1. Home
  2. News
  3. 2006
  4. May

Current Events in May 2006

Browse Current Events by year

2006

Browse Current Events by month

Get trending consumer news and recalls

    By entering your email, you agree to sign up for consumer news, tips and giveaways from ConsumerAffairs. Unsubscribe at any time.

    Thank you, you have successfully subscribed to our newsletter! Enjoy reading our tips and recommendations.

    PayPal, Equifax Team Up To Offer Credit Monitoring

    It sounds good but read the agreement carefully

    Online payment processor PayPal has put together a joint venture with Equifax to offer "free" credit monitoring to PayPal customers but, not surprisingly, careful consumers need to read the agreement carefully.

    Like Equifax's other credit monitor offerings, the service would notify PayPal customers if inquiries for credit are made in their names, and if their credit balances rise or fall according to pre-set alerts.

    The service would be free for PayPal users, including a toll-free number to call in case of possible fraud or identity theft.

    Equifax executive Steve Ely said in a press statement that "Our credit alert product gives PayPal users a convenient and easy way to help prevent their information from getting into the hands of identity thieves."

    Equifax's agreement with PayPal comes on the heels of a similar venture with SunTrust Bank, where the credit bureau is offering "select" SunTrust customers its "Credit Watch Silver" product for free, while normal subscriptions cost $49.95

    Look Again

    But a closer look at the offer indicates that all might not be so rosy for users of these services.

    According to the "Terms Of Use" agreement provided by Equifax when signing up for the PayPal monitoring service, the company reserves the right to change the offer at any time, possibly including switching from a free service to a paid subscription.

    The agreement also specifies that users are forced into binding arbitration if they have any disputes with the service, rather than pursue litigation, except in small claims court.

    According to the agreement, "you will not be able to bring a class action or other representative action in court, nor will you be able to bring any claim in arbitration as a class action or other representative action."

    Arbitration has been heavily criticized by consumer groups, and even some lawyers, for shifting too many costs of a dispute onto the consumer, and placing them at a disadvantage in negotiations.

    Many consumers, even those who have been victimized by identity theft, are reluctant to utilize free credit monitoring because they fear they'll be "baited and switched" into using a paid service. Others simply don't trust the company that lost their data to watch over it effectively after the fact.

    When a laptop containing data on thousands of students, faculty, and retired employees for the Vermont State College system was stolen, one former faculty member signed up for Experian's free credit monitoring service provided by the university.

    She ended up subscribing to Experian subsidiary ConsumerInfo's paid "Credit Monitor" service at $7.95 a month without her consent.

    PayPal, Equifax Team Up To Offer Credit Monitoring...
    Read lessRead more

    Get trending consumer news and recalls

      By entering your email, you agree to sign up for consumer news, tips and giveaways from ConsumerAffairs. Unsubscribe at any time.

      Thank you, you have successfully subscribed to our newsletter! Enjoy reading our tips and recommendations.

      H&R Block Threatened Employees, Spitzer Charges

      New York Attorney General Eliot Spitzer says tax preparation giant H&R Block threatened tax preparers who refused to push IRAs loaded with hidden fees and low interest rates.

      Spitzer amended a lawsuit he filed against Block on March 15, citing additional evidence of fraudulent marketing of individual retirement accounts.

      In his original complaint, Spitzer alleged that the H&R Block Company steered hundreds of thousands of customers into IRAs that were almost guaranteed to lose money. The complaint cited e-mails in which H&R Blocks own employees characterized the companys Express IRA as a bad investment that they could not in good conscience recommend to clients.

      In an amended complaint, the Attorney General cites new evidence showing that the companys senior management did more than simply ignore the concerns of its tax preparers; management penalized H&R Block tax professionals who refused to push the product.

      "In addition to designing a flawed product with hidden fees and marketing it fraudulently to unsuspecting customers, senior management steam-rolled conscientious employees who objected to the fact that clients were losing money," Spitzer said.

      The newly-obtained evidence cited in the amended complaint includes statements by former H&R Block employees indicating that:

      • Managers disregarded complaints from tax preparers about misleading marketing of the Express IRA;

      • Managers instructed tax preparers "to make a positive presentation" of the Express IRA and "avoid mention of negatives;"

      • Managers told tax preparers at conferences to "sell more IRAs" or "theres the door;"

      • As late as the current tax season (2006), tax professionals who refused to sell the Express IRA because it was not appropriate for their clients had their access to customers limited by managers.

      H&R Block introduced the Express IRA in 2002, claiming that it "paid great rates" and was "a better way to save," but the product paid less than one percent interest at times, and 85 percent of those who enrolled paid more in fees than they earned in interest.

      The lawsuit specifically alleges that H&R Block failed to adequately disclose its fees to customers, failed to warn them that the interest paid would not cover the fees in certain circumstances, and misleadingly described interest rates as "great" when they were actually low.

      This incomplete and misleading disclosure violated New Yorks consumer fraud law and was a breach of the companys fiduciary duty to its clients, Spitzer alleged.

      Settlement discussions earlier this year broke down when the company balked at making full refunds to customers for undisclosed fees. The company now faces statutory penalties of up to $250 million if found to have violated the law.

      H&R Block Threatened Employees, Spitzer Charges...
      Read lessRead more

      Disney Dumps McDonald's

      Meals Won't Be As Happy


      Mickey Mouse and Ronald McDonald are going their separate ways. After a ten year joint marketing agreement, Walt Disney Company said it will not renew its arrangement with McDonald's to provide promotional figurines for the restaurant chain's Happy Meals.

      The last Disney Happy Meal promotion will be this summer, with the release of "Cars and Pirates of the Caribbean: Dead Man's Chest."

      Disney isn't giving a specific reason for the breakup, but the Los Angeles Times quotes a number of high-ranking company sources as saying Disney would like to put some distance between itself and McDonald's menu offerings, increasingly being blamed for obesity.

      The Times also quotes a source at rival studio DreamWorks as saying studio executives are having second thoughts about a deal with McDonald's to promote "Shrek 3," set for release next year. Shrek is, after all, a little on the hefty side.

      McDonald's, feeling the heat from nutrition advocates, recently launched a campaign to educate its customers about healthy food choices.

      Eric Schlosser, author of "Fast Food Nation," told the Times that McDonald's has it within its power to reduce the flak it's receiving. "The obesity issue would be irrelevant if the food in the Happy Meals was healthy," he said.



      Disney Dumps McDonald's...
      Read lessRead more

      Coming Soon: No-Mow Grass

      Bad News for John Deere

      For anyone tethered to a lawnmower, the Holy Grail of horticultural accomplishment would be grass that never grows but is always green.

      Now, that vision of suburban bliss seems plausible; scientists have mapped a critical hormone signaling pathway that regulates the stature of plants. In addition to lawns that rarely require mowing, the finding could also enable the development of sturdier, more fruitful crop plants such as rice, wheat, soybeans, and corn.

      In a paper published in the journal Nature, Howard Hughes Medical Institute scientists report they have deciphered the signaling pathway for a key class of steroid hormones that regulates growth and development in plants.

      "By manipulating the steroid pathwaywe think we can regulate plant stature and yield," said Joanne Chory, a Howard Hughes Medical Institute investigator at the Salk Institute for Biological Studies, and the senior author of the new report.

      Manipulation of plant stature has been a longstanding goal in horticulture, agronomy, and forestry. The ability to control plant size precisely would have broad implications for everything from urban forestry to crop and garden plant development.

      Beyond perpetually short grass, trees could be made more compact for better growth in crowded cities, and berry bushes could be made taller for ease of harvesting.

      To chart the pathway, Chory and colleague Grgory Vert of the Salk Institute's Plant Biology Laboratory examined the molecular influence of a family of plant hormones known as brassinosteroids. Scientists have found brassinosteroids in all plants where they have looked for them.

      As critical chemical messengers of plant development, they are found in low levels in virtually all plant cells, including seeds, flowers, roots, leaves, stems, pollen, and young vegetative tissue.

      "Without them, plants are tiny dwarves, with reduced vasculature and roots, and are infertile," Chory explained. "They also regulate senescence or aging. Since brassinosteroids mainly regulate cell expansion, though, they are one of the most important hormones that regulate stature."

      Knowing the molecular chain of command -- how the hormone acts to influence genetic events that govern development at the cellular level -- gives scientists a way to reshape the steroid pathway to develop plants that grow in specified ways.

      "We might be able to dwarf grass and keep it green by limiting brassinosteroids or increase the yield of rice by having more brassinosteroids in seeds," Chory said. Another recent study by Makoto Matsuoka's group in Japan, she said, showed that limiting brassinosteroids in rice affected leaf angle and improved yield in densely planted fields.

      Coming Soon: No-Mow Grass...
      Read lessRead more

      GAO: Broadband Access Difficult To Measure

      There's not only a lack of broadband access in rural areas of the U.S., there's a lack of information about broadband access in rural areas

      There's not only a lack of broadband access in rural areas of the U.S., there's a lack of information about broadband access in rural areas, according to a new study by the Government Accountability Office (GAO).

      All the while they've been winning favorable treatment from Congress, the major telecommunications carriers have been promising to bring high-speed Internet access to rural areas. But there's little evidence that's actually happened and the foot-dragging is likely to become an issue in the upcoming off-year elections.

      President Bush has made a commitment to ensuring all Americans have access to low-cost broadband service, but major telecommunications companies have been slow to roll out connections to remote areas, citing costs and a supposed lack of demand.

      The GAO's report found that while broadband deployment in the United States is extensive and picking up speed, many factors make it difficult to assess gaps in rural or underpopulated areas.

      Among the report's findings:

      • 30 million American households utilized some form of broadband Internet access in 2005. Of those households, the type of connection was split roughly 50-50 between cable and DSL. However, the FCC's survey data was built on analyses on the level of subscriber Zip codes, not where providers have set up infrastructure. The GAO analysts believed this could create inaccurate estimates of which areas are lacking in broadband access.

      • Telecom companies and associations interviewed by the GAO cited population density and terrain makeup as chief factors that make broadband deployment expensive, as well as the need for "aggregating" deployment of broadband infrastructure around an "anchor point," such as a large government agency or health care facility, to keep costs down.

      • The Universal Service Fund (USF), the tax on phone and broadband services for low-cost Internet development, has been a critical resource for providing rural and low-population states funding to build their telecommunications infrastructure. But several of the telecom companies interviewed for the report opposed expanding the USF to explicitly include support for broadband development, fearing that it would induce more "program expenditures," and higher costs with them.

      • Wireless technology was cited as an alternative to the costs of rolling out cable to rural areas, but difficulties in finding available spectrum and negotiating deals with municipalities hindered telecoms' entrance into providing Wi-Fi access in both urban and rural areas. Local municipalities are pursuing their own initiatives to set up wireless Internet access in regions not served by major telecom providers.

      All of these issues are up for debate as the House and Senate reconcile different versions of updates to the 1996 Telecommunications Act.

      The Senate version of the bill, introduced by Commerce Committee chairman Ted Stevens (R-AK), includes provisions to allow municipalities to run their own Wi-Fi networks or negotiate with telecom companies to do so, without seeking permission from state authorities.

      The Stevens bill also provides for increased collection for the USF, which provides funding for many services in Stevens' home state of Alaska.

      Stevens was one of the requesters of the GAO report, along with his minority counterpart Sen. Daniel Inouye (D-HI), and House Commerce and Energy chair Rep. Joe Barton (R-TX).

      Barton, a longtime friend of the telephone companies, is the author of the "Communications, Opportunity, Promotion, and Enhancement" act, the House version of the new telecommunications legislation. The Barton bill would enable telecom providers to create local cable franchises in regions without having to undergo the same regulatory process cable companies did.

      The Barton bill also precludes local municipalities from setting up public Wi-Fi networks when existing Internet providers are already available. The issue has become a sore spot for many city governments, particularly in New Orleans, where BellSouth has been lobbying to shut down the city's emergency Wi-Fi network.

      Both bills have been under heavy public scrutiny due to the debate over "Net neutrality," the principle that all Internet content should be accessed equally, and users shouldn't have to pay extra money for faster service.

      Supporters of Net neutrality believe that companies like Verizon and AT&T (formerly SBC) will be restricting access to Web content according to who can pay the most money, and have engaged in a massive lobbying effort to prevent that from becoming accepted practice.

      The Barton bill is currently not on the House's agenda for the week, as the House Judiciary Committee has demanded it be referred to them. Judiciary Committee Chair F. James Sensenbrenner outlined "35 pages of reasons" why the bill's provisions fall under his jurisdiction, according to the National Journal.

      If Sensenbrenner gets the bill referred to Judiciary, action on the House version of the legislation could be delayed for several weeks while the committee discusses it and sorts out the politics of the matter.

      GAO: Broadband Access Difficult To Measure...
      Read lessRead more

      Fired DirecTV Contractors Say They Refused To Lie To Customers

      Technicians say they wouldn't tell customers to hook up their satellite receivers to phone lines

      A group of technicians employed by a contractor for DirecTV say they were fired for exposing the company's alleged practice of heavily pushing customers to hook up their satellite receivers to phone lines, even though the service doesn't require it.

      The technicians, who worked for cable and satellite infrastructure provider MasTec in Orlando, Florida, told news station Local6 that they were pressured to tell customers "anything you have to" in order to get them to hook their receivers to phone lines.

      Technician Frank Martinez told Local6 that he was ordered to "tell them if these phone lines are not connected, the receiver will blow up."

      Technicians said that $5 was deducted from their paycheck for every receiver they installed without the phone line connection.

      As a result of the May 1st report, the technicians were promptly fired from MasTec, and say they are pursuing legal action against their former company and DirecTV.

      The DirecTV service doesn't require a phone connection to order pay-per-view movies or events, as that can be done via the company's Web site or over the phone.

      So what does media mogul Rupert Murdoch's satellite service gain from the procedure?

      Money, for starters. Each phone line connection could cost a customer as much as $52 per room, according to the Local6 report, and another $50 for a wireless phone jack.

      Not only that, but the company collects data on transactions made through the phone lines for its own purposes. That could mean anything from targeted advertising, to selling the information to other subsidiaries of the Murdoch empire, or other businesses.

      DirecTV partner TiVo came under fire in 2004 for collecting information on the shows its users recorded, and being able to track specific instances of rewinding or pausing a show.

      Although TiVo clearly disclosed its practice and gave customers the ability to "opt out", users of DirecTV's TiVo service often had difficulty changing their recorder's settings to prevent the data being relayed back to the company, according to postings on customer forums.

      The relationship between MasTec and DirecTV is equally cozy.

      DirecTV is MasTec's biggest client, paying it more than $300 million in new installations in 2005. The company is a major player for both cable and telecom companies, providing them with the crucial "last-mile" connections for high-speed television and broadband services to customers' homes.

      Bob Apple, current president of MasTec's "Energy Group" division, was formerly Senior Vice President of DirecTV, ironically focused on the "installation, warranty, and service businesses," according to his company bio.

      MasTec has also has financial and investment troubles over the years. In April 2006, the company settled several lawsuits which claimed it had overstated its earnings and deceived shareholders.

      According to the company, the lawsuits were settled without paying the plaintiffs, even though "the company believes it would have been successful in defense of these actions."

      In Mastec's words, "Management concluded that entering into the settlement was the prudent course of action, given the low amount of the settlement, the inherent risk and uncertainty of legal proceedings, and the substantial time and expense required to defend these cases."

      DirecTV's own business practices have been regularly questioned by customers, particularly those who have been repeatedly billed for adult-oriented programming they say they did not order.

      The company recently paid millions to settle a 22-state investigation into claims that its partner telemarketing firms were violating the Do-Not-Call Act in order to get new customers.

      It also had to cough up another $5 million to settle charges of deceptive advertising, bad billing procedures, and not providing service requested by customers.

      Fired DirecTV Contractors Say They Refused To Lie To Customers...
      Read lessRead more

      FDA Not Ready To Order Recall Of Bausch & Lomb ReNu

      Though suspicion continues to mount, the FDA says it has not concluded there is enough evidence to initiate a recall.

      Though suspicion continues to mount that Bausch & Lomb's ReNu products are behind an outbreak of a rare but serious eye infection, the FDA says it has not concluded there is enough evidence to initiate a recall.

      The agency says patients with confirmed cases of Fusarium keratitis have reported using various contact lens cleaning solutions including various types of ReNu products and generics.

      "We continue to confirm reported cases associated with products other than ReNu with MoistureLoc," the FDA said in a statement.

      "Our interest in the MoistureLoc product is based on the disproportionate number of case of Fusarium keratitis associated with ReNu with Moisture Loc compared to the overall product market share. The trends of reported cases involving various contact lens solutions other than MoistureLoc have remained consistent throughout our investigation," FDA said.

      As of May 5, the Centers for Disease Control said it had received reports of 102 confirmed cases, 12 possible cases and 81 cases still under investigation from 31 U.S. states and territories.

      CDC said not all data are available for all confirmed cases. However, as of May 2, 2006, of the 58 confirmed cases for which CDC has complete data:

      • 56 wear contact lenses;
      • 32 reported using any B&L; ReNu with MoistureLoc;
      • 15 reported using any B&L; ReNu MultiPlus;
      • 7 reported using any unspecified B&L; ReNu;
      • 3 reported using any AMO product;
      • 3 reported using any Alcon product

      Some cases reported using more than one type of solution and therefore the solution categories are not mutually exclusive.

      Last week a Wall Street analyst downgraded Bausch & Lomb stock, saying it was likely more of the company's product would be recalled. So far, the FDA has not taken that step.

      "FDA continues to work with the CDC to investigate the Fusarium keratitis infections and will determine whether or not further action needs to be taken" the agency said. "While the investigation is ongoing, FDA will continue to update the public health notice and advice to consumers as needed."



      FDA Not Ready To Order Recall Of Bausch & Lomb ReNu...
      Read lessRead more

      Bausch & Lomb Facing Multiple Lawsuits

      Contact Lens Wearers Suffered Severe Eye Infections

      Bausch & Lomb faces a growing number of lawsuits from users of its ReNu contact lens solution, which is now suspected in at least 186 cases of eye infections in 29 states. Without prompt treatment, the infection can scar the cornea and blind its victims. At least eight patients have required cornea transplants.

      In Florida, Zoe Wade said she suffered an infection so severe that her left eye had to be removed to stop the infection from reaching her brain. Wade said she began using Renu MoistureLoc last July. By October, she was suffering from a severe case of Fusarium keratitis, a fungal infection.

      "The pain is very traumatic ... It's like your head is going to come off," Wade said at a news conference.

      Barbara Cavallaro, of Cranston, Rhode Island, said she is suing after she was forced to undergo a corneal transplant. Cavallaro's lawyer, Peter Wasylyk has filed a $5 million class action suit and an individual suit federal court in Providence.

      Cavallaro said the trouble started in October. It took weeks before a Harvard Medical School expert finally diagnosed it as Fusarium keratitis. Cavallaro said it was all because of her contact lens solution, the Bausch & Lomb Renu with Moisture Loc.

      Carvallaro said her sight is permanently damaged and she'll need two more surgeries. Because of the transplant, her eyes are now two different colors -- one is brown and the other is blue. She said her vision will never be the same.

      Time Line

      The company stopped sales of ReNu contact lenses with MoistureLoc solution last month after the product was linked to an apparent outbreak of Fusarium keratitis, a serious eye infection. Now, the company says it was alerted last fall to a rise in infections among lens wearers in Hong Kong.

      Hong Kong officials said they had interviewed 62 patients, of whom 25 said they had used a ReNu solution. Seven of those 25 patients had the Fusarium keratitis infection, officials said.

      The company also said earlier this week that Renu, which generated $45 million in U.S. sales last year, had been linked to a "handful" of eye infection cases in Europe but did not disclose the number of cases.

      It's estimated that a third of the 30 million Americans who wear contacts use a Bausch & Lomb lens solution.

      The Centers for Disease Control and Prevention said it is investigating 186 cases of the eye infection; 73 of those cases have been confirmed but the CDC isn't saying how many patients had used a ReNu solution.

      Officials say that a high incidence of the affected patients interviewed had used ReNu with MoistureLoc, which was introduced in 2004.

      The FDA and CDC say it could take a month or more to determine if MoistureLoc was indeed the cause of the infections. Inspectors have been examining the Greenville, S.C., plant where the solution is made for Far East and U.S. markets.

      Symptoms of the infection can include blurry vision, pain or redness, excessive discharge and increased sensitivity to light.

      Company Response

      Although the company has stopped shipments of the product and asked retailers to remove it from their shelves, it has declined to call those actions a recall.

      "Bausch & Lomb has not yet recalled ANY of its products. Rather, its ReNu MoistureLoc has been taken of the shelves. Who can I speak to about this inaccuracy?" said Grace Healy of the Hill and Knowlton public relations firm in an email to ConsumerAffairs.com.

      Other pharmaceutical companies facing potential problems have taken much more aggressive measures to alert their customers of the possible dangers.

      Ophthalmologists' Advice

      "The wearing of contact lenses is generally very safe, but this outbreak of infections is certainly something to be concerned about," said H.Dunbar Hoskins, MD, executive vice president of the American Academy of Ophthalmology.

      "Ophthalmologists across the country are sending in reports to help with the investigation, while at the same time making sure our patients who wear contact lenses are aware and informed."

      The Academy recommends that consumers follow these precautions:
      • Wash your hands with soap and water and dry them before handling lenses.
      • Wear and replace your lenses according to the schedule prescribed by your doctor.
      • Follow instructions from your doctor and your solution manufacturer for cleaning and storing your lenses.
      • Make sure you always use fresh solution and replenish the solution daily.
      • Keep your contact lens case clean and replace every three to six months.
      • Remove the lenses and consult an ophthalmologist immediately if your eyes become red or irritated or your vision changes.

      Regardless of what cleaning/disinfecting solution you use, consider performing a "rub and rinse" lens cleaning method rather than a "no-rub" method in order to minimize the number of germs to reduce the chances of infection.



      Bausch & Lomb Facing Multiple Lawsuits...
      Read lessRead more

      FTC Asked to Crack Down on Videos Aimed at Infants


      Citing a lack of evidence that screen media is beneficial for babies and growing concern that it may be harmful, a consumer group has filed a complaint with the Federal Trade Commission (FTC) against Baby Einstein and Brainy Baby, two of the leading producers of videos for infants and toddlers, for false and deceptive advertising.

      The Campaign for a Commercial-Free Childhood charges that the companies are falsely marketing their videos as educational for babies.

      CCFC is asking the FTC to prohibit Baby Einstein and Brainy Baby from making claims about the educational and developmental benefits of their videos and require that advertisements, packaging and websites for all baby videos prominently display the American Academy of Pediatrics' (AAP) recommendation of no screen time for children under two.

      "These companies are exploiting parents' natural tendency to want what's best for their children and their deceptive marketing may be putting babies at risk." said Dr. Alvin F. Poussaint of the Judge Baker Children's Center and Harvard Medical School.

      Research suggests that television viewing for babies is negatively associated with cognitive development, regular sleep patterns, and time spent interacting with parents and engaged in creative play.

      CCFC's complaint charges that the videos' packaging, websites, advertisements, and even the names "Baby Einstein" and "Brainy Baby" are likely to mislead parents into believing that they are beneficial to babies' development.

      For instance, on its website, Baby Einstein claims its Baby Wordsworth video -- designed for babies as young as one year -- "will foster the development of your toddler's speech and language skills." Similarly, Brainy Baby's claims on its website that its "brain stimulating" Peek-A-Boo video "helps nurture such important skills as object permanence, communication skills, cause and effect, language development and many others."

      "The industry, when pressed, acknowledges they have no proof these products do what they say they do," said pediatrician Dr. Dimitri Christakis, a researcher at Children's Hospital and Regional Medical Center in Seattle and the senior author of "A Teacher in the Living Room," a study on educational media for babies, toddlers and preschoolers released in 2005 by the Henry J. Kaiser Family Foundation.

      "Their unfounded claims undermine the research-based advice that families in my practice deserve."

      "Baby Einstein and Brainy Baby clearly violate the consumer protection laws. The Federal Trade Commission Act prohibits companies from making false claims or claims they cannot substantiate." said Jennifer Prime of the Institute for Public Representation at Georgetown University Law Center, which is representing CCFC in its complaint.

      There are clear signs that the marketing of baby videos is effective. To date, sales of videos for babies for children under two are estimated at more than $1 billion. Last year, Disney's Baby Einstein alone took in about $200 million. By contrast, only 6% of parents are aware of the AAP's recommendation of no screen time regardless of content for children under two.

      "Parents need honest information They have a right to know that baby videos aren't really educational and may even be detrimental to their babies' development," said Dr. Susan Linn, CCFC's co-founder and author of Consuming Kids. "Just because the marketing and media industries want to lure babies and toddlers to screens doesn't mean that Baby Einstein and Brainy Baby can mislead parents about the benefits of their products."

      FTC Asked to Crack Down on Videos Aimed at Infants...
      Read lessRead more

      AT&T Plans to Kill Cingular Name

      Reincarnated Telco Giant Finds Its Own Moniker More Singular

      First Paris Bennett, now this. Reborn telco giant AT&T plans to ditch the Cingular brand name and replace it with something it finds more "elegant." And what might that be? Why, AT&T Wireless, of course.

      Cingular's corporate parents, AT&T (nee SBC) and BellSouth, have spent an estimated $4 billion to turn it into one of the best-known names in the country and, through sponsorship of "American Idol" and similar shows, given it strong appeal to the younger set.

      AT&T Wireless, on the other hand, may sound vaguely familiar to consumers of a certain age. That's because there's already been an AT&T Wireless. The name changes in the telecom industry the last few decades have been so constant and so confusing, it's like trying to keep the players straight at a Jim Smith convention, so we won't repeat it all here.

      But marketing professionals are aghast at the notion that AT&T would throw its red-hot Cingular brand into the dustbin in favor of AT&T, which Advertising Age said conjures up little more than "images of the rotary dial."

      (Note to younger readers: Once upon a time, telephones were attached to the wall with a wire. There was a circular dial, sort of like an alloy wheel, that the user had to physically spin with his or her finger. This was called "dialing.")

      AT&T says what it would be expected to say -- that the name change will "eliminate customer confusion and make a much more elegant solution."

      What AT&T is trying to say is that it is still transfixed with the notion of "bundling," which it has been talking about since at least the 1980s. Bundling basically refers to selling the consumer everything you can think of -- landline, wireless, cable, broadband -- on a single account.

      The concept has been popular with traditional telephone executives for at least a generation but it has never quite caught on with consumers, partly because no one yet offers an entire range of services under one brand but also because consumers are always looking for the next new thing, perferably with a singularly appealing new name, like Cingular.

      Whether or not bundling matters, marketing experts interviewed by Advertising Age had little good to say about renaming Cingular.

      Jonathan Asher, president of Dragon Rouge USA, a branding and design consultancy called AT&T "my father's brand of telephony."

      Its only good attributes are "incredible recognition, incredible heritage and somewhat reliable." Its not-so-good ones -- "stodgy, old fashioned, big, heavy and dated."

      Cingular's hip image just may be obliterated when it gets pulled into AT&T's logo, which many advertising types refer to as the "death star." Check back with us a few billion dollars from now for the answer.

      AT&T says what it would be expected to say -- that the name change will "eliminate customer confusion and make a much more elegant solution." ...
      Read lessRead more

      Credit Counseling Agency Pays $2.4 Million to Settle Federal Charges

      Marketed themselves as a non-profit

      A credit counseling agency and related companies have agreed to settle Federal Trade Commission charges that they deceptively marketed themselves as a not-for-profit enterprise to entice financially distressed consumers to enroll in debt management plans, and then failed to deliver on promises of personalized credit counseling and dramatic and immediate interest rate reductions.

      Under proposed settlements, Lighthouse Credit Foundation Inc. and its co-defendants will pay more than $2.4 million in consumer redress, and they are prohibited from making deceptive claims about credit counseling or debt management services.

      According to the FTC's complaint, Integrated Credit Solutions, Inc. solicited consumers for Lighthouse's debt management plans by leaving prerecorded messages on home answering machines stating that the consumer had been approved through "a certified non-profit nationwide program" to consolidate credit card debt before the next billing cycle at interest rates "as low as 1.5%."

      People who responded to the messages were told that the program included counseling on how to manage finances, and that a monthly administrative fee was tax-deductible because Lighthouse was a nonprofit organization. Consumers agreed to pay large fees to enroll in debt management plans based on these representations, the complaint alleges.

      The FTC's complaint alleges that the defendants neither provided the promised interest rate reductions nor lowered interest rates before the consumers' next billing cycle, noting that it typically takes three to four billing cycles before interest rates can be reduced under a debt management plan.

      Consumers were not provided with financial counseling, and the monthly administrative fee was not tax-deductible, the FTC alleged. According to the FTC's complaint, Lighthouse acted as part of a for-profit enterprise with its co-defendants to generate substantial revenue from the fees paid by consumers.

      The proposed settlements prohibit the companies and their principals, Mary M. Melcer and J. Steven McWhorter, from making misrepresentations about credit counseling or debt management services, including non-profit or tax-exempt status, financial counseling, interest rate reductions, and the deductibility of fees.

      The defendants must honor cancellation, refund, and termination requests from consumers, and follow certain recordkeeping and reporting requirements to assist the FTC in monitoring their compliance. In addition to the defendants' payment of $2,371,380 in consumer redress, the corporate defendants will set aside $415,000 to refund the enrollment fees of consumers who complete their debt management plans.

      The FTC's complaint alleges that Jeffrey E. Poorman and Daniel M. Melgar, Sr., without participating in the alleged deception, received proceeds of the illegal conduct as shareholder distributions from co-defendant Flagship Capital Services Corporation, Integrated's parent company.

      Poorman has settled with the FTC, agreeing to pay $105,000. The FTC is proceeding with its claims against Melgar. The FTC acknowledges the valuable assistance of the Attorneys General in California, Florida, Massachusetts, and Vermont, who settled claims against Lighthouse, Integrated, and/or Flagship in 2004 and 2005.

      Credit Counseling Agency Pays $2.4 Million to Settle Federal Charges...
      Read lessRead more

      Congress Wrestles with Net Neutrality

      Net neutrality gets a boost and a setback

      Net neutrality, the principle that all content on the Internet can be accessed equally, received both a boost and a setback in Congress this week, as both the House and Senate introduced new legislation that could affect how consumers access the Web in virtually every way.

      After the House Commerce Committee voted 34-22 to defeat an amendment protecting Net neutrality from being added to new telecommunications legislation, House Judiciary Committee chair F. James Sensenbrenner (R-WI) and Rep. John Conyers (D-MI) asked for a referral of the legislation in order to add language that provides much stronger protection for net neutrality in the law.

      Whereas the current Commerce bill, sponsored by Rep. Joe Barton (R-TX), would grant authority to the FCC to handle disputes involving blocked access to Web content, the Sensenbrenner-Conyers draft would transfer authority to the Justice Department's antitrust division.

      Sensenbrenner achieved dubious fame last year for refusing to grant hearings on waiving the effects of the new bankruptcy laws in order to offer relief to victims of Hurricane Katrina.

      More recently, he authored a controversial immigration bill that would have made felons out of illegal immigrants, as well as anyone who might offer them assistance.

      The Sensenbrenner-Conyers draft is one of several competing bills proposed by Congressmen in order to address the Net neutrality issue. Rep. Ed Markey (D-MA), who sponsored the defeated Net neutrality amendment to the Barton bill, introduced his own "Network Neutrality Act of 2006" on the House floor on May 2nd.

      In his statement advocating the bill, Markey said that "Broadband network owners should not be able to determine who can and who cannot offer services over broadband networks or over the Internet."

      "The Network Neutrality Act of 2006 offers [Congress] a clear choice," Markey said. "It is a choice between favoring the broadband designs of a small handful of very large companies, and safeguarding the dreams of thousands of inventors, entrepreneurs, and small businesses."

      New House Majority Leader John Boehner (R-OH) said that full votes on the Barton telecom legislation will not be on the floor this week, due in part to the rising amount of public concern regarding net neutrality.

      "Sweeping Changes"

      Meanwhile, Senate Commerce Committee Chair Ted Stevens (R-AK) introduced yet another version of updates to the 1996 Telecommunications Act on May 1st.

      The Senate bill, while containing sweeping and far-reaching changes to laws on everything from recording television shows to broadband taxation, has no provisions for ensuring equal access to Internet content.

      Among the Stevens bill's offerings is the power for municipalities to run their own broadband networks, without having to seek permission from states to do so, and increased collection for the Universal Service Fund (USF), which provides funding for low-cost broadband services to rural American communities, including many in Alaska.

      As in the House, the Senate bill faces many obstacles to passage. Stevens' own co-sponsor, Sen. Daniel Inouye, expressed "numerous, substantive objections to the bill in its current form."

      Several Senators, including Olympia Snowe (R-MI) and Byron Dorgan (D-ND) have introduced bills designed to codify the principles of net neutrality into law, with the expectation that they will be addressed in any update of telecom legislation.

      Members of both parties have expressed increasing nervousness about making changes to laws that deal with Internet access in such close proximity to the Nov. 2006 Congressional elections. The net neutrality issue has exploded into mainstream awareness and provoked intense scrutiny as to how telecom companies intend to control Internet service.

      The "Save The Internet" coalition, a broad alliance of bloggers, consumer groups, academics, and special interests across the political spectrum, has delivered 500,000 petition signatures to Congress advocating protection of equal Internet access since its launch on April 24th.

      Wu, a coalition charter member, told Slate magazine that the "meritocratic" design of the Internet would be irreparably harmed by centralizing access control in the hands of a few large telecom companies.

      "When who you know matters more than anything, the market is no longer meritocratic and consequently becomes less efficient," Wu said. "At the extreme, a market where centralized actors pick favorites isn't a market at all, but a planned economy."

      Congress Wrestles with Net Neutrality...
      Read lessRead more

      New York Considers Tough Cell Phone Consumer Protection Law

      New York would offer the strongest cell phone consumer protections in the nation

      New York would offer the strongest cell phone consumer protections in the nation, under proposed legislation getting the strong endorsement of a number of consumer groups.

      The fight for the Cell Phone Consumer Protection Act is heating up as several groups publicly urged legislators not to bend to industry opposition and pass the legislation this year.

      "The cell phone industry has now out-ranked used car dealers as the most complained about industry in the nation -- we think consumers deserve and need better protections," said Lois Aronstein, AARP New York State Director.

      "With older New Yorkers mostly getting cell phones for use in an emergency, AARP strongly believes this legislation is a step in the right direction."

      The bill is a model for possible national legislation, requiring disclosure of all hidden fees and allowing people to cancel their contracts after they receive their first bill without penalty, consumer advocates say.

      The cell phone industry is heavily opposed to the legislation.

      The measure would require cell phone companies to:

      • disclose fees, surcharges and taxes to consumers;
      • allow consumers to cancel their contracts fifteen days after receiving the first bill without penalty;
      • require cell phone companies to provide more detailed coverage maps of where the phones will work; and
      • disclose to customers the cell phone's E-911 capabilities.

      AARP members from across the state were joined by representatives from the New York Public Interest Research Group (NYPIRG), Public Utility Law Project (PULP), and representatives advocating for safer college campuses for women. Assemblywoman Audrey Pheffer, chair of the Consumer Affairs and Protection Committee, and Assemblyman Daniel O'Donnell, sponsor of the Assembly legislation, lent a powerful voice to the need for stronger consumer protections for New Yorkers using cell phones.

      "As chair of the Consumer Affairs and Protection Committee I recognize that many consumers have concerns with their wireless service," said New York Assemblywoman Audrey I. Pheffer.

      "The committee has been working diligently this session with consumer advocates, as well as the wireless industry, to better understand the issues at hand and to find possible legislative solutions to these concerns brought forth by consumers," Pheffer said.

      "The need for consumer protection in this unregulated industry is critical. Cell phone users should know their rights as a consumer will be enforced under this legislation," said Assemblyman Daniel O'Donnell, sponsor of the Cell Phone Consumer Protection Act.

      "Hidden fees and bad coverage have brought consumers to a boiling point, especially after they are roped into long service contracts," added Aronstein. "We can't understand why the cell phone industry stands in the way of a law that will help its customers." The Better Business Bureau reported that more complaints were made about cell phones than any other business in 2004 and 2005. According to the New York State Consumer Protection Board, cell phones are the second most complain

      New York Considers Tough Cell Phone Consumer Protection Law...
      Read lessRead more

      Feds Gently Prod Food Marketers to Help Fight Childhood Obesity


      Since 1980, childhood obesity rates have tripled among adolescents and doubled among younger children, leading health experts to warn of a nationwide epidemic of chronic disease as today's children grow into adults.

      But top government agencies aren't pushing the panic button. Instead, they've held a workshop and released a report.

      The report released today by the Federal Trade Commission (FTC) and the Department of Health and Human Services (HHS) outlines "concrete steps" the food industry can take to make progress against childhood obesity. Both agencies said they will "monitor closely" food companies' response.

      Consumer groups didn't disagree.

      "Currently, virtually any food, no matter how nutritionally bankrupt, can be marketed to virtually any child, no matter how young," said Margo G. Wootan, Nutrition Policy Director of the Center for Science in the Public Interest (CSPI), a nonprofit nutrition advocacy group.

      "Parents are fed up with their authority being subverted by junk-food marketers. The industry's self-regulation system in this area has clearly failed," she said.

      Wootan said the FTC/HHS report made "welcome recommendations."

      "Importantly, the agencies recommend that food companies and the industry-funded Children's Advertising Review Unit, or CARU, set baseline nutrition standards for foods that can be marketed to children through television, schools, and via cartoon characters on food packages," she said.

      The report also included these recommendations for food companies:

      • intensify their efforts to create new products and reformulate existing products to make them lower in calories, more nutritious, more appealing to children, and more convenient to prepare and eat;

      • help consumers control portion sizes and calories through smaller portions, single-serving packages, and other packaging cues;

      • explore labeling initiatives, including icons and seals, to identify lower-calorie, nutritious foods clearly and in a manner that does not mislead consumers;

      • review and revise their marketing practices with the goal of improving the overall nutritional profile of the foods marketed to children, for example, by adopting minimum nutritional standards for the foods they market to children, or by otherwise shifting emphasis to lower-calorie, more nutritious products;

      • generally explore ways to improve efforts to educate consumers about nutrition and fitness, with simple and effective messages; and

      • review and revise their policies to improve the overall nutritional profile of the products they market and sell in schools.

      In focusing on racial and ethnic populations in which childhood obesity is more prevalent, the agencies recommended that:

      • food companies make a concerted effort to include, as part of their marketing of more nutritious, lower-calorie foods, promotions that are tailored to these communities; and

      • food companies, the media, and entertainment companies tailor their outreach efforts to promote better nutrition and fitness to these populations. The agencies recommended that media and entertainment companies:

      • continue to develop and disseminate educational messages about nutrition and fitness that are simple, positive, and repeated consistently across various platforms, with broad participation from other stakeholders; and

      • review and revise their licensing of children's television and movie characters to foster promotion of more nutritious, lower-calorie foods.

      The report noted that the current CARU Guides are a good foundation for industry self-regulation, but the agencies recommended that the Guides be expanded and their enforcement enhanced. Specific agency recommendations to be enacted right away included:

      • expanding the CARU advisory board to include additional individuals with expertise in the various fields related to childhood obesity, such as nutrition, children's health, and developmental psychology;

      • allowing parents and others to file complaints with CARU and make decisions more readily available to the public online; and

      • evaluating and determining whether CARU's staff and resources are sufficient to monitor and enforce adequately the CARU guides, in light of any changes made in response to the recommendations set forth in this report.

      The report is a product of last summer's joint FTC/HHS workshop, which provided a forum for industry, consumer, academic, and government stakeholders to examine the role of the private sector in addressing rising childhood obesity rates in the United States.

      "Workshop participants acknowledged that many factors contribute to childhood obesity, but recognized that regardless of the causes, responsible marketing can play a positive role in improving children's diets and exercise behavior," the FTC said in a press release.

      "Responsible, industry-generated action and effective self-regulation are critical to addressing the national problem of childhood obesity," said FTC Chairman Deborah Platt Majoras. "The FTC plans to monitor industry efforts closely, and we expect to see real improvements."

      "Businesses need to work with mothers, fathers and children to bring America's epidemic of childhood overweight under control," said HHS Secretary Mike Leavitt. "Families can help children to be physically active and to eat right, and business can encourage children to eat nutritious foods in proper portions."

      The workshop focused on the role that the private sector, including food, media, and entertainment companies, can and should play to address the increasing problem of childhood obesity in the United States. Food companies presented their product, packaging, labeling, advertising, and marketing initiatives designed to promote lower calorie, more nutritious foods.

      Media and entertainment companies discussed their incorporation of health and nutrition messages into programming and their support for public education campaigns featuring these messages.

      Workshop participants provided their views on the advertising guidelines that are enforced by the Children's Advertising Review Unit (CARU) of the Council of Better Business Bureaus (CBBB). Participants offered both praise and criticism of existing industry practices and self-regulatory efforts. Some also offered suggestions for ways that industry can build on current efforts and take new steps to tackle the childhood obesity problem.

      The report summarizes the presentations, panel discussions, and oral statements made at the workshop and the written comments submitted. It also provides specific recommendations for action by the food industry, the media and entertainment industry, and CARU.



      Feds Gently Prod Food Marketers to Help Fight Childhood Obesity...
      Read lessRead more

      Arizona Settles with Internet Work-At-Home Promoter

      Advertising Solutions sold Internet-based business opportunities to consumers nationwide.

      The state of Arizona has reached a $250,000 settlement with Smart Advertising Solutions, LLC, a Tempe company that sold Internet-based business opportunities to consumers nationwide.

      The settlement resolves allegations that Smart Advertising Solutions (SAS) made deceptive and misleading claims to consumers regarding the amount of earnings they could make through a home-based business sold by SAS.

      Beginning in February 2004, SAS advertised in direct mailings to consumers that they could purchase business opportunities through SAS that allowed them to work at home, selling various products and services over the Internet by using a Web site that would be set up and maintained by the company.

      The company claimed consumers could earn up to "$10,000.00 per week or more," that "people just like you are earning 6 figure incomes from the comfort of their own home" and that "SAS can now take you to the new wave of home based businesses, finally giving you a legitimate opportunity to earn thousands of dollars weekly in a $400 BILLION industry."

      In response to these mailings, thousands of consumers contacted SAS and purchased the home-based businesses, along with advertising services sold by SAS that it claimed would be useful in directing the public to the consumers' Web sites.

      The consent judgment requires SAS to:

      • Pay the Attorney General's Office $225,000 in civil penalties and $25,000 for fees and costs of the investigation.

      • Refrain from claiming consumers can make a certain amount of money unless the company can prove they have customers who have earned the represented amounts.

      • Refrain from making deceptive claims regarding the effectiveness of its advertising sold to consumers to support their established businesses.

      -

      Arizona Settles with Internet Work-At-Home Promoter...
      Read lessRead more

      Prius Shortage Drags Down Hybrid Sales

      Can't sell 'em if you don't have 'em

      Toyota Motor Corp., the world's largest manufacturer of hybrid automobiles, is facing a shortage of its popular Prius hybrid sedan.

      Toyota reports U.S. sales of its Prius hybrid have been hurt by the shortage and not by a decrease in demand as fuel prices approach record levels.

      Prius sales fell again in April, after a 3.3 per cent first-quarter decline. Sales dropped to about 7,500 Prius units last month, from 11,345 in April 2005.

      Even with the decline, Toyota sold more than three times the number of hybrids than Ford.

      Hybrid sales at Ford are up 50 percent over April of 2005 and 75 percent from March 2006 to nearly 2,800 units in April. The increase is due at least in part to aggressive incentives as well as increasing gasoline prices.

      Ford began offering interest-free loans for up to 60 months to consumers nationwide in April on its Escape hybrid and Mariner hybrid SUVs.

      In addition to rebates, Ford is also spending lavishly on advertising campaigns, featuring Kermit the Frog, that tout the company's commitment to hybrids.

      Federal and state tax benefits, which in some states can total as much as $5,925, also spurred demand for Ford hybrids. The federal tax credit for the Prius will expire in 2006 unless Congress extends the tax benefit.

      Prius Shortage Drags Down Hybrid Sales...
      Read lessRead more