June 17, 1998
	The Honorable Pete Wilson Governor of California
	The Honorable John Burton President Pro Tempore of the Senate     and Members of the Senate		The Honorable Ross Johnson Senate Republican Floor Leader
	The Honorable Antonio Villaraigosa Speaker of the Assembly     and Members of the Assembly		The Honorable Bill Leonard Assembly Republican Leader

Dear Governor and Members of the Legislature:

Each year, the State invests hundreds of millions of dollars in the name of consumer protection. Each year, consumers suffer losses because of unqualified professionals and fraud, unfair and anti-competitive business practices. Sometimes the losses are measured in dollars and sometimes in tears.

In this report, the Little Hoover Commission makes recommendations that it believes will help the State improve the return that Californians receive on the money invested in consumer protection.

California has more than a century of experience in the consumer protection business. For nearly 40 years the State has had a department dedicated solely to being guardian, advocate and educator of citizens as consumers. If there is a lesson from this experience it is that consumer protection done right is government at its best.

Done right, consumer education helps buyers throughout the marketplace make smart decisions -- avoiding bad actors and bad products, minimizing losses and lawsuits.

Done right, consumer advocacy results in market conditions that encourage robust competition -- providing consumers with more choices at lower prices and rewarding investors who support innovation and excellence.

Done right, consumer regulations build public confidence by ensuring that minimum standards will be met without discouraging competition, by investigating complaints and fairly but assertively enforcing the law.

Done right, consumer protection is seamless -- with licensing officials, investigators and law enforcement authorities working cooperatively regardless of their agency affiliation.

In each of these areas -- education and advocacy, regulatory structure and interagency collaboration -- the Little Hoover Commission found civil servants working hard to make California a better place to live and do business. And in each of these areas, the Commission saw opportunities to improve consumer protection.

The Little Hoover Commission became interested in the State's consumer protection apparatus because in so many of the issue areas explored by the Commission in recent years public advocates complained that the State's commitment to consumer protection was waning. Whether the service was long-term care for the growing number of aging Californians or an embryonic telecommunications technology, the public expects the State to protect privacy, to counter fraud, to ensure minimum standards and to enforce the laws.

During its review the Commission found that the State has an adequate, even ambitious legal framework for giving consumers a voice in the political process that often shapes their choices in the marketplace. The Consumer Affairs Act of 1970 eloquently articulates how important consumer education is to an efficient free market. And the law envisions the need and creates mechanisms to coordinate the consumer-related activities of the disparate government agencies that have some responsibility over some niche in the marketplace.

Yet consumer advocates, business representatives and even present and past leaders of the State's consumer protection units nearly unanimously agree that as a whole the network of consumer protections is not living up to its potential. Momentum has been lost. The day-to-day exigencies of operating public agencies have somehow overwhelmed the ability of the organizations to work together and be as dynamic as the markets they monitor.

Some advocated that the State lower its sights. The Little Hoover Commission heartily disagrees. As the century closes, a very dynamic marketplace is creating new opportunities for generating wealth and improving the standard of living -- and generating new threats to the health, safety and economic well-being of Californians. The State cannot sit on the sidelines waiting for potential threats to the public safety to materialize before taking action.

Too often, consumer protection is seen as adversarial to business, and that is not inherently the case. Establishing rational minimal standards and fairly enforcing those standards rewards the most efficient and effective suppliers, just as it protects consumers from harm.

To be sure, government cannot pretend or aspire to protect all consumers in every transaction. That reality is among the reasons why consumer education is the best protection. But that reality cannot be used as an excuse for failing to aggressively investigate complaints and enforce laws, particularly when adequate special funds are dedicated to that purpose. In some instances, the Commission believes a targeted investment of General Fund revenue will improve the public welfare, enhance commerce and prevent the need for more intensive government intervention.

In short, consumer protection is a quality of life investment. In some cases, regulations, licensing, enforcement and education programs can result in higher consumer prices. But those investments can also yield reliable and healthy goods and services, and priceless peace of mind.

The Little Hoover Commission stands ready to work with the Legislature and the Governor to make these reforms a reality.