Current Events in August 2019

Does the idea of shopping locally appeal to you as a consumer? If it does, then you may be paying more for your products without even realizing it.

A recent study from Indiana University suggests that consumers who buy local products tend to equate higher prices with higher quality items. And, conversely, they’ll often avoid buying lower-priced items for fear of buying something that’s also lower-quality. The researchers say that dynamic can be manipulated by businesses and marketers.

“Consumers tend to use price to judge a product’s quality when their local identity is most important to them,” said professor Ashok Lalwani. “When promoting high-priced or branded products, marketers can situationally activate consumers’ local identity [by encouraging them] to ‘think local’ or employ local cultural symbols in advertising and other promotional material.”

“Premium” products seen as more expensive

For their study, the researchers conducted several experiments and scheduled in-depth interviews with senior company officials to see how pricing was affected when it came to local products. In one response, an executive said that they actually had to increase prices in order to match consumers’ expectations.

“It is important to have a reasonably high price since it communicated ‘premium-ness’ and then reinforce it with advertising and packaging,” they said. 

In general, the researchers found that consumers tend to believe that local brands are much more different from each other when compared to global brands. As a result, the team said that customers often use price as a way of determining which local brands are the best. In the same way, they say that consumers often view lower-priced items as being lower-quality, even when that’s not necessarily true. 

“Discount stores, such as dollar stores, should discourage consumers from using the price of a product to infer its quality,” Lalwani advised.

The full study has been published in the Journal of Marketing.

Two U.S. senators have sent a letter to Facebook CEO Mark Zuckerberg over what they say is a disturbing privacy issue related to its Messenger Kids app. 

Sen. Edward Markey (D - Mass.) and Sen. Richard Blumenthal (D - Conn.) cite recent problems that came to light within the app that allowed children to enter group chats that contained other users that had not been approved by parents.

“While software bugs are a common occurrence, the need to protect children who use Messenger Kids and Facebook’s promises to parents set a higher for privacy and online safety,” the lawmakers wrote. 

“We write seeking more transparency regarding the nature of the Messenger Kids flaw and answers on what Facebook is doing to ensure that the product meets the expectations of parents and its obligations under the law.”

Demanding answers

The senators cited previous instances in which lawmakers questioned Facebook about the Messenger Kids app, saying that a “worrying pattern of lax privacy protections for kids on the Messenger Kids platform” has emerged.

The senators are asking Zuckerberg to respond to a number of questions they pose in the letter by August 27. Some of the queries involve technical information on how long the flaw existed within the Messenger Kids app before reports of the problem came to light. Others focus on what Facebook intends to do in the future to protect its youngest users.

“Children’s privacy and safety online should be Messenger Kids’ top priority. Your company has a responsibility to meet its promise to parents that children are not exposed to unapproved contacts, a promise that it appears that Facebook has not fulfilled,” the lawmakers said. 

Getting enough sleep is crucial for consumers of all ages, though it can be difficult for many people to fall asleep and stay asleep. 

Now, researchers from the University of Illinois at Urbana-Champaign are attributing more successful nights of sleep to consumers’ outlook. Their recent study suggests that being more optimistic leads to longer, better nights of sleep. 

“The lack of healthy sleep is a public health concern, as poor sleep quality is associated with multiple health problems, including higher risks of obesity, hypertension, and all-cause mortality,” said researcher Rosalba Hernandez. “Dispositional optimism -- the belief that positive things will occur in the future -- has emerged as a psychological asset of particular salience for disease-free survival and superior health.” 

Staying positive

The study included over 3,500 participants who were required to fill out surveys gauging their general outlook on life and sleeping habits, including how long it takes them to fall asleep and how often they wake up in the middle of the night. 

A group of selected participants took the study a step further by donning sleep monitors and having their sleep tracked for three nights in a row, one of which was a weekend night. The monitors were able to record accurate figures on the same factors that the participants were reporting on in their surveys. 

Using both the surveys and the data from the activity monitors, the researchers determined that having a more positive outlook led to better, longer nights of sleep, whereas the opposite phenomenon was also true. 

Participants with the highest levels of optimism were nearly 75 percent more likely to be alert during the day and fall asleep faster at night. These participants slept an average of six to nine hours per night. 

The researchers are unsure why this trend has emerged, but they believe that people who are more optimistic tend to feel less physical stress and have an easier time adopting restful moments. 

“Optimists are more likely to engage in active problem-focused coping and to interpret stressful events in more positive ways, reducing worry and ruminative thoughts when they’re falling asleep and throughout their sleep cycle,” said Hernandez. 

Getting a vehicle report from a company like Carfax before buying a used car has become more common. These reports are not infallible, but they can alert prospective buyers to undisclosed problems.

Most buyers usually look for evidence that the car was in an accident or was the subject of another insurance claim. Florida Attorney General Ashley Moody says there’s another good reason to get one -- to verify the odometer reading.

This is especially important for a private party sale. New and used car dealers certify that the mileage on the odometer is accurate, but the guy putting an ad on Craigslist doesn’t have to. And sometimes even dealers may not have accurate information.

Even though today’s cars are more sophisticated, it doesn’t mean a clever crook can’t tamper with the odometer. They do it by disconnecting, resetting, or altering the device to lower the mileage displayed on the dashboard.

Raises the value

 Lowering the mileage, of course, makes a vehicle appear to be worth more than it actually is. 

“Not only does odometer fraud trick drivers into paying a higher price for a less valuable vehicle, it can also prevent the driver from pursuing important maintenance and service work necessary to keep the vehicle safely running,” Moody said. “If important mileage-based maintenance is not performed on an older vehicle, it can break down unexpectedly, potentially putting the driver and passengers in severe danger.” 

A vehicle report can often be a tip off that the odometer has been altered. It often lists the mileage at significant points in the life of the vehicle and can estimate how many miles per year were put on the car.

Other ways to tell

In addition to paying for a vehicle report, a prospective buyer can also ask the seller for service records, which will list mileage. Look for oil-change stickers that may have been left on the vehicle. Those will list the mileage when the service was performed.

By closely inspecting the title before handing over the money, you can see the mileage on the vehicle when the seller received it and whether the current odometer reading makes sense.

Tampering with an odometer is a federal crime, and it is more common than you might think. The National Highway Traffic Safety Administration (NHTSA) has estimated that nearly a half million cars and trucks are sold each year with doctored odometer readings, causing buyers to overpay for these vehicles to the tune of $1 billion a year.

The Federal Trade Commission (FTC) has settled with an email management company that allegedly deceived consumers about what information it accessed and used as part of its service. 

In its complaint, the agency said that Unrollme Inc. told users that it would “never touch” their personal emails when providing its email curation service. However, regulators said that the company did, in fact, copy e-receipts (email receipts) and sent them to its parent company Slice Technologies, Inc. That information was then allegedly used for market research analysis for selling products. 

Andrew Smith, director of the FTC’s Bureau of Consumer Protection, said that these false statements violated consumers’ privacy. 

“It is unacceptable for companies to make false statements about whether they collect information from personal emails,” he said. 

Under the settlement, Unrollme and its parent company are required to delete all previously stored e-receipts it collected unless otherwise allowed to keep them by users. The companies are also barred from misleading consumers about what information it collects and what that data is used for in the future. 

The Federal Reserve reports that consumer borrowing rose in June, but at the slowest rate in months. The reason for the slowdown can be attributed to consumers reining in their credit card spending.

Consumers increased their borrowing across all categories by $14.6 billion, down significantly from the nearly $18 billion they borrowed the month before. It was the smallest increase in credit spending since March.

The increase likely would have been much larger except that revolving credit actually fell by a little more than $80 million. Revolving credit includes credit card purchases and lines of credit. 

The Fed report shows that consumers increased borrowing for new cars and for student loans, pushing the latter category to an all-time high.

Recession concerns

The slow increase in borrowing -- along with the dip in credit card spending -- may be troubling to economists who have expressed increasing concern that the economy may be slipping into a recession.

In its latest report on Gross Domestic Product (GDP), the government cited robust consumer spending as one of the forces keeping the economy moving forward. At the same time, data showing consumers are not running up huge amounts of debt suggests that consumers are not spending irresponsibly.

In its most recent accounting of consumer household debt, the New York Fed reported total household debt rose by $124 billion in the first quarter of this year to reach $13.67 trillion. Mortgage balances rose by 1.3 percent, while balances on credit cards fell 2.5 percent.

Mercedes-Benz USA (MBUSA) is recalling 1,957 of the following vehicles:

• Model year 2019 C300 Cabrios, C300A Cabrio 4MATICs, C300 Coupes, C300 Coupe 4MATICs, C300s, C300 4MATICs, C43 AMG Cabrio 4MATICs, C43 AMG Coupe 4MATICs, C43 AMG 4MATICs, C63 AMG Cabrios, C63S AMG Cabrios, C63 AMG Coupes, C63S AMG Coupes, C63 AMGs, C63S AMGs, CLS450s, CLS450 4MATICs, CLS53 AMG 4MATICs, E300s, E300 4MATICs, E450 Cabrios, E450 Cabrio 4MATICs, E450 Coupes, E450 Coupe 4MATICs, E450 Wagon 4MATICs, E450 4MATICs, E53 AMG Cabrio 4MATICs, E53 AMG Coupe 4MATICs, E53 AMG 4MATICs, E63S AMG 4MATICs, E63S AMG Wagon 4MATICs, S450s, S450 4MATICs, S560 Cabrios, S560 Coupe 4MATICs, S560s, S560 4MATICs, S560 4MATIC Maybachs, S63 AMG Cabrio 4MATICs, S63 AMG Coupe 4MATICs, S63 AMG 4MATICs, S65 AMG Cabrios, S65 AMGs & AMG GT53 Coupe 4MATICs, and
• Model year 2020 GLC300 Coupe 4MATICs, GLE350 4MATICs, & GLE450 4MATICs.

All of the recalled vehicles are equipped with the Driver Assistance Package.

A software error in the radar sensor control unit may impair the functionality of the Active Brake Assist.

An impaired Active Brake Assist may not automatically apply partial or full braking as expected, increasing the risk of a crash.

What to do

MBUSA will notify owners, and dealers will update the radar sensor control unit software free of charge.

The recall is expected to begin September 17, 2019.

Owners may contact MBUSA customer service at 1-800-367-6372.

BRP U.S. of Sturtevant, Wis., is expanding its earlier recall of model year 2017 Ski Doo MXZ, Summit and Renegade snowmobiles and model year 2018 MXZ and Renegade snowmobiles.

The vehicle’s fuel delivery system can leak fuel, posing a fire hazard.

The firm has received two additional reports of fuel leaks bringing the total to 15. There are two reports of fires. No injuries have been reported.

This recall involves model year 2017 Ski-Doo MXZ, Summit, and Renegade snowmobiles and 2018 Ski-Doo MXZ and Renegade snowmobiles equipped with an 850 E-TEC engine.

The vehicles are sold in a variety of colors. Ski-Doo and the model name are printed on the side panels of the vehicles.

The vehicle identification number (VIN) is on the decal located on the right hand side of tunnel.

The following models are included in the recall:

The snowmobiles, manufactured in Canada, were sold at Ski-Doo dealers nationwide from June 2016, through July 2019, for between $12,000 and $16,000.

What to do

Consumers should immediately stop using the recalled vehicles and contact a BRP Snowmobile dealer for a free repair. BRP is contacting all known purchasers directly.

Consumers may contact BRP toll-free at (888) 272-9222 from 8 a.m. to 8 p.m. (ET) Monday through Sunday or online at https://www.ski-doo.com and click on “Community” at the top of the page and then “Safety” for more information.

BMW of North America is recalling five model year 2019 X5 xDrive50i and X7 xDrive40i vehicles.

The left side wheel bolts may have been insufficiently tightened and may loosen over time, increasing the risk of a crash.

What to do

BMW will notify owners, and dealers will replace and tighten the left side wheel bolts free of charge.

The recall is expected to begin September 16, 2019.

Owners may contact BMW customer service at (800) 525-7417.

Ford Motor Company is recalling about 14,000 model year 2020 Ford Explorers and Lincoln Aviators.

Federal law requires the manual park release cover be in place and only removable with a tool.

If the cover is not installed, the manual park release lever may be inadvertently activated, which could result in unintended vehicle movement if the electronic park brake is not applied, increasing the risk of crash

In addition, the instrument cluster may be in factory mode, which disables warning alerts and chimes, and does not display the PRNDL gear positions and which gear is selected. 

The majority of affected vehicles are in dealer inventory and the issue will be remedied prior to delivery to customers.

The automaker says it is aware of one report of an accident occurring during vehicle transport within the production process.

This action affects 13,896 vehicles in the United States and 239 in Canada. The majority of affected vehicles are in dealer inventory. The issue will be remedied prior to delivery to customers.

What to do

Ford will notify owners and dealers will inspect for the manual park release cover and install one -- if necessary-- and will also verify the instrument cluster is out of factory mode and clear any diagnostic codes.

Owners may contact Ford at (866) 436-7332

Ford's reference number for this recall is 19C06.

FedEx has announced that it is severing ties with Amazon and will no longer be using its fleet of delivery trucks to ship the company’s packages to consumers. 

The move follows a separate action taken in June that ended a contract between the two companies when it came to shipping packages by air with FedEx Express. The latest news creates a new rivalry between Amazon and FedEx, which will both be vying for consumers attention to fulfill their shipping needs. 

“This change is consistent with our strategy to focus on the broader e-commerce market, which the recent announcements related to our FedEx ground network have us positioned extraordinarily well to do,” FedEx said in a statement. 

Amazon becomes more self-reliant

The change indicates that Amazon may have to rely more on its own network to deliver packages to consumers. However, that network isn’t starting off at ground zero; the company has been working for some time to create its own delivery fleet. 

An Amazon representative said that the move is a natural development as the company continues to grow. 

“We are constantly innovating to improve the carrier experience and sometimes that means reevaluating our carrier relationshipos. FedEx has been a great partner over the years and we appreciate all their work delivering packages to our customers,” they said. 

It’s a storyline that consumers have become all too used to over the past few years: Sears and Kmart are closing more store locations. 

After being snatched up by former CEO Eddie Lampert earlier this year for $5.2 billion, Sears has continued to struggle financially. On Wednesday, new parent company Transform Co. said that it would be closing 21 Sears locations and 5 Kmart locations that have been unable to meet sustainable productivity levels. 

“Our goal remains to return the company to profitability and preserve as many jobs as possible in the communities we serve,” the company said in a statement.

Liquidation sales for the affected stores are slated to begin in the coming weeks, with closures scheduled to begin in late October. Below is a full list of the closing locations:

Sears not immune to retail apocalypse

Of course, underperforming stores are not just an issue for Sears alone. Brick-and-mortar retailers across the U.S. have struggled to keep up as consumers increasingly turn to online channels to order items. 

Earlier this week, Barneys New York filed for Chapter 11 bankruptcy and announced that it would be closing many of its locations in an attempt to return to profitability. Similar actions taken by Payless and Toys “R” Us also underscore the pervasive problem for American retail giants.

Eddie Lampert stated back in February that company officials would try to shake things up by shrinking the size of Sears and Kmart stores. The executive said that future stores will be about a third of the size of previous stores and focus more on tools and appliances and less on apparel. 

A new study revealed that consuming too much red meat could increase the risk of developing breast cancer, though swapping red meat for poultry could help reduce that risk. 

“Red meat has been identified as a probable carcinogen,” said researcher Dale P. Sandler, PhD. “Our study adds further evidence that red meat consumption may be associated with increased risk of breast cancer, whereas poultry was associated with decreased risk.” 

Finding the right foods

To test the health differences between consuming red meat and poultry, the researchers had over 42,000 women track their diets and health status over the course of the study. The participants also completed the Block Food Frequency Questionnaire at the start of the study and again at a follow-up evaluation roughly 7.5 years after the first round. 

The relationship between red meat consumption and poultry consumption to breast cancer was completely inverse; eating more red meat increased the risk of breast cancer while eating more poultry decreased the risk. 

Overall, the researchers determined that those who were fervent red meat eaters were over 20 percent more likely to be diagnosed with breast cancer. They also had a greater risk of having invasive breast cancer. Conversely, those who favored poultry over red meat were 15 percent less likely to receive a breast cancer diagnosis and were less likely to have invasive breast cancer. 

Though the researchers are unsure why this relationship exists, they do know that consumers can take steps to improve their diet and reduce their risk of breast cancer. 

“While the mechanism through which poultry consumption decreases breast cancer risk is not clear, our study does provide evidence that substituting poultry for red meat may be a simple change that can help reduce the incidence of breast cancer,” said Sandler. 

Reducing red meat intake

One recent study found that eating red meat -- even in small increments -- can be incredibly detrimental to consumers’ health and actually lead to an early death. While red meat wasn’t entirely to blame for all premature deaths, the researchers did note that it certainly plays a role, especially in higher quantities. 

“Our findings give additional weight to the evidence already suggesting that eating red and processed meat may negatively impact health and lifespan,” said researcher Dr. Michael Orlich.

Marriott’s recent data breach has proved quite costly. The company says it has booked a $126 million charge to pay for its massive data breach that was revealed last year.

Late last year, Marriott disclosed that its Starwood Hotels division had suffered a network breach that compromised the records of about 383 million guest records, including passports and credit-card information.

Last November, the company disclosed that hackers had broken into Marriott International's database and gained access to customers' data. The breach is likely the largest ever, surpassing the 2017 Equifax breach that exposed credit records for more than 145 million consumers.

According to Marriott, the breach occurred only at its Starwood Hotel brand. An investigation has revealed that unknown parties gained access to the database sometime in 2014, copying and encrypting information that had been stored there. Marriott said it was alerted to unauthorized activity and began an investigation in September 2018.

Hit to the bottom line

Marriott no longer operates theStarwood Hotels & Resorts Worldwide database, having shuttered it within weeks of the announcement of the data breach. But the incident played a role in the company’s second quarter earnings report, with $22 million of insurance recoveries related to the data breach.

In addition to the dent on its bottom line, Marriott faces other charges related to the data breach. The UK’s privacy watchdog has proposed a $120.5 million fine because of the intrusion, saying the company could have done more to keep its data secure. The company said it would appeal.

The data breach affected customers who stayed at a Starwood hotel from 2014 to November 2018.

If you’ve cancelled your cable TV subscription and are relying on video streaming services for your entertainment, you are no longer just a trend-setter. You may soon be in the majority.

A new forecast from eMarketer predicts that the number of pay TV households in the U.S. will drop by 4 percent by the end of the year to around 86.5 million homes. It further expects the freefall to continue, with pay TV subscriptions falling below 80 million by 2021.

In fact, eMarketer researchers say it won’t be long before there will be as many households going without a pay TV subscription as there are subscribers. The company suggests the industry has arrived at a tipping point, with more consumers preferring to subscribe to services like Netflix, Amazon, and Hulu that cost little more than $10 a month.

That space is about to get even more crowded as Disney, WarnerMedia, and Apple get ready to launch streaming services of their own. And then there’s YouTube, which costs nothing.

Follow the money

According to eMarketer, money may have a lot to do with the wave of cord-cutting. The researchers say pay TV providers have responded to their loss of business by trying to increase profit margins. 

They often offer an attractive introductory price that surges once that limited time period ends. Subscribers often drop the service once the price goes up. There is also little flexibility if a subscriber asks for a lower price in return for not cancelling.

While pay TV services are losing customers, they are also facing higher costs -- which is putting many companies in an increasingly difficult position.

"Their answer has been to raise prices across the board, and it seems that they are willing to lose customers rather than retain them with unprofitable deals," the authors wrote.

Previous research

eMarketer’s research is in line with previous reporting on the subject. Earlier this year, the Convergence Research Group projected that 34 percent of American cable and satellite TV subscribers would cut the cord by the end of 2019.

These consumers sometimes opt for personal bundling of services like Hulu or Sling, where they subscribe to specialty channels they have a particular interest in, like the SEC Sports Network.

Live programming, it seems, is the main thing keeping consumers paying more to subscribe to pay TV services. Sports fans depend on ESPN to see games, and political junkies are hooked on CNN, MSNBC, and FOX News.

Local news, of course, is still available for free over the air. Viewers may need an external antenna, but they can receive it in HD over a regular TV set if they live near a TV station.

Cord-cutters rejoice! Another new streaming service bundle has been announced that will deliver sports, TV shows, movies, and children’s content.

Disney announced this week that it will be bundling ESPN+, Hulu, and Disney+ into one package that consumers can access for $12.99 per month. The offering will become available on November 12.

Disney has been positioning itself to be a major player in the streaming space over the last year. In May, the company took total control of Hulu in a deal with Comcast. The company also announced details for Disney+ back in April; that service will provide consumers with access to kid-friendly classic movies, over a dozen Pixar films, and newer titles that are scheduled for release this year. 

“If consumers want sports, they can subscribe to ESPN+. If they want adult content, they can subscribe to Hulu, and if they want family, there’s Disney(+),” Disney CEO Bob Iger pointed out at the time.

With the new bundle option, that choice may have just gotten easier.