Follow us at:                       

Our Legislative Updates / Blogs

Legislative Update: February 22, 2019 - Privacy & Consumer Protection Hearing Held

Assembly Privacy & Consumer Protection Committee Holds Hearing on CCPA

The Assembly Privacy & Consumer Protection Committee held an informational hearing this past Wednesday titled “Understanding the Rights, Protections, and Obligations Established by the California Consumer Privacy Act (CCPA) of 2018: Where Should California Go From Here.” 

At the onset of the hearing, Chairman Chau (author of the CCPA) thanked everyone involved in the enactment of the CCPA. He added although he expects several CCPA related bills to be introduced in 2019, he expects them to be in “consensus” form when they are heard in his committee (an inference that contentious bills will not fare well). Two Republican committee members Jay Obernolte and James Gallagher expressed support for the CCPA and reminded attendees the CCPA was unanimously approved by legislators in 2018.

The first panel discussed the CCPA background and a brief comparison to Europe’s General Data Protection Regulation (GDPR). Alastair Mactaggart, Chairman of Californians for Consumer Privacy and the sponsor of the initiative now turned law, made several comments in line with the Chair’s opening statement. Pushing back on the assertion this legislation was done in a hurry, Mactaggart stated that in fact the initiative was researched and drafted for two years prior to its introduction, and then further refined through the legislative process. He stated he did expect some clean-up proposals but the concepts and language itself are reflective of the intent of the bill. Any clean-up efforts must be compelling and technical, not an undoing of consumer protections.

Stacy Schesser of the Attorney General’s Office spoke to the committee about the public forums the AG has been holding throughout the state. She stated they have been very beneficial in their work to understand concerns regarding implementation from both the business community and the privacy advocates. She reiterated the timeline provided under AB 375 to promulgate regulations by July 2020 was extremely tight and unworkable. The CCPA mandated regulation adoption deadline of July 2020 could be pushed back by the enactment of legislation modifying the CCPA in 2019. Schesser also stressed to the committee there are three main issues of contention with the CCPA as it relates to the AG’s office. First, the AG strongly disapproves of the provisions in the CCPA directing the AG to provide compliance guidance to the regulated community. The AG believes to provide unlimited guidance to the community he is tasked with enforcing would be unfair and unconscionable. Furthermore, the AG’s office would be doing so at the taxpayer’s expense. Second, the AG believes that the “right to cure” provisions of the bill would essentially give everyone a “get out of jail free” card and allow the worst offenders to receive a pass at the consumer’s expense. Third, the AG’s office would advocate for the inclusion of a private right of action for all key rights in the CCPA.

The third panel focused on the CCPA workability and clarity issues at the debate and included representatives from the business community. Sarah Boot from the California Chamber of Commerce kicked off the panel by thanking the AG’s office for holding the forums throughout the state and their openness and inclusivity in the implementation process. She also asked the committee to please keep an open mind to resolving some of the concerns raised by the business community. The other panelists, including Eric Goldman, a professor at Santa Clara University of Law, Kevin McKinley of the Internet Association, Margaret Gladstein on behalf of the California Retailers Association and others, spoke about the negative impacts of the CCPA on businesses (large and small), registered concerns about what they considered overly broad or ambiguous provisions and urged lawmakers to resist opening the door to private lawsuits for violations. Among the most mentioned issues with the CCPA are the definition of “consumer”; definition of “household”; the adequacy of CCPA’s “safe harbor” provision; the workability of “verifiable consumer request”; the definition of “personal information” is overly broad; and there should be a distinction should be made in the CCPA between the sale of data versus the sharing of data for legitimate business purposes.

The last panel was focused on looking ahead and how to maintain the lead in privacy. This panel consisted mostly of the privacy rights advocates including representatives from the ACLU, the Electronic Frontier Foundation, Purism, and others.

The business community will face a very high burden of persuasion to win desired changes to the law. I also believe there is a strong probability that a “private right of action” provision will be added to the CCPA this year.

Bill Announced to Outlaw Collusive Agreements Between Drug Companies that Inflate Drug Prices

California Attorney General Xavier Becerra and Assemblymember Jim Wood unveiled legislation intended to help curb increasing drug prices in California. 
AB 824 would prohibit pharmaceutical agreements in which a drug company transfers anything of value to delay a competitor’s research, marketing, or sale of a competing version of its drug. These agreements, known as “pay-for-delay” agreements, have significantly contributed to price increases for prescription drugs in California. 

“Patients and consumers deserve to be free of unfair practices and price manipulation within the pharmaceutical industry,” said Attorney General Becerra. “This legislation is a crucial step in combating predatory pricing practices, like “pay-for-delay” schemes, by drug companies and in defending access to affordable care.” 

“When drug companies use these quiet pay-for-delay agreements with generic drug manufacturers, it hurts consumers twice – once by delaying the introduction of an equivalent generic drug that is almost always cheaper than the brand name and again by stifling additional competition when multiple generic companies begin producing even less expensive generic equivalents,” said Assemblymember Wood. “This is just wrong.” 

Drug manufacturers employ pay-for-delay agreements to block competitors from marketing lower-cost versions of their drugs. Studies from the Federal Trade Commission and from experts have consistently shown that, as a result of these anticompetitive maneuvers, consumers are left to pay as much as 90% more for drugs shielded from competition. 

Pay-for-delay agreements are the product of lawsuit settlements between a branded drug company and a generic drug company. In these cases, the branded company sues the generic company for alleged patent infringement. The companies then settle the case out of court in a confidential agreement. As part of the agreement, the branded drug company pays the generic drug company to keep its generic drug off the market for a period of time. These pay-for-delay arrangements are kept secret from the public through out-of-court settlements. 

AB 824 would presume these agreements are anticompetitive and they delay entry of the generic drug into the marketplace. It would also prevent the parties from withholding relevant evidence regarding the agreements behind attorney-client and common-interest privileges. 

This legislation is the first state legislation in the United States to tackle pay-for-delay agreements, providing California with the opportunity to continue to be a leader in pay-for-delay litigation.

Consumer and Worker Coalition

Unveils Health Bills  

A coalition of health care, consumer and worker advocates announced this past week the introduction of two bills intended to deliver savings to 10 million Californians with employer-based health insurance and increase transparency in health care pricing. 

The two bills, AB 731 by Assemblymember Ash Kalra (D-San Jose) and SB 343 by Senator Richard Pan (D-Sacramento), come as the U.S. debates the next round of reform following the Affordable Care Act. 

Under AB 731 (Kalra), existing rate review for health plans and insurers on individual and small group markets will be extended to plans purchased in the large group market. The bill would also propose to expand the “rate review” process, requiring insurance companies to disclose what is driving rising premiums, co-pays, and deductibles for workers. Should state regulators deem rate increases as unreasonable or unjustified, insurance companies would then be required to notify the large employer or union trust fund that purchases the coverage. A similar law (SB 1163, Leno) went into effect for individual and small business plans in 2011. Consumer health advocates argue as a result of that bill, consumers have saved an estimated $226 million, and predict under AB 731, large employers and workers could save even more. The bill is cosponsored by the California Labor Federation, UNITE HERE, SEIU California State Council, Health Access California, and the California Teamsters Public Affairs Council. 

“The skyrocketing cost of health care is contributing to wage stagnation and fueling income inequality in our state. Many are struggling with ever-rising co-pays and health insurance premiums that have risen 249% since 2002—more than six times the increase in the state’s overall inflation,” said Assemblymember Kalra. “That is why I introduced AB 731, building upon rate review that’s already working for millions of workers and using this proven tool for greater transparency and scrutiny on unreasonable health insurance rates. Consumers are in desperate need of relief and Californians deserve a clearer picture of what’s driving health care costs.”  

SB 343 (Pan) would update current transparency and disclosure requirements for the health care industry to include Kaiser Permanente. Kaiser’s status as an integrated system of insurance, hospitals, and doctors means the health care giant falls outside some key disclosure requirements. This exemption in state law has allowed them to not report key insurance and hospital financial information like the rest of the industry. According to the author, when Kaiser is required to report the same data as its competitors, regulators can make “apple to apple” comparisons of health care pricing. He asserts this would result in greater transparency for the public, advocacy groups, and regulatory agencies concerned with health care costs affecting all Californians, and for the significant portion of Californians covered by Kaiser. 

“Kaiser and all other health insurers and hospitals in California should play by the same rules for transparency,” said Dr. Richard Pan, state senator representing the Sacramento region. “Consumers need clear pricing and financial information so they are able to make informed choices regarding the value of their health coverage.”

Data Breach Bill Introduced 

Assemblyman Marc Levine (D-San Rafael) and Attorney General Xavier Becerra announced legislation this past Thursday which would require notification when a consumer's passport or biometric info is stolen in a data breach. 

Becerra and Levine (D-San Rafael) unveiled AB 1130, which is intended to close what they call a loophole in the state’s existing data breach notification law by requiring businesses to notify consumers of compromised passport numbers and biometric information. 

“Knowledge is power, and all Californians deserve the power to take action if their passport numbers or biometric data have been accessed without authorization,” said Attorney General Becerra. “We are grateful to Assemblymember Levine for introducing this bill to improve our state’s data breach notification law and better protect the personal data of California consumers. AB 1130 closes a gap in California law and ensures that our state remains the nation’s leader in data privacy and protection.” 

“There is a real danger when our personal information is not protected by those we trust,” said Assemblymember Levine. “Businesses must do more to protect personal data, and I am proud to stand with Attorney General Becerra in demanding greater disclosure by a company when a data breach has occurred. AB 1130 will increase our efforts to protect consumers from fraud and affirms our commitment to demand the strongest consumer protections in the nation.” 

California was the first state to pass a data breach notification law back in 2003 requiring companies to disclose breaches of personal information to California consumers whose personal information was, or was reasonably believed to have been, acquired by an unauthorized person. This personal information includes identifiers such as a person’s social security number, driver’s license number, credit card number, and medical and health insurance information. AB 1130 would expand that law to include passport numbers as personal information protected under the statute. Passport numbers are unique, government-issued, static identifiers of a person, which makes them valuable to criminals seeking to create or build fake profiles and commit sophisticated identity theft and fraud. AB 1130 would also expand the statute to include protection for a person’s unique biometric information, such as a fingerprint, or image of a retina or iris. 

The legislation was prompted by the massive data breach of the guest database at Starwood Hotels — recently acquired by Marriott — in 2018. Marriott revealed that the massive breach exposed more than 327 million records containing guests’ names, addresses, and more than 25 million passport numbers, among other things. Though the company did notify consumers of the breach, current law does not require companies to report breaches if only the consumers’ passport numbers have been improperly accessed.

Legislation Unveiled To Strengthen Program to Combat California’s Law-Evading Underground Economy

California Attorney General Xavier Becerra and Assemblymember Lorena Gonzalez today unveiled legislation, AB 1296, the Tax Recovery in the Underground Recovery program (TRUE Act), to combat underground economic crimes. AB 1296 is sponsored by Attorney General Becerra and was introduced by Assemblymember Lorena Gonzalez. 

“With underground economic crime, our workers get exploited, business owners face unfair competition, consumers get ripped off, and taxpayers bear the burden,” said Attorney General Becerra. “AB 1296 expands on successful efforts to prosecute violators and recover funds involved in wage theft, tax evasion, counterfeit commerce and other economic crimes. The funds recovered become available to benefit cheated workers, our schools, law enforcement and our communities.” 

“The underground economy hurts everyone: workers who are left without protection, consumers who are sold dangerous or fake products, and the state as we lose tax money,” said Assemblymember Gonzalez. “This task force is a unique, collaborative approach for law enforcement to breakdown its usual silos and execute wider solutions for targeting the underground economy.”  

According to a University of California at Los Angeles Labor Center report, the state’s underground economy generates between $60 to $140 billion in unreported revenue annually, depriving the state of $8.5 billion in corporate, personal, and sales and use taxes each year. TRUE’s pilot program, established in 2014, allowed agencies in Sacramento and Los Angeles to work together to investigate and prosecute the most outrageous felony-level multi-jurisdictional underground economic crimes in California. In September 2018, Attorney General Becerra announced the results of a year-long investigation that led to charges against a family of four for labor exploitation and human trafficking. In October 2018, Attorney General Becerra also announced that the State of California regained lost state revenues from an underground prescription drug business, from an illegal pharmaceutical scheme and from operators who possessed counterfeit merchandise intended for sale. AB 1296 builds on the success of a state pilot program by permanently establishing law enforcement teams in Sacramento and Los Angeles and authorizing additional teams in the three other major metropolitan regions of the state—San Diego, the Bay Area, and Fresno. 

Since the beginning of the pilot program, investigative teams have identified $482 million in unreported gross receipts and $60 million in associated tax loss to the state. Additionally, through its criminal enforcement actions, the pilot program has recovered over $25 million in lost tax revenue, victim restitution, and investigation costs. 

The legislation sponsored by Attorney General Becerra would strengthen the program by ensuring multi-agency collaboration between several governmental entities, including the Department of Justice, Department of Tax and Fee Administration, Franchise Tax Board, and Employment Development Department. Together these agencies combat wage theft, tax evasion and other crimes in the underground economy.