody seriously challenges the fact that
the regulatory agencies have made an accommodation
with the businesses they are supposed to regulate
— and that they've done so at the expense of the
public.7^
This type of accommodation in a federal, state, or local
regulatory agency is not a recent development. It
started as early as the selection of the first Commission
members of the Interstate Commerce Commission to regu
late railroads. Selection was made such that the first
Commission was sympathetic to the cause of the rail-
73
Milton Friedman, Introduction to the Book, The
Regulated Consumer by Mary Bennett Peterson (April 2,
1971), pp. 15-16.
^^Ralph Nader, Playboy Magazine Interview (October
1968).
68
75
roads. This view of accommodation is shared by
Mary Peterson in the above cited book: "Perhaps worst
of all, most current regulation dethrones the consumer
in favor of the producer and/or regulator."
How can this haphazard, inefficient pattern of
the creation of federal consumer protection agencies
be halted? Or can it? The answer to the second question
is probably a frustrated, emphatic NOI The same poli
tical motives that create an agency to provide a short
term solution and/or political gain, will prevent the
relatively lengthy "system study" and the implementation
required to streamline the federal agencies. With no
master plan for efficient utilization of the vast
federal resources, the protection provided the consumer
by the federal government agencies will continue to be
haphazard and sporadic.
A cynic could argue that the above discussion is
not based on fact. The facts are overwhelming. The
FTC, as discussed previously, one of the more active
75
Gabriel Kolko, Railroads and Regulation, 1877-
1916 (1965), p. 47.
^^Mary Bennett Peterson, The Regulated Consumer,
(1971), p. 28.
69
federal consumer protection agencies, is hampered by
legislation in need of revision for thirty years. The
FTC may issue cease and desist orders, violation of
which are punishable by severe fines, but several years
may elapse before such an order is forthcoming, and
the Commission lacks power to obtain court ordered
preliminary injunctions except in cases involving
foods, drugs or cosmetics. What may appear to be a
severe fine is frequently minor compared to the magnitude
of ill-gotten gains that can be acquired while the
lengthy law enforcement process drags on. And the FTC
is only one example. The many federal agencies crawl
to the consumers* rescue through red tape, outmoded
legislation, only to be faced with an uninformed,
unsympathetic court system.
If one accepts the premise that a detailed systems
study of all federal consumer protection agencies will
not occur, then alternatives must be provided. The
most effective alternative might very well be the
creation of a federal Department of Consumer Affairs.
This recommendation might appear to contradict the
paper's criticism of haphazard development. If the
new "super agency" were created with the express purpose
of gradually phasing out other federal agencies no
longer responsive to either the reason for their crea
70
tion or to current needs, and if an appropriate impartial
review mechanism (such as a qualified citizen panel)
were established, a federal Department of Consumer Affairs
could provide the required leadership and enforcement
powers desirable at the federal level.
A super federal agency would have to be supported
by both state and local agencies. With the local agencies
handling single area complaints (county-wide), the state
agency handling multi-county problems, and the federal
agency handling multi-state cases. All would have to
receive appropriate support from their counsel (County
District Attorney, State Attorney, and United States
Department of Justice).
If it can be conceded that the federal structure
is ineffective, fraudulent enterpreneurs will be
encouraged to learn that the State of California is
pursuing the same confused pattern of consumer protec
tion. Agencies and Commissions are being created to
fulfill immediate political or, in some cases, consumer
needs. The Governor has created a consumer protection
task force to assist him in assessing consumer needs.
Interestingly, the Attorney General, another elected
official of the State of California, has created his
own consumer protection task force. The State of
California has also created the State Department of
71
Consumer Affairs. To this date, the Department is
inadequately funded to provide the services required
of it in the creating statute discussed in Chapter III.
The Department has not utilized its power or taken the
opportunity to actively coordinate other consumer
agencies within the state. This is due to a myriad
of reasons, including a possible reluctance on the
part of local officials to be "controlled by the
State." It might also result from a lack of leader
ship in the top-most level of the Department. The
Director of the Department is a political appointee
of the Governor and is therefore susceptible to the
same political pressures as the Governor himself.
In the Fall of 1971, a new Director of the State
Department of Consumer Affairs was appointed. Donald
Livingston, in an interview in Los Angeles on October
13, 1971, shortly after his appointment as Director,
stated his priorities for the Department:
1. The Department must streamline consumer complaint
procedures — such complaints must be coordinated with
other agencies.
2. The Department must initiate a consumer edu
cation program with the Superintendent of Education.
3. The State must coordinate its own consumer
protection programs. Examples are the Department of
72
Motor Vehicles, Alcoholic Beverage Control Board, etc.
4. The Department must review existing consumer
education protection publications — do they meet the
77
needs of consumers ?
These priorities require analysis and will be
addressed in a following discussion of state/local
responsibilities. It should not be overlooked in a
critical analysis, such as this, that the Department,
like many other agencies, has some highly qualified,
dedicated personnel devoting their careers to the
betterment of the lot of the consuming public.
In light of the above discussion of the federal
and state levels — should any action be taken at the
local level of government? As William G. Kaye, former
Executive Director of the President's Committee on
Consumer Interest, states: "Clearly, much remains to
be done at the City level in the area of consumer
affairs, for it is at the local marketplace that the
7 8
consumer conducts most of his consumer activities."
77
Interview with Mr. Donald Livingston, Director
of the State of California Department of Consumer Affairs,
in Los Angeles, October 13, 1971.
7 8
William G. Kaye, "Analysis : The Problems of the
Great American Consumer Become a Matter of Governmental,
and Political Concern," City (February 1969), Volume 3.
73
The question is what local level of government is
appropriate: city, county, or both?
At the local level of government in California,
and more specifically in the Los Angeles metropolitan
area, consumer protection follows the federal and
state pattern of uncoordinated haphazard activities.
The City of Los Angeles has indicated a genuine interest
in concern for consumer protection by the creation of
its Bureau of Consumer Affairs. The Bureau claims
in its first three months of operation to have had
unprecedented success and saved consumers $20 0,00 0 as
a result of "unrestricted cooperation by business in
79
the City." Mrs. Fern Jellison, the General Manager
of the Department of Social Services, which is the
parent body of the Consumer Bureau, further states :
Not only has most business been willing to
go to extreme lengths to resolve a complaint
satisfactorily, but many businessmen have
commended the bureau for the job it is doing.
One would like to be encouraged by the reported success
of the new Bureau, but it is too much to hope that 10 0
79
Erwin Baker, "New City Panel Saves Consumers
$200,000," Los Angeles Times (July 3, 1972), Part II,
p. 1.
^^Ibid., p. 1.
74
part-time volunteers and 21 full-time staff employees
could solve the problems of Los Angeles area consumers
that have defied solution of over 12 5 other agencies
and the expenditure of millions of dollars. The
success of the Bureau will be measured not in terms
of splashy headlines, but in a better quality of life
for the citizens of Los Angeles, especially the
residents of low-income areas. It will be some time
before the new Bureau's success can be measured, but
to propose that "unrestricted cooperation by business
in the city" wiil solve the consumers' problems is
naive and misleading to the consuming public. The
fraudulent fringe of the business community will
continue to perpetuate consumer abuses on the public
unless checked.
In order for the city Bureau to be effective,
it will have to both cooperate with, and receive cooper
ation from, other city agencies. This may seem so
fundamental as to not warrant discussion; however,
in the past, various city agencies have not coordinated
their efforts but rather have jealously guarded their
"areas of responsibility." Some agencies have also
shown little inclination to involve themselves in the
problems of consumers.
75
The same lack of interest exhibited by some city
Departments has also infected the County of Los Angeles,
After a lengthy study of consumer problems in 1970,
the Chief Administrative Officer of the County concluded
that the County should not be involved in consumer pro
tection and that "...the State is the most appropriate
level of government to provide additional consumer
81
protection..." Is it any wonder that consumer
problems abound and the low-income consumers believe
government is non-responsive, when one of the most
populous counties in the entire nation sees no role for
itself in protecting its citizens?
Because of the numerous governmental agencies
within Los Angeles County, all with meandering, irregu
lar jurisdictional boundaries, the County is the
appropriate level of local government to coordinate
consumer protection in the Los Angeles area. County
involvement would elminate the possibility of a
defrauded consumer calling, for example, the City of
Los Angeles consumer bureau and being told, "Sorry,
you don't live in our city." The Board of Supervisors
81
L. S. Hollinger, "Consumer Protection" (September
2, 1970).
76
in the County of Los Angeles did create a Consumer
Advisory Commission to protect Los Angeles County
residents. Five citizens are appointed by the Board.
The effectiveness of such a Commission, however, is
suspect since it apparently has no staff and_
limited funding. On the surface, the move appears to
have been an election year political expedient all too
frequent in the area of consumer protection.
"A weak County agency and strong City agency
will create enforcement problems" stated Mr. Donald
Hauptman, Southern California Director of the State
Department of Consumer Affairs. Mr. Hauptman also
states that "unless you endow a new local agency with
82
significant powers, it cannot be effective." The
most logical position for a strong consumer protection
agency in the local government structure is at the
county level. A county agency would obviate the
need for each of the 77 different cities within the
county to create their own departments of consumer
protection.
Such a county agency would require the full
support of the County District Attorney, Public Defender,
82
Interview with Mr. Donald Hauptman in Los Angeles,
September 28, 1971.
77
the Sheriff's Department, local City Police Departments
and various other county and local agencies. If such an
agency were empowered to file class and injunctive ac
tions , were supported by a vigorous investigative staff,
received active legal support, and coordinated the
efforts of the local police agencies, the effect could
be significant.
In order to make such an agency effective in
communicating with the consumer, it would be mandatory
to communicate with citizens on various levels. The
problem of reaching the middle or upper income consumer
is minimal. He can be reached by radio and television
news programs, newspapers, and various other means of
written communication. Reaching the low-income
consumer is much more difficult. He is reticent to
deal with traditional government agencies even if he
had the level of sophistication required to do so,
traditional methods of communication are inadequate to
reach him. The agency would have to advertise its
existence via Spanish-speaking newspapers, radio and
television stations, and via Black publications and
radio stations. In addition, divisions of the agency
should be physically located in these communities.
If such a county agency were created and if
consumers could call one agency for assistance about
78
bad meat in a store instead of knowing that they had
to contact the Los Angeles County Health Department -
Bureau of Environmental Sanitation - Food and Drug
Administration - Wholesale and Manufacturing Consumer
Protection and Investigation Unit, that one unit's
program might be responsive to the citizen's needs.
If instead of being faced with the over 125 agencies
that are involved in consumer protection, the consumer
could call one agency and be placed in contact with the
appropriate authorities, the alienation of the low-
income, unsophisticated consumer toward government,
which is a fact we can no longer ignore, might start
to disappear. If such an agency existed in each county,
and if each such agency communicated with the others,
and if the State Department of Consumer Affairs coor
dinated the efforts of all counties, then needed legis
lation such as door-to-door sales regulation and a
cooling-off period and auto mechanic licensing and other
required legislation might pass the State legislature
instead of being defeated by special interest groups.
What is the possibility of such a County agency
being created? With the published position of the
Chief Administrative Officer, and the recent token
action by the Board of Supervisors, the possibility is
not strong. Until the City of Los Angeles Consumer
79
Bureau says to enough non-city residents "Sorry you
don't live in our city," and those citizens complain
to the county, there doesn't appear to be much hope.
Two major areas of consumer protection require
additional discussion. They are consumer education
and-special ghetto problems. Considerable effort is
expended in protecting a consumer from fraud by regu
lating the business industry. However, not much effort
has been put forth to educate consumers so that they
can protect themselves. If this is such a good method
of consumer protection, why hasn't it been done more
extensively already? Obviously for many reasons,
but one of the most realistic is that the payoff from
such a program doesn't occur until many years after
initiation, and therefore it is not a quick-fix solution
and no immediate political benefit would be reaped by
starting such a program.
The existing consumer education programs are for
the most part limited to home economics classes and
publications of various government agencies. The
classes are socially limited to female students, and
only a limited percentage of the female students take
these classes. The appropriate way to start a full-
scale program of consumer education would be to
integrate consumer issues into the regular curriculum
80
of the schools. Consumer problems would blend into
mathematics, English and government classes. Such a
program should start in the elementary schools. This
early start is important, sirce m^nv future low-income
consumers never finish high school or in some cases
junior high school. This type of program could be
initiated if the Director of the State Department of
Consumer Affairs would follow through with his intention
to initiate consumer education in cooperation with the
Superintendent of Education.
Complicating any solution to consumer abuse is
the considerable inertia built into our social-political
system, and although possible benefits may be derived
from this inertia in some areas, consumer protection
is not among them.
Many of the programs discussed in previous
portions of this paper would, if implemented, aid the
ghetto residents; however, many other special conditions
need to be addressed. Frederick D. Sturdivant, who
performed a detailed study of retailing in disadvantaged
areas, is of the opinion that a program to encourage
large retailers to collectively build large shopping
centers in poverty areas would be desirable. in
commenting on this proposed program, Sturdivant states:
81
The new program should be good for retailers
from the standpoint of profits. In addition,
retail leaders should derive a great deal of
satisfaction from demonstrating that U.S.
enterprise is capable of contributing signifi
cantly to the solution of the major domestic
crisis of the twentieth century. An efficient
and competitive retail community in a ghetto
would certainly discourage ineffective and
unethical store managers in the area. And while
the new program would not solve all of the
problems of the nation's cities, it could do
a great deal to reduce the injustices suffered
by the poor and to eliminate the bitterness that
feeds the spreading civil disorders.
Mary Jones also encouraged the need for competition in
the inner-city :
The elimination of deceptions and the
promotion of competition in the inner-city
marketplace are long-range goals which will
not be achieved overnight and indeed can
probably never be perfectly achieved for
all consumers at all times. It is essential,
therefore, that consumers increase their own
marketing sophistication so that they can
protect themselves from the deceptive gimmick
and sharp practice and learn to recognize
and seek out the marketing options which are
in fact available to them.84
The President's Riot Commission points to unfair com
mercial practice as one of the leading sources of ghetto
o o
Frederick D. Sturdivant, "Better Deal for
Ghetto Shoppers," Harvard Business Review, Volume 46,
Number 2 (March/April 1968), p. 130.
8 4
Mary Gardner Jones, "Inner City Marketplace," The
George Washington Law Review, pp. 1029-30.
82
85
discontent. Conditions in the low-income areas are
affected by many adverse influences of which consumer
abuse is only one. Other problems which persist in
spite of reports of numerous high powered commissions,
are inadequate housing, lack of employment, limited
access to public transportation, etc. Attempting to
improve the lot of the low-income consumer means trying
to end these other fundamental problems, as well as
stopping consumer abuses.
To assist the reader, a list of the recommendations
contained in this final chapter is presented below.
In making specific recommendations for consideration
by local agencies interested in protecting their citi
zens , this paper has tried to avoid recommending only
further study or sweeping changes in government
structure that would be impossible to bring to fruition.
When preferred recommendations are of a nature that
would meet with stifling opposition, less desirable
but realistic alternatives are recommended. If the
solutions to consumer abuse were simple, a simple
cookbook procedure could be developed, and papers such
Report of the National Advisory Commission on
Civil Disorders (196 8) , p. 274. '
83
as this would not be necessary.
RECOMMENDATIONS ;
1. The United States Congress should authorize
and adequately fund a systems study of existing federal
programs and attendant expenditures involved in pro
tecting and/or educating consumers. As a part of such a
study, a proposed realignment of the expenditures of
the federal government should be made.
Alternate: In lieu of the above, the Congress
should authorize and adequately fund a new "super
consumer agency" with the express intention that the
new agency would lead to the elimination of other
outmoded federal agencies.
2. The County of Los Angeles Board of Supervisors
should authorize and fund a County-wide Department of
Consumer Affairs. A County Department would obviate
the need for each individual city to provide its own
agency.
The proposed County Department should have division
offices strategically located in low-income areas of
the County.
Such an agency should be authorized to file, 'with,
the assistance of the appropriate legal services, class
and injunctive actions against fraudulent business enter
prises .
84
The advertising of the existence of such a county
agency should be via media designed to reach not only
middle and upper-income residents, but also specifically
low-income residents.
The proposed County agency should, at a minimum,
be staffed at a level with the following:
a. Administrator (manager)
b . In-house attorney from the District Attorney's
Office (with additional staff provided on an "as needed"
basis).
c. Investigators (both full and part-time). Part-
time: to be located in main office; could use 2nd and
3rd year law students from various law schools in Los
Angeles arear® Full-time: to be located in main office
and in divisions around county (estimated need for
divisions in Pacoima> East Los Angeles, Venice, Watts-
Willowbrôôk^^WiImihg.toheSan^Pedro > Pico Rivera, Pasadena,
Covina) .
d. Support staff (clerical)
ê. Administrative Assistant
The estimated annual costs are :
1 - administrator @ $20-$24K
1 - attorney @ $20-22K
investigators
14 fu1Intime @14K
15 part-time, $3^4/hr @ 10-20 hrs/wk
85
support staff
3 typists @6K
1 file clerk @ 5K
1 - administrative assistant 012K
TOTAL SALARIES $345K
SUPPLIES 6K
Equipment costs dependent on county equipment
inventory
3. The California State Department of Consumer
Affairs should take the necessary steps to coordinate
the efforts of local consumer agencies (preferably
County-wide agencies).
4. The California State Department of Consumer
Affairs should, through the coordinating mechanism,
initiate and then enlist support for needed consumer
legislation such as: door-to-door sales regulation,
cooling-off period legislation, auto mechanic licensing,
etc.
5. The California State Department of Consumer
Affairs should initiate, utilizing the advise available
from consumer protection experts, a program of consumer
education through the public school system. Such an
education program should start at the elementary school
level and be integrated into the regular school curricu
lum.
86
APPENDIX A
(Partial list of Consumer Protection Agencies)
Federal Agencies
Administration on Aging
Agricultural Research Service
BWgpàu of Federal Credit Unions
Bureau of Family Service
Bureau of Labor Statistics
Bureau of Public Roads
Civil Aeronautics Board
ChiIdren * s Bureau
Consumer and Marketing Service
Department of Defense
Federal Aviation Agency
Federal Communications Commission
Food and Drug Administration
Federal Deposit Insurance Corporation
Federal Extension Service
Federal Housing Administration
Farmers Home Administration of Agriculture Department
Federal Home Loan Bank Board
Federal Power Commission
Federal Savings and Loan Insurance Corporation
Federal Trade Commission
Government Printing Office
General Services Administration
Department of Health, Education, and Welfare
Department of Housing and Urban Development
Interstate Commerce Commission
Internal Revenue Service
National Bureau of Standards
National Highway Safety Agency
National Traffic4Safety Agency
Office of Education
Office of Economic Opportunity
Western Center on Law and Poverty
Neighborhood Legal Services Society
Office of Metropolitan Development
Office of Renewal and Housing Assistance
President's Committee on Consumer Interests
Public Health Service
Post Office Department
Rural Electrification Administration
Rural Development and Conservation
Soil Conservation Service
87
Securities and Exchange Commission
Social Security Administration
U. S. Department of Agriculture
U. S. Department of Commerce
U. S. Department of the Interior
U. S. Department of Justice
U. S. Department of Labor
U. S. Department of Treasury
Veterans Administration
state of California Agencies
Accountancy Board
Adult Authority
Agriculture Department
Air Resources Board
Alcoholic Beverage Control Department
Architecture and Construction Office
Architecture Examiner Board
Assembly Legislative Office
Athletic Commission
Attorney General
Barber Examiners Board
Cemetery Board
Chief Justice
Child and Youth Clinic
Chiropractic Examiners Board
Collection Agency Licenses
Consumer Affairs
Contractors State License Board
Controller's Office
Corporations Department
Cosmetology Board
Dental Examiners Board
Dispensing Opticians Board
Dry Cleaners Board
East Los Angeles Child and Youth Clinic
East Los Angeles Service Center
Education Department
Electric Repair Dealer Registration Bureau
Employment Agencies Bureau
Equalization Board
Fair Employment Practice Commission
Fish and Game Department
Franchise Tax Board
Funeral Directors and Embalmers Board
Furniture and Bedding Inspection Bureau
Geologists Board
Governor's Office
Guide Dogs for the Blind
Highway Patrol
Housing and Community Development Department
Human Resources Development Department
Industrial Relations Department
Insurance Department
Justice Department
Land Commission
Medical Examiners Board
Mental Hygiene Department
Motor Vehicle Department
Nurses Examiners Board
Optometry Board
Osteopathic Board
Pharmacy Board
Private Investigators and Adjusters Board
Professional Engineers Board of Registration
Professional and Vocational Standards
Psychologists Board
Public Health Department
Public Utilities Commission
Real Estate Department
Savings and Loan Commissioner
Social Welfare Department
Structural Pest Control
Veterinary Medicine Board
Water Quality Control Board
Water Resources Department
Local Governmental Agencies
Department of Weights and Measures - County of Los Angeles
Department of Building and Safety, Electrical Testing -
City of Los Angeles
District Attorney's Office - County of Los Angeles
Health Department - County of Los Angeles
Mayor's Office - City of Los Angeles
Police Department - Bunco-Forgery Division - City of
Los Angeles
Public Defender - County of Los Angeles
Public Utilities and Transportation - City of Los Angeles
Sheriff's Department - County of Los Angeles
89
BIBLIOGRAPHY
Books
Harold S. Burson and William A. Marsteller. Consumerism:
A New and Growing Force in the Marketplace (Third
Edition, March 19 70)•
Robert O. Hermann, The Consumer Movement in Historical
Perspective (Department of Agricultural Economics
and Rural Sociology Agricultural Experiment
Station, The Pennsylvania State University,
University Park, Pennsylvania, February 19 70).
Gabriel Kolko, Railroads and Regulation, 1877-1916,
W. W. Norton and Company, Inc., New York, 1965.
Mary Bennett Peterson, The Regulated Consumer, Los
Angeles, Nash Publishing, 1971.
Radio Broadcasts
The High Cost of Driving, KABC Radio Editorial, May 14,
1971.
Articles and Periodicals
Alexander Auerbach, "Complaints Rise on Door-to-Door
Magazine Sales," Los Angeles Times, Part 1,
y, August 28, 19:70) .
Alexander Auerbach, "FTC Plans to Display Talent to
Phony Acting, Modeling Agents," Los Angeles Times,
Part III (March 7, I9i72).
Alexander Auerbach, "When is a Claim 99 and 44/100%
Pure," Los Angeles Times, Part III (November 22,
, 1971). ”
"Auto Repossession Abuses," Los Angeles Times, Editorial,
Part II (June 29, 1971).
Erwin Baker, "City Opens New Office to Protect Consumers"
Los Angeles Times, Part II (April 3, 1972).
90
Erwin Baker, "Consumer Office; 1 week 2,000 Complaints,"
Los Angeles Times, Part 1 (April 9, 1972).
Erwin Baker, "New City Panel Saves Consumers $200,000,"
Los Ange1es T1 me s, Part II (July 3, 1972).
Dan Fisher, "Consumerism Tide Won't Ebb, Says Official,"
Los Angeles Times, Part 1 (April 13, 19 71).
Paul Houston, "Ralph Nader : The Man and His Crusaders,"
Los Angeles Times, Sec. 1 (November 3, 1971).
William G. Kaye, "Analysis : The Problems of the Great
American Consumer Become a Matter of Governmental,
and Political Concern," City (February 1969), Vol. 3.
Ralph Nader, Playboy Magazine Interview, pp. 73-84, 196-
224 (October 196 8).
Harry Nelson, "Prescription Drug Study Finds Poor Pay
More," Los Angeles Times, Part II (April 5, 1972).
Ronald G. Shafer, "Moves Gain to Halt Some Credit
Practices Assailed by Consumer," Wall Street
Journal, Part 1 (June 7, 1971) .
Frederick D. Sturdivant, "Better Deal for Ghetto
Shoppers," Harvard Business Review, pp. 41-74,
Volume 46, Number 2 (March/April 1968) .
Better Retail Selling, Standard Printing^Incorporated,
P. O. Box 97, Santa Barbara, Calif. (May 19 72).
Consumer News, Volume 1, Number 1 (Office of Consumer
Affairs, Executive Office of the President,
April 1971).
Consumer Reports, Volume 37,;Number 4 (New York;
Consumers Union of the United States, Inc.,
April 19 72).
"Garagemen Form Aid Unit for Car Owners," Los Angeles
Times (May 4, 1971).
"School Class on Consumer Laws Urged by Yorty" Los
Angeles Times (May 27, 19 71).
91
"Monthly Report" (Office of Consumer Affairs, August
3, 1971).
"32 Vaccines Called Worthless, Harmful," Santa Barbara
News Press, Section A (March 31, 1972).
Interviews
Lieutenant S. Arabian and Captain F. J. Beeson, Los
Angeles Police Department Bunco and Forgery Unit,
Interview held August 12, 1970 and other dates.
Herschel Elkins, California Deputy Attorney General,
Consumer Fraud Unit, Interview in Los Angeles,
May 5, 19 70.
John Gibson, President of Los Angeles City Council,
Interview in Los Angeles, October 4, 1971.
Donald Hauptman, Interview in Los Angeles, September 28,
1971.
Morton E. Levey, Attorney, Public Defender, Interview
in Los Angeles, January 15, 1971.
Donald Livingston, Director of the State of California
Department of Consumer Affairs, Interview in Los
Angeles, October 13, 1971.
Gary H. ManuIkin, Attorney, Neighborhood Legal Services
Society, Inc., Interview in Los Angeles, July 22,
1970.“
John Wilcox, Attorney, Federal Trade Commission, Interview
in Los Angeles, July 30, 1970 and other dates.
Reports
Milton Friedman, Introduction to the Book, The Regulated
Consumer by Mary Bennett Peterson, pp. 15-2 0, (April
2, 1971).
L. S. Hollinger, Consumer Protection (September 2, 1970).
Mary Gardner Jones, "The Inner City Marketplace; The
Need for Law and Order," The George Washington Law
Review, Volume 37, Number 5, pp. 1015-1030 (July
1969) .
92
Robert W. Johnson, "The Uniform Consumer Credit Code and
the Credit Problems of Low-income Consumers" Yale Law
Journal, Volume 37, No. 5., pp. 111.7-1130 (July 1969).
Harold B. King, "Local Government and the 1970 Census,"
The Municipal Yearbook, 1972, Volume 39, pp. 80-86,
(international City Management Association, 19 72).
C. Erwin Piper, "Consumer Protection in the City of
Los Angeles," (February 24, 1971).
Clyde H. Reeves, "Consumer Protection," Council of State
Governments Report, pp. 21-35, (January 19 71).
Carl W. Stenberg, "Decentralization and the City," pp. 88-
96, The Municipal Yearbook, 1972.
Milan D. Smith, The Significance df Consumerism, National
Canners Association, Washington, D, Cl 1967.
Philip G. Schrag, "On Her Majesty's Secret Service:
Protecting the Consumer in New York City," The Yale ,
Law Journal, Vol. 80, No. 8, pp. 1129-1603 (July 1971)
William D. Warren, "The Direct Selling Industry; An
Empirical Study," UCLA Law Review, Volume 16, No. 5,
pp. 883-1049 (September 1969).
Association of California Consumers, Report to the Public
Health and Welfare Committee on the City Council of
Los Angeles (May 1971).
National Advisory Commission on Civil Disorders Report
(1968).
President's Commission of Law Enforcement and Adminis
tration of Justice, The Challenge of Criine in a
Free Society (1967).
U. S. Department of Commerce, Bureau of the Census,
1970 Census of Population, (February, 1971).
Speech
Casper W. Weinburger, Chairman, Federal Trade Commission,
"Where is the Consumer Revolt Taking us?" Speech
at Mayor's Consumer Protection Symposium, Century
Plaza Hotel, Los Angeles, July 17, 1970.
93
Symposium
Mayor's Consumer Protection Symposium, Century Plaza
Hotel, in Los Angeles, July 17, 1970. Moderator;
Dr. Edward H. Barker, Graduate School of Business
University of Southern California. Participants:
Don E. Brewer, President, Brewer and Betancourt,
Inc., Ernest E. Debs, Supervisor, Los Angeles
County, Third District; Treesa Drury, Consumer
Affairs Editor, KFWB Radio 9 8 (Since moved to
Consumer Affairs Director, KHJ TV Channel 9);
Herschel Elkins, Deputy Attorney General, Con
sumer Fraud Division, State of California;
Alan Sieroty, Assemblyman 5 9th District, State
of California; and George J. Zervas, Senior
Attorney Federal Trade Commission.
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Asset Metadata
Creator
Davies, Glyn
(author)
Core Title
Local governments' role in consumer protection
School
School of Public Administration
Degree
Master of Public Administration
Degree Program
Public Administration
Degree Conferral Date
1973-06
Publisher
University of Southern California
(original),
University of Southern California. Libraries
(digital)
Tag
OAI-PMH Harvest,social sciences
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application/pdf
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