How does the new pork slaughterhouse program affect food safety? – National Consumers League

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By Zoe Stahl, Food and Labor Policy Intern
 
Zoe Stahl, a food and labor policy intern at NCL this summer, is a rising senior at the University of Michigan, where she is pursuing a dual major in Art History and Environmental Science. Zoe is interested in food policy, sustainability, and labor issues. 
 

Last month, the Office of the Inspector General, essentially USDA’s internal watchdog, released a scathing report of pork slaughterhouse inspections. What particularly concerns NCL is the report’s review of the pork slaughterhouse pilot program, which increased line speeds and reduced the number of inspectors.

The report raised a number of issues with the pilot program. First, the USDA failed to conduct a comprehensive review to gauge whether it has increased food safety and plant efficiency as intended. Despite limited oversight, the report still found major flaws with the inspections. With three of the plants receiving most noncompliance reports (formal write-ups of food safety violations), the program may increase the potential for food safety risks.  This is not surprising considering these plants have faster production lines and fewer inspectors, limiting their ability to improve food safety and to comply with food safety regulations.  Even more alarming, inspectors failed to manually inspect the internal organs in which disease and contamination may lurk.

A similar program has been piloted in poultry slaughterhouses and might be expanded to all poultry plants. This is a program that NCL, along with a robust coalition of food safety and workers’ rights groups, has been fighting against. As in swine slaughterhouses, the program would increase the speed of the poultry line and replace inspectors with plant workers, who would not be required to receive any new training. Workers would have only a third of a second to examine the chicken, meaning contamination and defects could go undetected. It is not only a food safety issue, but also a worker safety issue. Faster line speeds mean higher rates of repetitive-motion injuries, such as carpal tunnel syndrome, for slaughterhouse employees. And many of these workers, who are often new, undocumented immigrants, women or non-native English speakers, may be hesitant to speak up for fear of being fired or, even worse, deported.

Given the findings in pork slaughterhouses, you may be wondering how USDA could even consider industry-wide implementation. Here at NCL, we are too. NCL’s conviction that implementing this program is a bad idea has now only deepened given the overwhelming evidence.

Mineworkers suffer after an unfair and wrong court ruling – National Consumers League

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On May 30, a bankruptcy court handed a devastating blow to mineworkers across the nation. The courts ruled that Patriot Coal could declare bankruptcy and effectively end its obligation to provide healthcare and retirement benefits to mineworkers. Thousands of miners who spent up to 12 hours a day in the mines breathing in harmful coal dust that can result in Black Lung disease and other ailments have been stripped of healthcare benefits intended to alleviate the financial burdens of retirement. NCL, a long-time ally of the United Mine Workers of America, is extremely disappointed with the court’s ruling and thinks the decision ensures corporate greed wins out over everyday worker’s rights.

A closer examination of Patriot Coal’s financials indicates that the company was doomed for failure. When Peabody Energy formed Patriot Coal in 2007, the company held more liabilities than assets. “NCL believes that Patriot was set up to fail,” says Sally Greenberg, NCL Executive Director.

This ruling reinforces a dangerous precedent established by the courts wherein a company can declare bankruptcy and offload retirees’ benefits. Many Americans think that union contracts are binding agreements between workers and companies; a string of recent court rulings, however, indicate otherwise. This ruling demonstrates that big business can throw workers aside in the name of corporate greed, which will severely weaken our labor unions. This is an unthinkable decision that has far-reaching negative implications for union workers across the country.

A deeper look at Angelina Jolie’s decision to undergo a double mastectomy – National Consumers League

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By Sally Greenberg, NCL Executive Director

Last week the actress and celebrity Angelina Jolie came forward on the OpEd page of the New York Times with the unexpected news that she had undergone a double mastectomy. Jolie disclosed that she carries the BRCA1 gene that sharply increases a woman’s chance of developing breast cancer. Her doctors advised her that she had an 87 percent risk of developing breast cancer and a 50 percent chance of getting ovarian cancer as a result of what she calls a “faulty gene.” What made this story so compelling is that Jolie’s mother, to whom she was very close, died at age 59 after fighting ovarian cancer for over a decade. Jolie talked about how much she wants to see her children grow up and be a part of their lives for a long time in a way that her mother could not. After this procedure, Jolie was advised that her chances of developing breast cancer are under 5 percent. “I can tell my children that they don’t need to fear they will lose me to breast cancer,” she writes.

Jolie also described in great detail that she had three months of medical procedures, including having breast tissue removed and temporary fillers put in place. Nine weeks later, she had the final surgery completed and reconstruction of the breasts with an implant. This is a grueling, difficult, and painful surgery.

The reaction in most camps after Jolie’s column appeared was that she had made a very difficult but very brave decision to have the surgery, that every woman must make up her mind about what is right for her, and that going public is likely to give other women with equally dire genetic information the strength to have this kind of preventive surgery.

Then I read a very sobering piece by my friend and colleague Dr. Diana Zuckerman responding to Jolie’s announcement. Zuckerman is a PhD and president of the Cancer Prevention and Treatment Fund.

She raised serious questions about the advice Jolie received from her doctors, noting that the 87 percent figure Jolie was told was her chance of getting breast cancer, was apparently based on older and smaller studies than those available today.  Quoting Stanford University’s Cancer Institute, Zuckerman argues that newer studies have found that the risk of getting breast cancer for an average woman with BRCA1 is 65 percent. “Since being overweight and smoking increase the risk and exercising and breastfeeding lower the risk, Ms. Jolie’s risk of breast cancer, even with the BRCA1 gene, could be considerably lower.”

Zuckerman says that according to experts, a 40-year-old woman with the BRCA1 gene has a 16 percent chance of getting breast cancer before she turns 50. Compared to 87 percent, 16 percent looks a lot less dire. Zuckerman also points out that with the latest breast cancer treatments and regular screening, the survival rate from breast cancer is higher than ever.   Zuckerman adds that if  “Ms. Jolie (or any other woman with BRCA1) got breast cancer in the future–if she ever did–the treatments available would be even more effective than they are today.”

Zuckerman makes a very important point, “Nobody can second-guess Angelina Jolie’s choice–it’s hers alone to make.” Yes, that is true for any woman.

But before anyone who has the BRCA1 gene rushes out to follow Ms. Jolie’s example, we need to ensure that she fully understands what the true risks are, the improved diagnostic and treatment options, and that she doesn’t base any decision on how a celebrity acted without knowing all the facts.  Most cancer experts are doing their best to explain why double mastectomies are not the best choice for most women in the aftermath of this celebrity’s disclosure.  I hope that perspective – based in the latest science – is not overshadowed  by the publicity that Ms. Jolie’s announcement has received.  This is a teachable moment – let’s make the most of it.

Bill to improve compounding pharmacy falls short of protecting public health – National Consumers League

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92_ayannaBy Ayanna Johnson, Health Policy Associate

Legislation proposed to clarify the practice of compounding pharmacy falls short of protecting the public’s health. In early October, a deadly meningitis outbreak killed 55 individuals and caused 741 cases of fungal meningitis, as a result of shoddy practices and absent safeguards at a large compounding facility in Massachusetts. The proposed bi-partisan legislation from the Senate Health, Education, labor and Pension (HELP) Committee was drafted in response to this outbreak, but does not do enough to address public health threats. After a unanimous vote in the HELP committee this Wednesday, the bill, S.959 the Pharmaceutical Compounding Quality and Accountability Act, is now headed to the full Senate for deliberation.

Compounding pharmacies provide a unique service to consumers by reformulating medicines for patients with special medical needs that cannot be met by FDA-approved drugs. However, compounding processes can introduce new risk into the health care system, as evidenced by the tragedy this past fall. This proposed legislation attempts to clearly define compounding pharmacies. The legislation clarifies that traditional compounding pharmacies will continue to be regulated by the states and then creates a new category for large-scale drug compounders and calls these businesses “compounding manufacturers.” These businesses make sterile compounded drugs in advance of a prescription and sell them across state lines.

Though the FDA is given the authority to regulate the new class of compounding manufacturers, there are concerns that FDA’s authority is not complete and that the definition of compounding manufacturers is too narrowly defined. In order to qualify in this category a business must meet all three of the following criteria: 1. Compounds at least one sterile drug. 2. Compounds before receiving a prescription. 3. Ships (sells) those drugs interstate.   However, this definition leaves open several questions. What happens if a compounder operates only within one state, and does not ship across state lines?  Also this definition does not allow for monitoring of large compounding pharmacies that sell non-sterile oral drugs, such as those used in cancer treatment. There have been reports of contaminated, counterfeit, and inactive drugs in this class of non-sterile drugs as well.

The bill allows traditional compounders to be regulated under existing state law, which varies from state to state—a further loophole in the regulation. According to a recent Washington Post article, the FDA believes that the proposed legislation limits its authority to appropriately protect public health. In early May, I attended the Senate HELP Committee hearing on this legislation, where Dr. Janet Woodcock of the FDA stated that the FDA needs clarity on its oversight role, as well as, access to additional documents and records from compounders on adverse events. Additional ambiguity lies with a clause calling for licensed pharmacist oversight in compounding manufacturers.  Does the clause require a licensed pharmacist be present during manufacturing or just generally be aware of the practices?  And the bill does not provide for appropriate labeling of compounded drugs to alert both health care providers and consumers that they are administering or receiving, respectively, a compounded drug.

It remains to be seen what will happen with the bill, but hopefully it will be strengthened to appropriately protect the public.  A recent report released by the US PIRG, a consumer health group, identified a number of lapses in authority and oversight of compounded pharmacies, by analyzing FDA warning letters sent to compounding pharmacies from 2002 to 2012. Numerous instances of contaminated products, or drugs produced without FDA approval, and distributed to patients were identified along with loopholes that compounders have used to avoid legal ramifications. The Senate also conducted a similar investigation since the October outbreak, finding that 48 large-scale compounders sold drugs that were contaminated or produced in unsanitary conditions.

What’s clear is that compounding pharmacy has evolved significantly, and if not appropriately monitored, can lead to unnecessary public health crises. The Senate legislation lacks teeth; but there is a House Bill being proposed by Congressman Ed Markey (D-MA.), which seeks to address some of the shortcomings outlined here, including broader FDA authority of compounding manufacturers and more communication among state and federal government. The National Consumers League, along with members of the Patient, Consumer and Public Health Coalition, backs this new bill.

New milk rules — not such a sweet deal for consumers – National Consumers League

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By Teresa Green, Linda Golodner Food Safety & Nutrition Fellow

Since NCL’s founding in 1899, our organization has been dedicated to providing consumers with clear and accurate information that enables them to make informed decisions.  In our work on various food labeling and food safety issues, we follow this same philosophy, and so it was in this frame of mind that we this week commented on a petition from the dairy industry that is pending before FDA.

Currently, when a producer substitutes artificial sweetener for sugar in flavored milks, they must indicate this on the front of the product label with a clear statement such as “low calorie.” In an attempt to address the criticisms of nutrition advocates fighting diligently against rising rates of childhood obesity and new school meal standards, producers have reformulated their products to remove sugar, a source of extra calories in chocolate milk.  The natural replacement has been artificial sweeteners.  However, when these companies use artificial sweeteners, they must indicate that they have done so by including statements such as “low calorie” on the front of the package.  The petition before FDA asks that this requirement be removed, arguing that the label discourages children from drinking less caloric, and therefore healthier, products.  Contrary to some reports, these products would still be required to list artificial sweeteners on their ingredient lists.

In our formal comments filed earlier this week, NCL came out against implementation of this change.  While we are certainly supportive of encouraging children to consume healthier products, doing so by depriving consumers of information they are accustomed to seeing is misguided.  The “low calorie” statement currently alerts consumers that they need to look at the ingredient list.  Some consumers choose to avoid artificial sweeteners and transparent labeling, on both the front and the back of the package, enables them to make consumption decisions for themselves and their children.

Saving workers’ lives with the ’10 cents’ pledge – National Consumers League

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This morning, NCL is proud to announce the launch of the 10 cents social media campaign. Our new pledge campaign aims to harness consumers’ collective power and to send a message to retailers that we American consumers really do care about the health and safety of workers overseas who manufacture our clothes.

On April 24, in Bangladesh, the Rana Plaza garment factory collapsed and more than 1,100 people died. We have to do everything in our power to make sure that type of disaster never happens again.

The Worker Rights Consortium has calculated that for $3 billion total, every factory in Bangladesh could be renovated and updated to meet basic safety standards, preventing such tragedies. Updates would include construction of proper fire exits or fire escapes, as well as installation of emergency lighting, safety equipment, and electrical rewiring. Recent events have demonstrated the devastation and death that are inevitable when factories do not have these safeguards.

There is an estimated 7 billion individual garments imported every year from Bangladesh. A mere 10 cents tacked on to the price of each garment would generate $700 million a year – more than enough revenue to cover these necessary factory updates.

While European countries are making moves to show their support for improvement, only two American retailers (PVH and Abercrombie & Fitch) have signed an accord agreeing to improve factory conditions for workers in Bangladesh. Other American retailers including Walmart, GAP, JC Penney, and others think American consumers would be unwilling to pay the extra 10 cents needed to keep thousands of workers out of harm’s way.

Consumers need to SPEAK UP and let retailers know we are willing to pay 10 cents. Sign a pledge that you will pay 10 cents more to protect workers. When consumers band together, they have amazing power to influence even the biggest corporation’s decisions.

Let your voice be heard! Take the 10 cents pledge today!

FDA launches new campaign to keep consumers safe from illegal online pharmacies – National Consumers League

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By Rebecca Burkholder, NCL Vice President for Health Policy

The sales of counterfeit drugs through bogus online pharmacies continue to rise. According to a recent survey by the U.S. Food and Drug Administration, nearly one in four adult Internet consumers has purchased prescription medicine online. Some of these Internet users may be at risk of harm because they have purchased medicine from questionable online sources.  To protect consumers from the growing threat of fake online pharmacies, FDA is launching a national educational campaign, “BeSafeRx – Know Your Online Pharmacy.” The campaign seeks to increase public awareness about the dangers of buying from illegal online pharmacies and provides resources to help consumers buy prescriptions safely online.

The National Association of Boards of Pharmacy (NABP) estimates that more than 97 percent of websites that present themselves as online pharmacies do not meet pharmacy laws and NABP’s practice standards. These websites are often selling unapproved versions of medicines used in the United States—or worse, the drugs may be made with harmful ingredients.  A 2011 Wall Street Journal report, estimated that the counterfeit drug industry netted $24 billion worldwide every year. These drugs are not FDA approved, have not been tested, and their contents are unknown. Consumers should not be tempted by the appeal of cheap drugs at the risk of their health.

The BeSafeRx website contains an interactive map that lets consumers search for licensed online pharmacies in their state. A few signs that an online pharmacy might be illegitimate include:

  • The Web site does not ask you for a prescription before purchasing the drug.
  • There is no doctor or pharmacist you can easily talk to if you have questions or concerns regarding a drug.
  • The Web site asks you to pay for the prescription using a third party payment system such as Western Union or PayPal.

Every year, the FDA issues numerous warnings about counterfeit versions of drugs intended to treat cancer patients. The stakes are high, and with the counterfeit market continuing to expand, many in Washington want to take action to curb this problem. One bill proposes a track-and-trace system that mandates a bar code be placed on prescriptions and then be scanned by everyone who comes in contact with the drug so the medication can be better tracked through the supply chain.

Buying counterfeit drugs can not only hurt your health, but also hurt your wallet. If you think you have purchased counterfeit drugs please report the incident to the FDA. For more information, check out our information on counterfeit drugs at Fraud.org. Before purchasing any drugs online make sure you are using a reputable online pharmacy.

FDA energized to reexamine caffeine added to products – National Consumers League

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By Teresa Green, Linda Golodner Food Safety & Nutrition Fellow

The biggest buzz in the food community in the last few weeks has been around FDA’s announcement to take a closer look at caffeine added in food products.  This recent trend has led to caffeine showing up in products ranging from gum, to marshmallows, to maple syrup, to cracker jacks.

Given the increasing popularity of energy drinks, it should come as no surprise that companies are trying to tap into that market.  However, because there have been some deaths linked to energy drink consumption, and because many of the foods that have added caffeine are particularly attractive to children and teens, FDA has decided to look into these products.

After the announcement by FDA, Wrigley’s, which had been developing a caffeinated gum, has decided to withdraw the product “out of respect” for FDA.  This demonstrates the power of targeted action by the agency.  In a time of constrained resources, it is understandable that FDA has to prioritize.  This announcement by FDA clearly illustrates that one “warning shot” can send a message to the industry to change their behavior.  We hope the agency will continue taking similar action on food fraud and labeling issues, problems we consider important parts of FDA’s mission.

Protect music and sports fans from ticket industry abuses – National Consumers League

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Originally posted on the Public Citizen Consumer Law & Policy Blog.

By John Breyault, Vice President of Public Policy, Telecommunications and Fraud

When Beyonce recently announced her highly-anticipated “Mrs. Carter Show” tour, fans waited eagerly for the moment tickets went on sale. But at the magic moment, thousands of fans were disappointed to learn the show had sold out in seconds.

Was this just a simple case of too much demand for too little supply, just luck of the draw since not everyone could “win” in the contest for a limited number of tickets?  But the reality of today’s ticket marketplace is neither that simple nor that fair.

In fact, the ticketing procedures for the multibillion dollar sports and entertainment industry have become the antithesis of the fair marketplace that consumers have a right to expect, especially when so many concerts and games take place in taxpayer-subsidized facilities.

Instant sellouts like Beyonce’s occur in part because a large number of tickets are set aside for paid fan club and premium credit card “pre-sales” and for industry insider VIPs, leaving thousands of regular fans disappointed each time.  Sometimes, those pre-sale and VIP tickets are the ones that end up on resale websites. And ordinary fans are left with the sinking feeling that they never did have a chance to buy those tickets at face value in the first place.

In Nashville, for example, an investigative news unit revealed that only 1,001 of 14,000 tickets were offered to the general public for a recent Justin Bieber concert.  The overwhelming majority of the 14,000 seat arena was earmarked for pre-sales, available only to privileged premium credit card holders and paid fan club members.  Often, professional scalpers sign-up for multiple fan club memberships or use multiple American Express cards to gain access to pre-sale tickets to sell on the secondary market.

What’s worse, the investigation found an entire block of tickets held back from the public were then resold above face value by Bieber’s own tour, or as the local news headline put it: “Documents Show Bieber is Scalping His Own Tickets.”

The practice doesn’t stop with Bieber. Singer Katy Perry two years ago garnered unwanted publicity when the Smoking Gun website revealed that the standard rider for her concert tour reserved the option to hold back tickets and provide them to “resellers” for “distribution to the public” on the “secondary market,” the quantity and location of the tickets to be determined in each case by Ms Perry’s personal manager.  Or, as one pop culture website put it, Katy Perry Reserves the Right to Scalp Her Own Tickets, to her own fans at a price higher than the face value.The phenomenon of holdbacks and artists scalping their own tickets is neither new nor unique to just a few bad apples on the pop music scene.  A March 2009 Wall Street Journal article cites Neil Diamond scalping his own tickets on the Ticketmaster resale site, then flatly reports the following:Virtually every major concert tour today involves some official tickets that are priced and sold as if they were offered for resale by fans or brokers, but that are set aside by the artists and promoters, according to a number of people involved in the sales.

That includes recent tours by Bon Jovi, Celine Dion and Van Halen, and a current tour starring Billy Joel and Elton John.

No wonder then that it is almost impossible for ordinary consumers to buy tickets at “face value” when the tickets go on sale to the general public – and no wonder that venues, entertainers, promoters and the ticketing giant Ticketmaster are all loath to disclose to the public just how many tickets they are actually making available to the general public at the moment of the initial on-sale.

Yet once you do buy a ticket with your own money, the entertainment industry wants to control what you do with it.

More and more concert tours use restricted ticketing to limit your ability to resell or even give the ticket away. Under that system, you have to show up with the credit card you used to buy the ticket, or your entire party has to show up at the same time, in order to gain entry. If the goal is to limit the role of professional scalpers, why not deal with the problem at its source instead of inconveniencing every fan?

Consumer activism about what appears to be an unfair market has spurred legislators around the country to seek ways to level that playing field, and to prevent those who benefit from the unfair system from cementing their control over the secondary market.

In New Jersey, bipartisan groups of lawmakers are considering transparency legislation that would require ticketing agencies to disclose how many tickets to an event are actually available when they go on sale online to the general public. Other proposals would prohibit “bot” technology, software programs that grab large blocs of tickets before the general public has a chance to buy them.

Michigan legislators are considering similar proposals targeting software “bots” as well as proposals to ensure fans own the tickets they buy, barring the use of restrictive tickets that would limit fans’ ability to transfer those tickets whether as a gift or through reselling.

Minnesota’s House approved legislation last year to ensure ticket buyers own those tickets, and can transfer them or use them as they wish. The bill has been reintroduced this year as well.

In Tennessee, four legislators who originally co-sponsored a Ticketmaster-backed bill – called, with no sense of irony, the Fairness in Ticketing Act – that would restrict secondary market rights for ticket buyers, rescinded that support when they realized that consumers’ rights were being attacked.

The industry’s attempt to restrict the market in ways that benefit the entertainment and ticketing giants to the detriment of ordinary consumers extends to sports as well.

Both the New York Yankees and the Los Angeles Angels recently opted out of Major League Baseball’s deal with StubHub as the official resale marketplace, instead negotiating their own partnerships with Ticketmaster to establish, for example, the Yankees Ticket Exchange for reselling Yankees tickets.  Unlike the secondary market managed by MLB and StubHub, however, the new Yankees Ticket Exchange will have price floors, limiting both the ability of fans to buy cheap tickets and perhaps the ability of ticket holders to offer their seats for sale at a low market price if the team still has unsold tickets. Since many season ticket holders can only afford their seats by being able to lay off those games they do not want to attend, they could be left holding tickets that will not be used if the floor is imposed.  Already, it has been reported that ticket prices on the new Yankees Ticket Exchange are higher than on StubHub.

Consumers can benefit in many ways from secondary markets that allow them to buy and sell tickets, as long as those markets are transparent, competitive and consumer-protected. Consumers need to make our voices heard so that decision makers understand we want a fair market and an even playing field.

That is why the National Consumers League has joined with advocates and others, including StubHub, to support Fan Freedom (fanfreedom.org), which is fighting in states across the country for a fair deal for fans.

Consumers have a right to expect a fair and transparent marketplace.

Wireless cramming: The tip of a very large iceberg – National Consumers League

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By John Breyault, Vice President of Public Policy, Telecommunications and Fraud

Wireless cramming is at the top of the Federal Trade Commission’s agenda today, as government officials, advocates and industry representatives gather to discuss the issue and potential solutions at the FTC’s Mobile Cramming Roundtable. I am honored to present at the event, along with a number of other experts on the topic. For those loyal readers unable to watch the live webcast, I can sum up my comments thusly: Wireless cramming is a big problem and is only going to get worse without action by regulators to protect consumers.

Cramming fraud has been around for decades. Beginning in the late 1990s, enterprising scam artists learned that they could get small charges placed on consumers’ landline phone bills. With doctored “authentications” and poor policing by the phone companies and billing aggregators, scammers made millions of dollars. As consumers increasingly adopted wireless phones, the scam artists moved to those bills. Wireless cramming is proving to be just a lucrative for the fraudsters. In its first enforcement action against alleged wireless cramming outfit Wise Media, the FTC stated that the company made millions of dollars in less than two years of operation.

Wise Media is likely just the tip of a very large iceberg. While there is precious little data about the scope of the wireless third-party billing market generally and the cost of wireless cramming on consumers, we can make some educated estimates based on the data that is available.

Earlier this year, the California Public Utilities Commission (CPUC) published its Cramming Report, which reported that in 2011, wireless carriers in California billed $171 million for third-party products and services. According to the Federal Communications Commission’s most recent Wireless Competition Report, there were an estimated 34,892,000 wireless subscribers in California and 298,293,000 wireless subscribers nationally in 2011. Extrapolating the California data to a national scale therefore yields an estimated $1.46 billion in third-party charges were assessed on consumer bills nationally in 2011. According to recent reports from the Illinois Citizens Utility Board and the Vermont Attorney General, between 44 percent and more than 50 percent of charges on consumers’ wireless bills are fraudulent. This means that we are potentially looking at $643 million to more than $730 million in wireless cramming losses annually.

How did things get this bad? First of all, wireless cramming is practically the perfect scam for its perpetrators. Unlike muggings, carjacking or other types of crime, cramming victims are often unaware that they have been harmed. This is because the scammers typically only charge small amounts per month on consumers’ wireless bills – usually less than $10 per month.  Lost in the maze of fees on consumers’ bills and often deceptively labeled, these charges are easy to miss, even by those few consumers who check their wireless bills regularly. With the ease of paperless bills and auto bill pay, it is even easier for consumers to overlook these charges.

Second, the structure of the wireless billing ecosystem is inherently insecure. There are typically three main actors in this ecosystem: the third-party service provider who provides a service (say, horoscopes by text message), a billing aggregator who contracts with dozens or hundreds of third-party service providers and bills the wireless carrier on their behalf and the wireless carrier who bill the consumer and collect payment (typically 1/3 to ½ of the total charge). Given this lucrative line of business, there is an incentive to overlook instances of cramming at all levels of the billing ecosystem. Even worse, phone bills aren’t protected from fraud the way that credit or debit cards are. Therefore, consumers are essentially at the mercy of their carriers to refund the fraudulent charges when the end-user detects the scam.

When consumer groups and government agencies examined the issue of landline cramming in 2011 and 2012, the solution seemed self-evident to many – simply prohibit third-party billing that was unrelated to the underlying telephone service. Given that the vast majority of third-party billed charges on landline phones were fraudulent, this was an easy call. The solution is more complex when it comes to wireless bills.  By all accounts, legitimate commerce is conducted via wireless third-party billing. For example, relief agencies raised more than $43 million via text-to-donate programs after the 2010 Haiti earthquake. Simply prohibiting wireless third-party billing would clearly be regulatory overreach.

However, there are steps that can be taken to address cramming fraud. For example, cramming fraud operators often set up shell companies so that they can continue to operate even when consumer complaints get their operation shut down by wireless carriers or billing aggregators. If billing aggregators were to require all third-party service providers to post a significant bond before they can start billing consumers, it could make it prohibitively expensive for scammers to set up shell companies.

Another solution would be to prohibit the use of “negative options” in confirmatory text messages. Industry guidelines require the use of a “double opt-in” before a third-party service provider can begin billing. This is most often provided in the form of a reply to a confirmation text message (i.e., “are you SURE you want this? Text ‘YES’ to confirm”) Unfortunately, cramming fraud operators like Wise Media often use negative options – assuming that most recipients would simply ignore the confirmation text message and thus agree to be billed.

Third, the lack of public data on wireless cramming is a significant impediment to effective consumer protection. Wireless carriers in California are currently required to report cramming complaints to the California Public Utilities Commission, which makes this data public. Wireless carriers should be required to report all cramming complaints to the FCC so that regulators have an accurate picture of the scope of the problem.

These are just a few common-sense reforms that would do much to better protect consumers from fraud on their wireless bills. We look forward to working with the FTC, FCC and all parties in the wireless billing ecosystem to address this important issue.