27 August 2014

Misleading Ads And Crazy Schemes

The problems are as old as time.  People making misleading statements to secure people's money, and people trying to get people's money with crazy or ill advised ventures and opportunities.  A patchwork of laws regulate this conduct, but not terribly effectively.

Who are some of the most recent offenders that have assaulted my ears and eyes?

* Recent radio advertisements for programs claiming to teach you how to fix and flip houses, and how to profit from investments in property tax liens, are grossly misleading or outright false, dramatically overestimating likely returns, and underestimating the risks and investments of time and talent that are required.  If they were selling the investments themselves, these advertisements would constitute illegal and actionable securities fraud, but because they are merely selling overpriced educational programs instead, they aren't "securities" and can get away with making these false claims (although these advertisements are still probably "deceptive trade practices" which are actionable under the Colorado Consumer Protection Act).

* Western International University, which is a for profit private educational higher educational institution targeted at working, non-traditional students, mostly in a remote education format, based in Phoenix, Arizona, is currently running a radio campaign lauding the benefits of faculty led 10 minute classes which argue that adults have trouble retaining anything longer.  I would suggest that people who can't retain information from a presentation longer than 10 minutes really shouldn't be seeking degrees at all.  It's classes are eight weeks long.

Most of the higher educational institutions that advertise on the radio are for profit institutions that, while accredited, have high tuition, low retention and graduate rates, poor rates of career success for graduates, and poor reputations.  They minimize professor pay, spend a great deal of their revenues on marketing and sales functions, generally don't have tenured faculty, and rely on federal Pell Grants and federally subsidized student loans for the bulk of the funds that they receive to bring in revenues.  Default rates on the student loans incurred at these institutions are generally much higher than public and non-profit higher educational institutions.

For example, in the 2011-2012 year, Western International University had 4,696 students enrolled (89% online), but only 98 were first time, full time students enrolled in bachelor's degree programs.  Only 21 of those were still enrolled a year later (a 78.6% dropout rate in the first year alone), and only 4% of first-time, full time students graduate in 3 years for associate degree programs or 6 years for bachelor's degree programs.  None of the 50 students who were black, Hispanic, Native American, or identified with "two or more races", or non-resident aliens graduated, 5% of white students graduated (3 out of 61), and 2 out of 12 students who declined to identify their race or ethnicity graduated.  There were no Asian or Pacific Islander students enrolled there on a first time, full time basis.  Apparently, about 10% of part-time or not first-time students earn a certificate or degree of some kind each year although the website isn't very forthcoming on this point.

Online tuition is $6,072 per year for undergraduates and $8,592 for graduate students, and is $11,112 per year for undergraduates and $15,336 a year for the small number of "ground campus" students.

Like the institution where I was a professor for a while, the College For Financial Planning, it is a sister college of the University of Phoenix and is owned by the Apollo Group (whose Horatio Alger story billionaire founder died in his 90s this week).

* College America's pitch is the abundance of big scholarships that they offer, more of less indiscriminately, which is simply a matter of offering everyone or almost everyone a scholarship and inflating its tuition by the same amount.  Like Western International University and most other for profit colleges, however, they are a very poor value.  A state college or community college is almost always a better value, and community colleges and some state colleges, like Metro in Denver, admit pretty much anyone who has completed high school or a GED and has the slightest prayer of not flunking out when faced with college level material.

* Radio campaigns (often for hair products or skin products) that claim that free offers are available only if you call in an order within the next ten minutes or half an hour, when in reality, the company has no idea when the radio ads will air and there is no such time limitation, are another scam that I despise.

* While merely misleading and not actually false, I despise advertisements in the newspaper by automobile dealers that show a huge colored print price of a vehicle than is not of various discounts from manufacturer's suggested retail price in much smaller black print that include several thousand dollars of "your cash".  I'm sorry, "your cash" is part of the price of the car.  An advertisement like that screams out to the reader that the dealer is hell bent on cheating you in your negotiations to buy the car and can't be trusted.

* Multilevel marketing campaigns, often euphemized as "direct marketing" are another huge swindle.  If these industries could be regulated or taxed to the point where the industry ceased to exist entirely, the world would be a better place.

* It is amazing how many illegitimate "college preparation" counselor and test preparation and special programs advertise and make cold calls in a way designed to make them seem official or to have a prior relationship with you, when they have neither.

* "No call lists" seem to have made great inroads in stopping telemarketing, although a few persist claiming thin "prior relationships" or because they are marketing for non-profits.  In the many months before I killed my land line this month, perhaps 95% plus of calls had become junk calls, and some of the rest were robocalls (e.g. from the library reminding you of overdue books).

I have no tolerance for receiving a robocall with no one on the other side of the line when I pick up for a few moments.  It is one thing to call an automated service, and another to receive calls from them.  When I get a call like that, I immediately hang up.

* I am also offended by insincere astroturf political campaigns such as the No on 68 campaign in Colorado right now (funded by casinos to protect their turf, despite its anti-casino rhetoric), and the big dollar pro-fracking campaign of a few months ago funded by big oil companies.

Regulating these kinds of commercial and political speech and business ventures without offending the First Amendment's free speech guarantees isn't easy.  But, I do think that we could do a better job of it than we do.  Neither freedom of conscience, nor a healthy economy, require that we tolerate whole industries whose very business model depends upon deceiving and exploiting consumers and investors, although the free speed issues associated with misleading political speech are more challenging.

23 August 2014

Vote No On Colorado Proposition 105

Colorado Ballot Issue 105 would enact a new law to require any "prepackaged, processed food or raw agricultural commodity that has been produced using genetic modification" to include the label: "Produced with genetic engineering." The law would be put into effect by January 1, 2016.

California, Oregon and Washington State have rejected similar ballot issues.  Vermont enacted a statute this year to require such labeling.  Some European countries require this kind of labeling.

GMOs are not appropriate to require food providers to label

Genetic modification as used in this sense is not a useful or meaningful concept

Perhaps the most important point to understand in the debate is that all domesticated plants and animals are genetically modified, which is to say that humans have consciously and deliberately manipulated their genome in a manner that would not have happened had humans not intervened.

The genomes of modern wheat, corn and rice are all wildly different than the wild types.  "Ancient grains", like emmer wheat, mostly represent early attempts at genetic modification of wild plants that were previously gathered by humans that had diminished commercial success when further genetic modifications produced more desirable crops.

Vegetables that are completely different in appearance such as kale, cabbage, Brussels sprouts, cauliflower, broccoli, broccoflower, broccolini, Romanesco broccoli, red cabbage, collard greens, savoy, kohirabi, kai-lan, and Chinese kale are all genetically modified versions of a single species of plant known as wild mustard (Brassica oleracea) which is native to coastal southern and western Europe.

Almonds would be poisonous without genetic modification.  Chickens are genetically modified to produce about twenty times as many eggs as their wild ancestors of Southeast Asia.

These genetic modifications aren't simply a matter of accelerated natural selection either.  Developing hybrid plants is every bit as much as genetic modification as more high technology methods.  Commercially developed hybrid oats have been produced since 1892.  Hybrid wheat and corn strains were widespread before World War II.  One of the main forms of rice grown in Africa is a hybrid.

Pretty much the only thing you buy in a grocery store for human consumption which are not genetically modified are wild caught fish and water.

GMOs are not a health risk

The modern campaign to label and have consumers avoid genetically modified plants and animals defines genetic modification narrowly to include only certain newly invented techniques for accomplishing this end, but this is ultimately a distinction without a difference.  As the American Association for the Advancement of Science noted in an October 20, 2012 statement, there are no proven health risks associated with genetically modified foods.

Labeling of genetically modified foods also promotes the misapprehension that "natural" foods are more healthy and more safe, which is simply not the case.  While pretty much every healthy animal is edible when cooked well (apart from mad cow disease and the venomous parts of venomous reptiles, frogs and insects), wild and natural plants are frequently hazardous to your health and have not been systematically tested for their health effects on humans.

It is impracticable to mandate GMO labeling in a small state like Colorado

Colorado residents value the wide diversity in the foods that they have available to them.  But, many of these choices could vanish if GMO labeling is required.


Because most food vendors in Colorado are incapable of determining in good faith if their foods are, or are not, genetically modified.

For example, most U.S. corn, but not all U.S. corn, is genetically modified.  A very large share of all processed food in the United States has some form of corn in it, be it corn syrup, corn flour, corn starch, or just plain old corn.  But, food vendors who buy corn derived products have no reliable way to determine if the corn in their supply chains, the vast majority of which comes from places which would not be subject to Colorado's GMO labeling mandate, is genetically modified or not.  The same concerns apply to products made with imported wheat flour, to Colorado beer made with imported barley and hops, to pork and beef made in other states or abroad, and so on.

Also, even if foods are imported from a place that does have GMO labeling, there is no consensus definition of what constitutes a GMO, so there is no assurance that food that is GMO free by Vermont standards, for example, is GMO free by Colorado standards.

This proposed law may be pre-empted by federal law or unconstitutional

This practical impact potentially has constitutional implications.  Under a legal doctrine known as the "dormant commerce clause", state regulation that substantially interferes with interstate and international commerce in void, because the power to regulate interstate commerce is reserved to the federal government.  So, if Colorado GMO labeling regulations make it very difficult or impossible for merchants who want to bring food from outside of Colorado that is not compliant with Colorado's GMO labeling law, then Colorado's law is probably unconstitutional.

This requirement is also arguably pre-empted by the federal food safety and labeling laws enforced by the Food and Drug Administration.

These kinds of concerns are the reason that states can only regulate motor vehicle emissions within the context of federally authorized environmental regulations.

Voluntary labeling has been an effective paradigm so far

Nothing prevents food vendors who market to people who are concerned about GMOs (or at least nothing should prevent them) from voluntarily monitoring their supply chains to assure that their products are GMO free and developing a labeling certification program to do so.

This is the approach that has been used to develop markets for organic products, for fair trade products, for product safety assured through third parties like Underwriter's Laboratories, for lactose free products, for Kosher foods, and for gluten free products.  These approaches have legal force under the federal Lanham Act.  They are also much more accurate and less corrupt because they secure the willing cooperation of people who believe in the value of the labeling regime.  It also puts key operational definitions in the hands of people who believe that these labels matter, instead of government bureaucrats who may be subject to industry capture and produce inadequate definitions.

Voluntary GMO labeling, if it is pervasive enough, naturally gives rise to the inference that unlabeled products are not GMO free, but does so in a manner that doesn't require every food vendor who wants to do business in the marketplace to have a full command of the supply chain of every ingredient that they use in places where there are no GMO labelling laws.


While the proponents of a mandatory GMO labeling law in Colorado are no doubt well meaning and have our best interests at heart, and while they merely want to label GMO food, rather than ban it, this law still does not deserve your vote.  The definition of a GMO is dubious.  There are no proven health benefits to non-GMO food.  It is impractical and probably unconstitutional to mandate GMO labeling at the state level at this time.  And, voluntary labeling is a completely adequate, well precedented, and effective alternative that does not raise the same problems.  Mandatory GMO labeling would not be accurate, would be costly, does not advance a compelling public need, and would reduce food choices for Colorado consumers.

Vote no on Colorado ballot issue 105.