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OpenMarket: April 2014

  • Pompeo-Butterfield Food Labeling Bill: Valuable But Needs Work

    April 9, 2014 5:53 PM

    Earlier today, Reps. Mike Pompeo (R-Kan.) and G.K. Butterfield (D-N.C.) introduced a bill in the House that would establish federal standards for the labeling of genetically engineered (GE) foods and preempt a growing patchwork quilt of state action on GE labeling. The underlying motivation behind the “Safe and Accurate Food Labeling Act of 2014” (H.R. 4432) is praiseworthy, so the congressmen deserve an A for effort. However, the execution leaves more than a little to be desired.

    This year, an estimated 25, or more, states will consider legislation or ballot initiatives that would mandate special labeling for many GE foods. As I’ve written before, those proposals are bad policy, make no sense scientifically, would needlessly raise the cost of producing and selling safe, nutritious and wholesome food, and are arguably unconstitutional on several grounds. Nor would they give consumers any actual knowledge about what’s “in their food” – the ostensible purpose of those state measures.

    The U.S. Food and Drug Administration’s current policy requires foods to be labeled when a material difference has been made in their composition – and the labels must say what the actual change is, not simply what technique was used to make the change. So, in many ways, the FDA’s current policy does a far better job of telling consumers what’s in their food than a GE labeling mandate ever could.

    By explicitly preempting state labeling laws and making clear that FDA policy on GE food labeling is the law of the land, H.R. 4432 would serve an extremely valuable function. And, because the packaged food items found in most grocery stores are the epitome of interstate commerce, ensuring that oversight of their safety and labeling be governed at the national level, rather than state-by-state, perfectly reflects the plan established by the framers of the U.S. Constitution.

  • Administration’s Lack of Transparency Extends to States; The Independence Institute Reports New Findings

    April 9, 2014 12:45 PM

    Obama RacineAlthough President Obama occasionally clings to the claim that his administration is the “most transparent” in history, with more and more revelations, this gets farther and farther from the truth. Clearly, we have an epidemic on our hands.

    Over the past couple years, I have uncovered case after case of federal government officials, particularly those at the Environmental Protection Agency (EPA), knowingly and willingly moving select correspondence "off-line", away from required, official email accounts. We have even found senior appointees at EPA, Department of Energy, and the White House Office of Science and Technology Policy using email accounts controlled by environmental pressure groups.

    Regardless of intent, although I would argue these practices on their face indicate a desire to evade disclosure, the use of non-official email accounts for work purposes circumvents federal-recordkeeping responsibilities. Since employees have chosen to not search them in response to Freedom of Information Act (FOIA) requests or congressional oversight requests, this allows government officials to avoid revealing their actions to taxpayers who finance their salaries.

    These corrupt practices are not isolated to the federal government. In requests the Competitive Enterprise Institute (CEI), assisted Colorado’s Independence Institute with, we show the practice extends to activists employed in state government. In Colorado, this means Gov. John Hickenlooper’s Chief-of-Staff, the governor’s Chief Strategy Officer and Director of the Office of Policy and Research to Colorado, Alan Salazar, and the Director of Environmental Programs for the Colorado Department of Public Health and Environment (DPHE), Martha Rudolph.

    On October 15, 2013, I filed a FOIA request on behalf of CEI for all non-official account emails of former EPA Region 8 (Rocky Mountain West) administrator James Martin, a former Environmental Defense (ED) lawyer who we had already showed was using a private account to correspond on work-related issues with former ED colleagues and state officials. After these revelations, like another high-level EPA official -- former administrator Lisa Jackson, also known as "Richard Windsor" in a false-identity account I also discovered -- Martin resigned from his post in February 2013. Under congressional scrutiny after these revelations, he turned over more emails, which I obtained from the EPA.

  • Threatening Free Speech, New Jersey Court Allows Parents to Be Sued for Children's Facebook Posts

    April 9, 2014 11:32 AM

    Earlier, we wrote about a Wisconsin town whose ordinance holds parents liable for bullying by their children, including certain speech. We and law professor Eugene Volokh noted that this raised serious First Amendment issues. Now, a New Jersey judge has done the same thing by judicial construction, by allowing New Jersey school districts to drag students and their parents into lawsuits brought against school districts by alleged victims of bullying or discriminatory harassment. (New Jersey's anti-bullying law is so broad that it violates the First Amendment by banning non-violent speech, notes the civil-liberties group Foundation for Individual Rights in Education.)

    On March 12, a New Jersey Superior Court Judge ruled in V.B. v. Flemington-Raritan Regional School District that that school district, and the Hunterdon Central Regional High School, "could name 13 students and their parents as third-party defendants in a bullying suit," dragging them into a lawsuit against the school districts, and potentially forcing them to share the massive cost of paying any damages awarded by a judge or jury against the school district. Judge Yolanda Ciccone allowed the parents to be sued based on conduct and offensive comments both in school (where teachers and schools officials, not parents, were in charge) and outside of school. She based this ruling partly on speech that is protected by the First Amendment outside the schoolhouse, such as unkind remarks on Facebook, writing that "Plaintiff's complaint includes several allegations of that acts of bullying and harassment took place on Facebook, and that plaintiff had to contact Facebook directly to have to [sic] offending statements removed."

    Never mind that federal judges have ruled that the First Amendment applies with added force to students’ speech outside of school, meaning that vulgar speech that is banned in school may be protected speech when it occurs away from school, as cases like Klein v. Smith (1986) illustrate. Similarly, the federal appeals court in New Jersey has issued two First Amendment rulings in favor of students disciplined for creating fake web profiles lampooning their principals, holding that the speech was protected outside of school even if it would be unprotected in school, in Layshock v. Hermitage School District (2010) and J.S. v. Blue Mountain School District (2011).

  • CEI Podcast for April 9, 2014: A Consumer's Guide to Chemical Risk

    April 9, 2014 11:20 AM

    Senior Fellow Angela Logomasini talks about her new Consumer's Guide to Chemical Risk.

  • Opening brief in Pearson v. NBTY, Inc., No. 14-1198 (7th Cir.)

    April 9, 2014 8:54 AM

    In a settlement of several class actions over the labeling of glucosamine supplements, class counsel settled for a claims process that paid the class under $900,000, and token injunctive relief that tweaked the labels, while leaving much of the supposedly fraudulent labeling language in place (and precluding class members from ever suing on that language again). For this, class counsel asked for $4.5 million, claiming that the settlement was really worth tens of millions because 4.7 million class members could have made $3 claims. (In reality, the postcards mailed to ascertainable class members failed to inform them that they were actually class members, and the claims process demanded they provide receipts or other information already in the defendants' possession. Little wonder no money was actually distributed to the class.) Defendant NBTY was really only on the hook for $2 million, of which $1.1 million went to cy pres, though it would have been possible to distribute that money to class members.

    To top it all off, the fee request was subject to a clear-sailing clause and reversion to the defendant, the sort of self-serving fee-protection clauses condemned in our Bluetooth victory.

    As a class member, I objected, represented by CCAF attorney Melissa Holyoak. The district court approved the settlement, but partially agreed with us that the fee request was excessive, knocking the Rule 23(h) award down to $1.9 million.

  • Professional Licensing: A Risk to the Free Markets and Freedom of Speech

    April 7, 2014 2:59 PM

    From physicians to dentists to lawyers, the licensing requirements of many professions are well known—but for bloggers? A recent case in North Carolina demonstrates the dangers that mandatory occupational licensing poses to liberty and how established interests use such requirements to protect their bottom line.

    North Carolina resident Steve Cooksey was ill, obese, and struggling with type 2 diabetes. In 2009, after being rushed to the hospital, nearly in a coma, he decided to do everything in his power to get healthy. By following a low-carbohydrate diet, Cooksey claims he was able to drop 45 pounds and get off insulin and drugs. He documented his story on his personal blog, where he provided advice to others practicing the “paleo” diet that he believes saved his life.

    That sounds like a win-win situation, but not according to the North Carolina Board of Dietetics and Nutrition (NCBDN), which decided to go after Cooksey for the “crime” of offering nutritional advice without a dietitian's license. In 2011, it sent Cooksey a letter, claiming that his blog, by giving readers “unlicensed dietetic advice,” even for free, violated North Carolina law. The NCBDN included a 19-page copy of his online writings with comments in red ink pointing out what he could and could not say.

    Even more surprising, the notice asserted that Cooksey’s private conversations with readers and friends via email and telephone also constituted a violation of the state’s dietitian licensing law!

    Unfortunately, Cooksey’s case is far from an isolated incident. In just about every state, there is a dizzyingly long list of jobs that require would-be workers to go through a long, expensive, and sometimes arduous process to earn the privilege of entering into a given profession. While the stated reason for requiring occupational licenses is public safety, established players operating under existing licensing schemes usually fight tooth and nail to maintain occupational license requirement in place, to make it harder for potential competitors to enter the market.

    Today, roughly 30 percent of jobs in the U.S. require some form of license (a sharp increase from a low back in 1950, when the share was only 5 percent). Fortunately, some workers are fighting these licensing regime—and many are winning.

  • Food Policy Fight: Junk Study on Vegetarian Diet

    April 7, 2014 1:25 PM

    Log on to Twitter and you might read: "A vegetarian diet is associated with poorer health, a higher need for health care, and poorer quality of life." Here we have junk science going viral! And its fanning the flames between meat-eating and vegetarian advocates. But it shouldn't.

    You can't really blame the person pushing out this tweet too much, however, because her source is a study published in a PLOS One research paper. It highlights some of the pitfalls associated with paying too much attention to isolated studies that rely on questionable methodology and overblown claims.

    This study is another example of how junk science adversely impacts public policy debates, which is why I recently developed A Consumer's Guide to Chemical Risk: Deciphering the “Science” Behind Chemical Scares.” As this study on vegetarian diets shows, it's not just chemical policy that's negatively impacted by bad science. Personal choice, should rule the day when it comes to dietary choices, but because government is so involved -- setting guidelines and telling us what we should and shouldn't eat -- food politics are unavoidable. Accordingly, meat-eaters might use this dumb study to push their agenda, but the facts do not really support them.

    This study placed all vegetarians into one category, but there is no such thing as a single vegetarian diet. For example, some vegetarian diets might include mostly processed food and french fries, while others consist of nuts, beans grains, and fresh vegetables. It makes no sense to lump these diets into one category. Yet there are no more details in this study about what the vegetarian participants' diets included and when the participants began them. Nor does the study include any empirical medical data; just reports from individuals about their perceived health profile.

    Apparently, assessing the value of any particular diet was not really the point of this study, despite its conclusions. Rather it addresses the subjects lifestyles' and perceptions about them, and it found that vegetarians (at least the Austrians in this survey) worry more about their health and report having more health problems than do meat eaters. It does not demonstrate that a vegetarian diet can't be as healthy as or healthier than a diet that includes meat.

    Yet the authors somehow conclude:

    Moreover, our results showed that a vegetarian diet is associated with poorer health (higher incidences of cancer, allergies, and mental health disorders), a higher need for health care, and poorer quality of life. Therefore, public health programs are needed in order to reduce the health risk due to nutritional factors.

    This conclusion offers lots of opportunity for anti-vegetarian soundbites, but the study really doesn't show what this conclusion says. First the "association" does not prove cause-and-effect; and second it's not a vegetarian diet that causes these problems. It's the alleged lifestyles of the vegetarians, such as not getting vaccinated as often and not pursuing preventative health check-ups.

  • CEI’s Battered Business Bureau: The Week in Regulation

    April 7, 2014 11:25 AM

    79 new regulations, from whistleblowers to watermelon promotion.

  • In re Apple MagSafe Power Adapter Litigation oral argument in the Ninth Circuit Tuesday

    April 7, 2014 9:00 AM

    Class counsel collected $3.1 million in the Apple MagSafe Power Adapter Litigation, but their putative clients received less than $900,000, and perhaps even less than $500,000—the district court never bothered to make findings. The settlement was structured to pay the attorneys double their lodestar but make it difficult for class members to make claims, and few of them did. We represent objector Marie Newhouse, who received $0 under the settlement, and appeals the approval of the self-dealing settlement and the district court's imposition of a punitive appeal bond. We've also moved for sanctions in response to class counsel Mehri & Skalet's Rule 28(j) letter that claimed Newhouse had never made an argument that was in her first issue presented.

    The oral argument will be webcast live starting sometime between 10:15 and 11 am Pacific time Tuesday on the San Francisco Courtroom 1 camera; the link will be on the front page of the Ninth Circuit website, and we'll update this post with a link to the podcast of the argument after the Ninth puts it on the site.

    Update: oral argument is online.

  • Is High-Frequency Trading a Form of Front-Running?

    April 4, 2014 8:50 AM

    On 60 Minutes, Michael Lewis accused high-frequency traders of front-running. Apparently it’s become necessary to remind critics of high-frequency trading of the definition of “front-running.”

    Front-running  - n. “The practice by market makers of dealing on advance information provided by their brokers and investment analysts, before their clients have been given the information.”  -- Oxford English Dictionary

    There is room for reasonable debate about the merits of HFT. And there is room for multiple exchanges catering to multiple types of investors.  But one thing critics should be wary of is distorting the terms of debate. Many, if not most, HFT firms are ”prop shops.” That is, they are proprietary traders, trading on behalf of their own accounts, not clients. There are no clients for these particular high-frequency traders to “front-run.”

    Front-running is already illegal under current law. If firms that do take in outside capital are front-running, then they should be prosecuted. But indiscriminate use of that term detracts from the HFT debate.


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