These anti-consumer laws should be repealed now

Some rules and regulations work as intended. Some don’t.

Last week, I took a hard look at new laws that needed to be passed in order to protect consumers. But such legislation goes against the prevailing political winds, which are to dismantle “burdensome” regulations that hurt businesses and consumers. So, let’s go there.

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I asked the biggest proponents of deregulation which rules they’d like to remove. Their answer: not just a single regulation, but an entire regulatory agency.

“Abolish the Food and Drug Administration,” says Arvin Vohra, vice chair of the Libertarian Party. “Expensive FDA approval drives the regulatory costs so high that no drug company can hope to recoup costs on rare diseases.”

Vohra says that as a result, consumers with rare diseases will almost certainly never see a cure. Eliminate the FDA, and the cost of medications will go down, pharmaceutical companies will be able to turn a profit, and lives will be saved.

I’m sure there are doctors, regulators, industry-watchers, and even patients who would disagree with that analysis. But the broader point is sound: Some regulations probably have, to use a medical term, unintended side effects.

But which ones?

How about the Fair Credit Billing Act (FCBA)? That’s what Monica Eaton-Cardone thinks. She’s the co-founder of Chargebacks911, a cybersecurity company that helps e-stores and online merchants eliminate chargeback fraud.

“The Fair Credit Billing Act of 1974 was intended to protect consumers and encourage credit card spending by guaranteeing zero liability for cardholders,” she explains. “Unfortunately, the law was designed for a pre-Internet economy.”

Result: The law is now artificially inflating prices by tens of billions of dollars each year.

“That’s because the Fair Credit Billing Act also created the chargeback mechanism, which costs merchants and e-stores $40 billion annually in fraud, product loss and penalties,” Eaton-Cardone says. “Online stores are then forced to raise their prices to offset the rising cost of fraud, making consumers pay more money for goods and services. It’s like a hidden tax on eCommerce.”

That argument — that regulation raises prices for consumers — resonates across the more politically conservative landscape, whether it’s provable or not.

Since I handle an unusually large amount of airline cases, people also often ask about the Airline Deregulation Act of 1978, which, to quote a recent trade publication article, changed the airline industry beyond recognition.

The law’s goals were laudable. They included:

The availability of a variety of adequate, economic, efficient, and low-price services by air carriers without unjust discriminations, undue preferences or advantages, or unfair or deceptive practices, the need to improve relations among, and coordinate
transportation by, air carriers, and the need to encourage fair wages and equitable working conditions.

Unfortunately, deregulation created an oligopoly where rising prices, preferential treatment, unfair and deceptive practices and collusion is being served up daily. Shouldn’t this law be removed from the books, some airline passengers wonder?

“I believe that the worst thing that ever happened to air travel is deregulation,” says Ted Hochstadt, an independent farming professional who lives in Pimmit Hills, Va. “The supposed savings in airfare has not been worth the discomforts and ripoffs of deregulated travel. I long for the good old days when an airplane ticket was the equivalent of money, either for a refund or to be used on any other carrier traveling to the same destination.”

The deregulation act must go, Hochstadt adds.

“If you want human rights for air travelers,” he says, “reregulate air travel.”

That’s easier said than done. The Airline Deregulation Act removed some unnecessary barriers, and even the most pro-consumer voices aren’t ready to give up those benefits. But the law also created the consumer-hostile commercial airline industry we have today, where passengers are charged ever-increasing fees and squeezed into ever-smaller spaces. Corrective action is necessary.

And then there’s healthcare and the polarizing debate over the Affordable Care Act. It’s hardly a perfect law, and the side effects are fairly dramatic. I know because I just tried to buy health insurance in Arizona. I had only a few expensive ACA-compliant policies to choose from, and in order to bring my costs down, I had to fill out endless forms that made my insurance company believe I was a small company (I am not).

That’s the problem with lifting any of these laws. If you do, you also eliminate the benefits. Who knows how many lives have been saved by the FDA? Or how many consumer purchases were salvaged by the FCBA? Or how many more people could afford to fly because of airline regulation? Or how many Americans now have healthcare because of the ACA?

Getting rid of laws — or entire agencies, for that matter — that might hurt consumers sounds like a good idea. But, as with any legislation, there will be unintended consequences.

49 thoughts on “These anti-consumer laws should be repealed now

  1. I’d love to see a new law go into effect that says “If you pay for an item/service in cash, that is the only way you can get a refund”. No more funny money (future credits, mileage, etc).
    Oh, add to that, they must refund your money in the same amount of time it took to take it from you. *LOL*

    1. “…they must refund your money in the same amount of time it took to take it from you…”

      I agree but there should be measures to prevent fraud like someone presenting a check then requesting a refund later in the day or the next day.

      1. They present a check, they receive the refund as a check. It takes days for the check to clear, so should threefold check takes days. If a bank cashes it and then the check comes back as stopped or fraud, then the bank that cashed it is responsible for the loss, not the merchant.

        1. If a customer write a check to my business and I deposit that check and the check is NSF, stolen, bad, fraudulent, etc., I will be 1) be charged a fee why do you think businesses have a NSF fee of $ 20 to $ 35? 2) the money will be subtracted out of my account.

          If your method, logic was correct, merchants will be asking people to write ‘bad’ checks all of the time!

  2. Wow, four recommendations, and they’re all absolutely terrible ideas.

    Abolishing the FDA is a great idea if you want to lose all confidence in the safety and efficacy of prescription drugs.

    Abolishing the FCBA is a great idea if you’re a credit card company or a merchant. Why is a consumer website quoting a vendor who helps companies fight chargebacks? She’s suggesting we abolish the ability to chargeback entirely!

    Getting rid of airline deregulation would be great – for airlines. If you want to return to the days of $2400 minimum fares JFK-LAX round trip, OK. Consumers wouldn’t agree.

    Getting rid of the ACA would be great for the healthy and high income, terrible for anyone who’s got any sort of pre-existing condition.

    1. from Chris’ article: “That’s the problem with lifting any of these laws. If you do, you also eliminate the benefits. Who knows how many lives have been saved by the FDA? Or how many consumer purchases were salvaged by the FCBA? Or how many more people could afford to fly because of airline regulation? Or how many Americans now have healthcare because of the ACA?

      Getting rid of laws — or entire agencies, for that matter — that might hurt consumersSOUNDS like a good idea. But, as with any legislation, THERE WILL BE UNINTENDED CONSEQUENCES ” (capitols are from me). thanks.

    2. “Abolishing the FCBA is a great idea if you’re a credit card company or a merchant.”

      I used to work for a company that is in the online space as well as I am currently a consultant to several companies that are online merchants. There are customers that are submitting chargebacks for the sole purpose of stealing the product and/or service. Of course, there are dishonest merchants but there are an equal amount of dishonest consumers.

      For example, there are websites and blogs telling people how to rip off Amazon and the Amazon third-party sellers.

      The solution is revising the laws of the FCBA to fair to honest merchants and honest consumers.

  3. The airline deregulation act dropped airfares dramatically; in the “Good ‘ol Days” it’s true that every ticket included what you see today in full-fare coach… and… the prices about matched what you pay today for full-fare coach.

    The Libertarians can take their “Abolish the FDA” in a pipe and smoke it. The drug-approval process for safety and effectiveness isn’t that much more burdensome or elaborate than what any insurance company would require before agreeing to actually PAY for any of these rare-disease drugs. And a lack of an approval requirement would inevitably open the field up to any scum that decided to sell worthless snake oil to vulnerable and desperate patients.

    Get rid of the FCBA? That would get rid of an awful lot of consumer protections that have nothing to do with credit-card chargebacks, and likely have little effect on the chargeback process. It is highly likely that if the FCBA chargeback requirements were removed, merchant contracts would contain them anyway. After all, we already have chargeback rights the FCBA doesn’t grant, like the ability to dispute any purchase anywhere for any amount. (For many disputes the FCBA sets a $50 floor, and only applies to purchases made less than 100 miles from home.)

  4. Whil in college in the 70’s I had a class on the news stories and the evidence behind them. We discussed a time where even Ralph Nader suggested abolishing the FDA due to regulatory capture by the drug companies.

    1. Well, if the Libertarians are saying the FDA should be abolished for being too strict, and Ralph Nader says they are an Unwitting Tool of the Corporate Kleptocrats, I’d say the FDA is doing things about exactly right.

  5. The FDA performs the vital function of setting standards for testing of drugs and devices. It does not do the actual testing, but establishes an industry wide set of steps that pharma companies must perform to be able to declare a compound nontoxic, then effective for purpose. The part that needs reform is the agency’s use of coercive power to lock out competition in medicine and keep prices abnormally high. Search for the Colcrys fiasco for an example of what I mean.

    Deregulation of airline routes and fares works just fine, and there’s no need to re-regulate that part of the business. The reform we need is to set minimum standards for the user-facing components of a flight: seat sizes, fee policies, handling of ejections, and handling of service problems.

    1. Seat size (i.e. width)…a lot of people want wider seats…the width of airplanes are fixed…therefore, you will need to remove seats (instead of having 3 seatsaisle3 seats having 2 seatsaisle3 seats) which will increase fares.

      Seat pitch (i.e. the distance between the rows of seats)…if you regulate the pitch, it will reduce the number of seats on a plane (again, the length of a plane is fixed); therefore, the fares will go up.

      Fee policies: The elimination and/or reduction of fees will increase the fares. People will say “Southwest don’t have these fees or their fees are lower.” If the other airlines adopt the Southwest model…either flights will be eliminated (i.e. airlines will stop flying into mid to small markets) or the fares for the flights for mid- to small market will go up. One part of the Southwest model is to have one airplane…the 737…having different airplanes increase the operational and maintenance costs.

      The flying public has a champagne taste (i.e. service in the regulation days like flight attendants carving chateaubriand on rolling silver carts and airlines put piano lounges in the upper decks of their Boeing 747s) on a beer-bottle budget (i.e. low fares).

      1. Yeah, a modern fresh-from-the factory 737 still has the same cabin width and seating setup as the original, the basic design of which was “baked-in” in the mid 60’s.

        This could be remedied with a “clean-sheet” design, instead of endlessly extending the original, but that would require a lot of money that Boeing doesn’t need to spend when the existing plane has about nine years of production backlog with the factory running flat-out.

      2. if you regulate the pitch, it will reduce the number of seats on a plane (again, the length of a plane is fixed); therefore, the fares will go up.

        The UK regulates the pitch.
        Ryanair’s seats are slightly farther apart than Spirit. So how do you explain the fact that Spirit charges more per available passenger seat mile (not less) than Ryanir? Why haven’t the fares gone higher in the UK like you say? And don’t forget, Ryanair pays EC Regulation 261 compensation too…

        1. The requirement for the pitch for planes that are registered in the UK is 26/28 inches. The shortest pitch for economy class seat on AA, UA and Delta is 30 inches (Source: Seatguru: Short-haul Economy Class). Personally, I think that the 26 inches is draconian for the UK standard.

          If the US passed a pitch law stating that the minimum pitch is 32, 34 , 36 inches…this will require row(s) of seats to be removed from most airlines.

          1. The UK/BATA number sounds draconian to you only because it’s based on a different measurement than the figure you see reported on Seatguru, et. al. The UK/BATA threshold doesn’t include the seat parts and seat thickness.

            As I understand it, Spirit’s standard seat pitch would be illegal in the UK. The minimum pitch you will see on Ryanair or other UK carriers is either 29″ or 30″ according to the way Seatguru and other sources measure it, which exceeds the 28″ offered by Spirit.

          2. The UK does include the seat thickness…that is why the numbers are 26 inches and 28 inches. Here is the text from the link that you posted:

            “These regulations apply to all aircraft registered in the UK. The regulations state that the minimum distance between the front of the back support cushion of a seat and the back of the seat or other fixed structure in front should be 26 inches (660mm). This distance is designed to ensure the rapid and safe evacuation of passengers in an emergency. This dimension is not the same as seat pitch.

            Consideration must also be given to the thickness of the back support and cushion which will vary with the type of seat but is on average about 2 inches (51mm) thick. In practice, the minimum seat pitch necessary to comply with the regulations is 28 inches (711mm).””

          3. Measuring the front of one seat (minus the support cushion) to the back of the next seat means you exclude most of the seat itself. Hence the source added “This dimension is not the same as seat pitch”.

          4. “In practice, the minimum seat pitch necessary to comply with the regulations is 28 inches (711mm).”

          5. Ok, so why doesn’t Rynair go to 28″ and add at least one more row, if not two more rows to their configuration? And why would they charge less per passenger mile (including fees + fares) than their cousin across the ocean which uses 28″ to squeeze more rows, and which doesn’t have to pay EC 261 compensation?

          6. Depending on the plane, adding another row of seats may require the addition of another flight attendant t keep within the limits of passengers/attendant. The cost of a flight attendant usually is greater than the income generated by the additional seats.

        2. 2016 revenue per passenger seat mile for Ryanair and Spirit is almost exactly the same, at $0.108 – naturally, ratio also depends on Euro/GBP vs USD. Spirit’s revenue per available seat mile is a touch lower, since they have slightly lower load factors (86% vs. 93% for Ryanair). Ryanair’s got a better overall cost structure (landing fees, airplane standardization, etc.).

          I certainly agree that seat pitch is an imperfect metric for airline legroom, since a 30″ seat pitch with slimline seats can be better than 28″ pitch with much thicker seats. Really, the UK metric (seatback to headrest, essentially) is what we want to use.

          The UK regulation is a bit of a red herring, since Spirit would certainly pass on that basis.

          1. For 2016, I get $0.1061 for Ryanair (61.41 GBP per pax / .0770 xchange rate / 762 avg segment miles) and $0.1097 for Spirit ($107.41 / 979 avg segment miles).

            Yes, load factor is part of the explanation, but in 2015 Ryanair’s load factor was “only” 88% and yet the discrepancy was still there ($.1182 for Ryanair and $.1211 for Spirit). Yes, Spirit had higher expenses and lower margins than Ryanair in 2016, but I’m not sure that reflects a consistently lower cost structure — in 2015 they had about the same margins — and both airlines had higher revenue per pax mile.

            My main point is that higher costs don’t necessarily translate to higher fares — as you can see, Spirit’s costs went up from 2015 to 2016, yet it’s collected fares went down. Ryanair has more leg room and must pay EC 261 compensation, yet charges slightly less.

      3. southwest lately has been the most expensive option (for me). I still book when my plans are a little uncertain and I don’t wan the full expense of trip insurance.

      4. Oh come on! Nobody is talking about making seats really wide again, but just to stop them from getting any smaller and set a minimum size based on medical safety. It’s reached the point where an increasing fraction of normal butts just won’t fit in the seat, normal shoulders clash with your seatmates’, and normal knees collide with the seat in front.

        And the flying public today doesn’t even remember what “champagne-taste” flying-as-a-luxury was like. Even my own venerable memories go back to the time after that, when mass air travel was just settling in.

        No, what people flock to is the Southwest model, where it is an available alternative: slightly higher fares in exchange for a good part of the old flexibility.

        1. “Oh come on! Nobody is talking about making seats really wide again…”
          You wrote “regulating the seat size”…you didn’t explain if this means making seats wider.

      5. I would be VERY happy if they regulated seat pitch and airfares went up some. With my height, I can not book coach on most airlines these days. With the way a lot of airlines do premium (either requiring coach purchase and premium as addon or with low legroom even in premium), my only option is often to book business/first. This was fine 5-10 years ago, when a typical business class was 2-3x coach but really sucks these days where business is typically 5-10x coach (sometimes as high as 25x+ if you look at promo coach fares).

    2. Exactly right, Alan. Colchicine used to cost patients literally pennies; now the exact same medication is too expensive for my uninsured gout patients. And must we mention thalidomide?

  6. in regards to the FDA, I think that there should be changes to the rules such as when a person has a ‘death sentence’ illness, they should have the option to try experimental drugs (i.e. drugs that are not fully approved by the FDA).

    You can go to another country and buy the same prescription medication from the same pharma company for a much lower price. One of the reasons for this ‘phenomenal’ is trial lawyers…we really need to have tort reform. Also, the reason for doctors and hospitals to order a bunch of ‘unnecessary’ tests is for legal protection…we really need tort reform in the healthmedical fields.

    Another reason why prescription costs are lower in other countries is that we (Americans) are a richer country; therefore, we are subsidizing the prices in the second- and third-world countries.

    In addition, we do need to streamline the FDA process without compromising the public because it is very long and costly to bring out a new medicine.

    In the United States, it takes an average of 12 years for an experimental drug to travel from the laboratory to your medicine cabinet. That is, if it makes it. Only 5 in 5,000 drugs that enter pre-clinical testing progress to human testing. One of these 5 drugs that are tested in people is approved. The chance for a new drug to actually make it to market is thus only 1 in 5,000.

    According to Eli Lilly, their average cost of bringing a new drug to market is $1.3 billion (Source: Eli Lilly)

    Looking at 20 pharmaceutical companies, the average drug developed by a major pharmaceutical company costs at least $4 billion, and it can be as much as $11 billion. (Sources: InnoThink Center For Research In Biomedical Innovation; Thomson Reuters Fundamentals via FactSet Research Systems)

    For the year of 2016, it turned out to be a disappointing one for new drug approvals with the U.S. Food and Drug Administration clearing just 22 new medicines for sale, the lowest number since 2010 and sharply down on 2015’s tally of 45.

    1. One widely touted pharma myth is that high American prices somehow subsidize lower prices in other countries. Not so. Pharma prices are set for what the market will bear in each country. There is no country in which pharma companies lose money except for intentional humanitarian campaigns in places hit by plague and disaster. Because Americans are suckers who will swallow their stupid story and pay their ludicrous prices, our domestic market stays high.

      There is no need to abolish the TDA. Just strip it of its power to enforce pharma regulations like preventing us from buying drugs on the world market. I want to be able to fill my prescriptions on Amazon from the same trusted world suppliers that countries like Canada, whose single-payer system shops the same way, uses.

      1. If you look at the facts: 1) it costs between $ 4 Billion to $ 12 Billion to develop a new drug. 2) Most people in the world earns $ 2.00 a day…just look at the overall median annual household income worldwide is $9,733, and the median per-capita household income is $2,920, according to Gallup. Three hours south of Los Angeles, in a small town called Javier Rojo Gomez, Mexico, 95% of the children go to school without food. Most people live in shacks without running water or electricity. Most families are headed by a single mother and the average family income is $ 80 per week.

        How do you think that a pharma company that spent $ 8 Billion on a drug is going to recover that investment? The first million of the pills cost $ x.xx per pill…the second million of the pills cost $ x.xx…so forth. If the cost of the pills in the first million was $ 50 per pill…the US market is going to subsidize the Javier Rojo Gomez, Mexico market.

        Another reason for higher prices is the US is trial lawyers and their lawsuits. The lawsuits that take place in this country doesn’t take place or doesn’t take place to the same degree in other countries.

        Another reason for higher prices is the federal government doesn’t negotiate for drug prices.

        1. “Most people in the world earns $ 2.00 a day…just look at the overall median annual household income worldwide is $9,733”

          Those two numbers are contradictory. If a majority of the world earns $2/day, then the median per capita can’t be higher than $730 (365*2). Unless the average household has 13 members, one of those numbers doesn’t match the other.

          While there is this cross-subsidy between the developed and developing world, it doesn’t explain why pharma prices are so much higher in the US than in Western Europe, for example.

          Lack of buyer power (Medicare and Medicaid prohibited from negotiating, insurance companies not big enough, and subject to patient pressure) is the biggest factor in pricing. Also, drug advertising, which creates patient demand regardless of efficacy or value.

          Personally, I’d like to see Medicare/Medicaid initiate a policy (which they can’t do without legislation) that says that Medicare, to cover a particular drug, must first be provided by the pharma company (under oath) with the amount spent advertising that drug over the past year. Once a price is negotiated, the gov’t receives a credit equal to that advertising budget to buy the drug. Effectively, it doubles the cost of advertising.

        2. Yet pharma makes money in Mexico, just as it does everywhere else. So do the sellers of computers and electronics, because that industry has grown up having to operate in open, uncontrolled markets from the very beginning.

    2. The problem, mostly, isn’t the FDA. Pharmaceutical companies want the FDA, because it helps shield them from liability so long as they didn’t actively know the drug was dangerous.

      I agree that drug research is difficult. After screening compound libraries for an active agent that inhibits/activates the target or screening for a biologic such as an antibody, the drug researcher then has to make sure the drug actually works in the condition and is as safe as the next best choice.

      One problem that was recently highlighted in the literature is that human tumors in culture or even when implanted in mice rapidly evolve to differ from their state in human patients, making drug screening that much more unpredictable.

      So I think much of the delay is because drug research is hard, not FDA.

      1. “…because it helps shield them from liability so long as they didn’t actively know the drug was dangerous.”
        There have been manufacturers of new drugs and medical devices that have been sued and lost even when they didn’t actively knew that the drug or medical device was dangerous and nothing appeared in the research and the FDA signed off on the drug or medical device.

        The average time for a new drug to come to market is 12 years. Here are the phases of a new drug:

        1. Preclinical Testing (3.5 years)
        2. Investigational New Drug Application
        3. Phase I Clinical Trials (1 year)
        4. Phase II Clinical Trails (2 years)
        5. Phase III Clinical Trails (3 years)
        6. New Drug Application (An NDA typically consists of at least 100,000 pages…taking an average of 2.5 years to be reviewed by the FDA)
        7. Phase IV Studies (Phase IV is any organized collection of data from patients who are taking a drug that has already received approval from the FDA. In Phase IV studies, patients may check boxes on a list (as in phase III studies) or they may just report other symptoms. Phase IV studies are commonly called “post-marketing studies.”)

        I used to work for a company that we sold software to the pharma industry; therefore, I have some knowledge what the FDA requires in the manufacturing of drugs (i.e. a regulated environment). In the amount of data for the development of a new drug is staggering…the application is over 100,000 pages.

        Even if the FDA is a clog or slow down the process, it is very expensive to bring a new drug out to market.

        1. For most drugs, a good chunk of that time is spent at the USPTO (Patent Office), waiting for issuance (I also have some knowledge of the FDA and USPTO). If delays result from the patent office, there is term extension available. So most of these drugs receive patent protection that extends a reasonable time, and FDA delays can provide up to an additional 5 years (I believe). For most drugs, the most valuable term is towards the end of the patent term, when the drug is being sold, so the early periods don’t really impact the calculation as much (see

      2. I’ve heard the argument that “the FDA should just be concerned with safety, not efficacy.” That sounds reasonable on the surface, until you realize that safety and efficacy are closely tied together. Without knowing how well a drug works, you can’t judge whether it’s safe enough to bring to market.

        Imagine two drugs. Both are similarly safe, in that they have no side effects, with the exception that 1 in 1000 people who take them will die instantly. Now, imagine that drug A cures pancreatic cancer with a 100% success rate on a single dose, while drug B relieves headache pain 1% faster than ibuprofen. While both drugs have the same level of safety, drug A’s efficacy means it absolutely should be approved, while there’s no way it makes sense to bring drug B to market.

  7. I think change or replace is better than repeal. For example, we don’t need full airline regulation. There are already large amounts of airline regulation in place, and there just needs to be some tweaking done to rid us of the bad habits the airlines have gotten into. Any change of travel laws needs to also make sure that there are no mandatory “fees” added to make fares or hotel rates look like less than they are.

  8. as others have mentioned, tweaks are probably more effective than elimination.

    One off the top of my head:
    -FDA restrict the type of drugs offered. for example when a patented drug is close to losing its patent, drug companies often modify the drug to extend the patent, eg. drug x becomes “slow release” drug x. some places (like Canada, IIRC) restricts this. That is, their plans won’t pay for slow release drug x, but only the generic of drug x, because drug x.

    1. That’s not an FDA issue, though. The problem is that insurers don’t have enough power to tell the pharma companies (and patients) “we’re not paying for that.”

      1. Insurers absolutely have the power to tell patients “we’re not paying for that”. The approved list of drugs covered by my insurance gets SMALLER every year (never mind that there are more drugs being released so it should logically be growing). Some of the removals from the list make sense but many do not (my guess would be cost of drug and the insurer thinks they can get away with not covering it).

        1. Their power is quite limited, though, given patient pressures. Really, it’s all part of our irrational emotional objection to putting a dollar value on life. Since we do have to put a dollar value on life (since resources aren’t infinite), we end up doing it very badly by not being open in what we’re doing.

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