Jeff Gelles: Consumer chief leaves FTC a feistier place

David Vladeck is departing as head of the consumer bureau that ferrets out unfair, deceptive, and anticompetitive practices.
David Vladeck is departing as head of the consumer bureau that ferrets out unfair, deceptive, and anticompetitive practices. (ALEX BRANDON/ AP)
Posted: December 03, 2012

It's easy to imagine harsh judgments - even the occasional blazing-hot eternity - for some of the people David Vladeck and his colleagues at the Federal Trade Commission have encountered in the last 3 1/2 years. But Vladeck will be satisfied if the marketplace gets the message, and if the worst actors never get a chance to repeat their misdeeds.

Vladeck will step down next month from his post heading the FTC's Bureau of Consumer Protection, a modest unit of about 425 people at a small federal agency with a large, multifaceted task: protecting consumers and the marketplace from practices that are unfair, deceptive, or anticompetitive.

He'll return to Georgetown University's law faculty, which he joined after a quarter-century at the Public Citizen Litigation Group. But at 61, Vladeck still hopes to lend a hand to the agency he's leaving and clearly hasn't given up the fight.

As an outsider, he cut his teeth as a litigator during the anti-regulation campaigns of the Reagan administration, battling a federal government he saw as falling short in its role as a protector of its citizens. He pushed, for example, to protect workers and consumers from exposure to toxic or carcinogenic substances such as urea-formaldehyde insulation. And he pushed back against the rigid use of cost-benefit analyses to measure a regulation's impact on businesses when be believed it grossly undervalued potential victims' lives.

Vladeck has shifted gears since joining the FTC. Now he fights with the weight of the federal government behind him - albeit with resources he compares to those of a midsize private law firm. For all the complaints about the size of government, the FTC is a counter-example. With about 1,200 employees, it is smaller than in the early 1980s, even though it polices a marketplace that has grown much larger and, with the Internet and mobile technology, ever more complex.

Critics sometimes portray the FTC as playing small ball, but its power and playing field are tightly constrained by federal law. Its fines are limited to $16,000 per violation per day - enough to slam a small company but barely a sting to most mega-corporations.

It has a limited role in financial markets, including no jurisdiction over banks - a shortcoming that left consumers in the lurch for a range of financial abuses overlooked by traditional banking regulators until the formation of the new Consumer Financial Protection Bureau.

But small ball? Not under Vladeck or his boss, Jon Leibowitz, chairman of the five-member commission, who lured Vladeck away from his academic role, which included helping run a public-interest law clinic and working with Georgetown's Center on Health Regulation and Governance.

The big money in the health business - or at its fringes - drew Vladeck's early attention. The agency had long held advertisers to a standard that claims in ads had to be backed by "reliable and scientific evidence," but advertisers had increasingly tried to push the envelope.

Once again, Vladeck pushed back, advancing a more precise definition of the term through settlements with major food companies and sports-equipment manufacturers. In one groundbreaking case, Nestle agreed in 2010 to drop claims that its Boost Kid Essentials protected against colds and flu by strengthening children's immune systems, all thanks to probiotics - "good" bacteria, like those in yogurt - delivered through a straw that came with the drink.

If Nestle wants to claim that Kid Essentials reduces the risk of colds or flu, it needs preapproval from the Food and Drug Administration. To claim that it cuts school absences and the duration of acute diarrhea, it needs "at least two well-designed human clinical studies."

Under Vladeck, bureau lawyers won similar settlements with Dannon over digestive- and immune-system health claims for Activia yogurt; Kellogg's, over claims that children who ate Frosted Mini-Wheats daily "improved their attentiveness by nearly 20 percent" and that Rice Krispies improved immune function; and Skechers and Reebok over claims that their toning shoes could lead, as Reebok put it, to "better legs and a better butt with every step," in agreements that won $65 million in refunds for consumers.

But if those cases, and other high-profile cases such as those involving privacy violations by Google and Facebook, have drawn more attention, they're not all he cares about - or even at the top of the list for Vladeck and the team of "wonderfully dedicated men and women who spend 50, 60, 70 hours a week doing this work."

Speaking last week to the Consumer Federation of America, Vladeck said his agency felt a special duty as it saw what happened after the 2008 financial collapse. Scammers were targeting the "last dollar" of people who had already lost nearly everything - jobs, homes, creditworthiness, even their hope.

It doesn't speak especially well of humanity, but the evidence is abundant: People already on the edge are frequent targets for fraudsters who promise to settle their debts, rescue them from foreclosure, dangle new sources of income, or even promise bogus health insurance. Under Vladeck, the FTC has pursued more than 100 cases against such predators, often winning restitution and agreements barring the principals from ever striking again.

One of Vladeck's proudest cases was a $2.5 million settlement earlier this year with Asset Acceptance L.L.C., a Michigan company that Vladeck says pursued "zombie debt": debts so old that they weren't legally collectible and that may not have been owed in the first place. Consumers were scared and browbeaten into paying anyway.

"For us, the highest priority was trying to protect consumers who were rendered vulnerable by the economic downturn," Vladeck says.

Ed Mierzwinski of the U.S. Public Interest Research Group puts it plainly: "Under Vladeck, powerful companies are paying money for cheating consumers."

To do its job, sometimes government has to push back.


Contact Jeff Gelles at 215-854-2776 or jgelles@phillynews.com.

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