Tuesday, April 10, 2007

Mainstream Corporate Scam Artists

In Seattle recently we got a car at Hertz. I had a prepaid package deal and after saying no to the optional insurance, I was offered gas fill up for the car for $2.91 per gallon. (I'd just been in LA where the gas was about $3.45/gallon, but didn't think that Hertz would give me a great deal and figured it would be cheaper outside the airport and said no.) If I didn't take this option, they'd top off the car at $6.99/gallon. When we got out on the road, gas was around $2.99 and I thought, hmmmm, maybe I should have gotten that. Until my daughter said that at $2.99 I needed to bring the car in empty because they'd charge for a full tank. That certainly wasn't clear at the counter. And one would have to work really hard to bring it in totally empty. And why $6.99 to top it off? That's more than 100% surcharge.

It used to be that there were reputable businesses that treated their customers with some level of respect and then there were scam artists. And while there were gradations, there was something of a gulf between the two. The first basically let you know the terms and conditions of a transaction and if there was a problem they would make a correction. Of course, businesses always were out to make a profit, but many in the past had some level of integrity (shame?) that kept them reasonably fair with customers. There still are some places like that - Nordstrom and Costco come quickly to mind. You can bring products back, no questions asked. The scam artists were like the guys who'd offer to resurface your driveway cheap because they were "in the neighborhood and had some hot asphalt leftover we need to use up." But all they did was paint it black and when it rained the scam would be revealed.

But nowadays we have mainstream, well known companies that act like scam artists making you guess which shell hides the pea. Either the rules are so complicated that few people actually read them or they offer you 'deals' that turn out to cost far more than you expected. Like the gas scheme at Hertz. Or like phone companies with all those free minutes, that suddenly become outrageously expensive when you go over the limit or out of the area. Or they set up arbitrary fees such as the ridiculously expensive late fees many credit card companies charge.

These aren't customer friendly. They are purposely devised to trick people into behaviors that will cost them much more than they were expecting to spend. And banks and phone companies, the sorts of formerly mainstream businesses that used to be reputable, are scamming customers with legal sleight of hand too. Why?

Some thoughts here, and maybe you have some other explanations:

1. Corporate mergers and concentration have had several affects here:
----First, there is much more focus on the bottom line and pressure to find ways to squeeze out more profits

----Formerly locally owned businesses answer to some distant headquarters, that don't have local accountability

----Large trade associations heavily lobby legislatures and government agencies to get rid of any consumer oversight or regulations

----The concentration of ownership means there is less competition and consumers have fewer choices (One might argue that there are lots of choices for credit cards arriving in the mailbox daily. But the hype ("0% Interest") is highly misleading and the small print is impossible without reading glasses not to mention a law degree and an extra hour a day. And once you have a credit card, they can change any of the conditions they want and it's take it or leave it.)

2. Consumers are not taking their responsibilities to be savvy shoppers.
----They are too lazy or too tired to shop around. (The internet usually gives me several choices, of say, decent car rental places that charge a half or a third of the Hertz' and Avis'.)

----They just can't say no. We do have the option to not buy on their conditions. We can shop around or even do without. When we stop accepting these outrageous conditions, the companies will respond with better options. Though it is hard to not have a credit card if you want to buy an airplane ticket or rent a car, so in many ways not having a credit card is like not having a car. You can do it in today's world, but not easily.

Even with the influence business has today on legislative bodies at the state and national levels, we can be more intelligent consumers. The market does work if consumers are discriminating. Though the outrageous bilking of the consumer raises serious questions about the fundamental assumption of market economics - the so called 'rational man.'

Some places that offer more information on these things:

Credit Card Nationis a book by Dr. Robert Manning which examines how credit card companies prey on cardholders and would-be card holders.

Justice Talkinghad a show yesterday on consumer debt that discusses many of these issues, including how the poor are especially hard hit by check cashing stores.

An Unreasonable Man, the movie on Ralph Nader's long consumer advocacy reminds us that large corporations have always gone for profit over consumer safety.


  1. To me, your explanation #2 is obviously true, especially for American consumers. So go get their money.

  2. Des - Ha! Somehow I believe you mean it :)
    - monica


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