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February 2020

House Hearing on Equitable Algorithms

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By: Isabel F. Farhi

New-Development-IconOn February 12, the Task Force on Artificial Intelligence of the House of Representatives Committee on Financial Services conducted a hearing titled “Equitable Algorithms: Examining Ways to Reduce AI Bias in Financial Services.”  The purpose of this hearing, as articulated in the opening remarks of the Committee Chair, was to assess fairness and transparency in the use of algorithms in the financial services industry.  The panelists were public interest advocates, academics, and legal professionals working in the technology space. 

The comments at the hearing revolved around two major themes:  first, how to define ‘fairness’ and the consequences of choosing a definition, and second, how bias can result from using algorithms and how regulators might correct that bias.  The panelists and Congressional representatives also made some general suggestions about appropriate regulations and remedies Congress could implement to ensure fair algorithms.

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FDA to Study "Endorser Status and Explicitness of Payment in Direct-to-Consumer Promotion"

By: Jay K. Simmons

DrugstoreFor several years the FDA and FTC have been considering the impact of celebrity endorsers.  The FDA is now providing an opportunity for public comment on a proposed study on celebrity endorsers and the explicitness of payment disclosures in direct-to-consumer promotions.  As the agency’s January 28, 2020 notice indicates, commercial advertisers have long employed celebrity endorsers, including in direct-to-consumer pharmaceutical promotion.[1]  Prior research has explored the role of various types of endorsers, such as celebrity influencers, experts and non-celebrities, in generating attention for a product.[2]  Existing research suggests that physicians and pharmacists, followed by other consumers and celebrities, are the types of endorsers most likely to influence consumers’ interest in purchasing over-the-counter pharmaceuticals.[3]

The FDA proposes collecting new information in this area via two studies on the role of celebrity product endorsements and endorsers’ payment status.  These studies are proposed to consider “the role of endorsement and payment status on participants’ recall, benefit and risk perceptions, and behavioral intentions.”  This includes, first, whether the type of endorser and “the presence of their payment status influences participant reactions,” and second, the impact of different types of endorsers’ payment disclosure language, ranging from “direct and more consumer-friendly” to “less direct.”[4]

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Consumer Finance Observer – Winter 2020

CFOJenner & Block has published its third issue of Consumer Finance Observer or CFO, a newsletter providing analysis of key consumer finance issues and updates on important developments to watch.  As thought leaders, our lawyers write about the consumer finance sector on topics ranging from artificial intelligence, compliance, data security, FinTech, lending and securities litigation.

In the Winter 2020 issue of the CFO, our consumer finance lawyers discuss the use of alternative data in credit underwriting; the New York action on UnitedHealth's algorithm; the next phase of Madden v. Midland Funding; the validity of arbitration agreements in bankruptcy proceedings; CCPA's impact on existing California consumer protection statutes; a quick look at HUD’s new Affirmatively Furthering Fair Housing Rule; and proposed amendments to the CCPA.  Contributors are Partners Landon S. RaifordMichael W. RossDavid P. Saunders, Damon Y. Smith, Kate T. Spelman and Andrew W. Vail; Associates Kevin J. Murphy, William S.C. Goldstein and Effiong K. Dampha; and Law Clerk Isabel F. Farhi.

To read the full issue, please click here


California’s Attorney General Appeals a Preliminary Injunction Barring Enforcement of AB-5, The State’s New Worker Classification Law

 

By: Gabriel K. Gillett and Philip B. Sailer

CaliforniaCalifornia’s new AB-5, which took effect January 1, 2020, revised the state’s worker classification law to make it very difficult to classify a worker as an independent contractor.  Under the so-called ABC Test codified in the new law, businesses must show (A) that the worker is free from the hiring entity’s control and direction, (B) performs work that is outside the usual course of the business, and (C) engages in an independently established trade, occupation, or business.  A number of plaintiffs challenged the law, including Uber, freelance journalists, and the California Trucking Association. 

On January 16, 2020, the California Trucking Association became the first plaintiff to succeed in its challenge (at least so far).  In California Trucking Assn v. Becerra, the Southern District of California issued a preliminary injunction barring the state from enforcing the law as to motor carriers.  2020 WL 248993 (S.D. Cal. Jan. 16, 2020).  As the court explained, the Federal Aviation Authorization Administration Act (FAAAA) expressly preempted state regulations that “related to . . . price, route, or service of any motor carrier.”  49 U.S.C. § 14501(c)(1).  The court cited past cases in the First and Ninth Circuits that held that the FAAAA preempted similar state employee classification statutes, and distinguished a Third Circuit case that held otherwise.  See id. at *6 (comparing Schwann v. Fedex Ground Package Sys., 813 F.3d 429 (1st Cir. 2016), California Trucking Ass’n v. Su, 903 F.3d 953 (9th Cir. 2018), and Bedoya v. Am. Eagle Express, Inc., 914 F.3d 812 (3d Cir. 2019)).  Notably, the court explained, AB-5 codified a test that “classif[ied] workers for the purpose of determining whether all of California employment laws do or do not apply, rather than a small group of those laws” as other states had done.  Id. at *9.  The result, according to the court, is that AB-5 will cause employers to reclassify a substantial amount of independent contractors as employees because they work “within ‘the usual course of the hiring entity’s business.’”  Id. at *7.

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