In recent years, corporations have been trying to get away with making more money while appearing to charge the same price. But you might not have noticed due to the subtlety of their tactics.
Often, this can be as simple as reducing package sizes—for example, orange juice cartons have incrementally gone down from a full half-gallon (64 ounces) to 52 ounces, nearly a 20% reduction—or the now-common practice of charging extra for baggage. Another tactic involves holding out a low price while adding on extra costs during the purchasing process or even after the order is completed. For instance, “resort fees” or generic “service fees” are often tacked onto a hotel bill that doesn’t explain what those fees are even paying for. Companies pad the price in the guise of a fee simply because they can.
Although such bait-and-switch pricing tactics are hardly a new phenomenon, many American consumers have recently noticed—and even fallen victim to—a proliferation of hidden fees and unexpected and unjustified charges.
A few pertinent examples spring to mind:
- So-called premium airline seats: It has become commonplace for airlines to charge extra for premium seats, including those in first or business class sections or rows with additional legroom. But if you try to book a seat on some flights these days, you may notice that every single seat on the plane carries a surcharge beyond the ticket price. To avoid this surtax, where are you supposed to sit? In the baggage hold? How can there be an added fee simply for having a seat? How is even the most basic, no-frills seating accommodation not part of a standard ticket? Certainly the airline is not selling standing-room-only fares. This is a buried fee that you must fork over to fly at all.
- Endless ink cartridge replacements: Most people know that printer ink can be expensive—far exceeding the actual cost of the printer—particularly when there are different cartridges for different colors. Many inkjet printers use five different cartridge colors: black, yellow, cyan, magenta, and photo or matte black. What you could not have known at the time of purchase is that, even if you only print black-and-white documents and never print photographs or print in color, the printer will not function at all unless all five cartridges have ink in them. Run out of ink in one of them and the printer becomes a useless prop. This forces consumers to constantly replenish all five cartridges if they want to have a working device.
- Rental car insurance schemes: When you book a rental car online, it will often give you the option to purchase insurance on the spot. The policy is issued by a third-party insurer and is typically cheaper than buying insurance coverage through the rental car company when you pick the car up at the counter. You might have been able to use the outside insurance successfully in the past and still can do so in most instances—what matters is that the vehicle is covered and that the insurer pays in the event of an accident. However, don’t be surprised if you are informed when picking up a car (which has already been fully paid for) that the rental car agency claims that it does not accept outside insurance policies and will not allow the vehicle to leave the lot unless you then buy coverage from the agency directly; otherwise, they assert, the car will not be considered insured. At this point, the consumer is faced with an offer that can’t be refused and has no real choice but to pay for duplicative and excessively pricey coverage. The same rental car company also might try to tell you that you can’t use your own EZ-Pass for tolls but must pay a fixed charge of approximately $25 per day to use theirs—regardless of the actual tolls incurred.
- Passing credit card fees and other hidden charges onto customers: Some retail stores and restaurants have begun to charge extra to customers who pay by credit rather than cash, displacing credit card companies’ fees onto the consumer. For example, some local convenience stores have begun to use this tactic when they did not do so before. You also could step into the store to buy some beer and be surprised at the register by a “service charge” on top of sales tax and the credit card usage fee. This extra charge will probably be significantly higher than the bottle deposit you can get back if you recycle each bottle. Hidden fees have gone to an extreme when there is one imposed just for buying a six-pack.
- Not-so-free public spaces: Public parks are supposed to be a free amenity for the community, but that is not always the case. A few years ago, some local parks like those in NYC began requiring special paid permits to use different amenities like tennis courts. Not only does the application process require people to go through unnecessary hoops to obtain access to what should be a free public service, but it also restricts the use of the courts and pools to those with the ability and willingness to pay. Park facilities are meant to be open to all residents on an equal basis, not just the most privileged ones.
How to Counteract Company Schemes & Scams
What can be done about the seemingly exponential increase in scams and schemes from small businesses, mega-corporations, and government entities alike? In many cases, it may boil down to “buyer beware” or engaging in a publicity or education campaign. However, depending on the circumstances, undisclosed fees and other deceptive practices can often give rise to a legal claim for consumer fraud.
But there is a catch. Purchasing a consumer product or service typically comes with an arbitration agreement attached—as with the average printer, plane ticket, or hotel or rental car reservation—frequently without the consumer’s knowledge or express consent. This is not innocuous. Arbitration clauses are designed to eliminate consumers’ ability to file or participate in a class action—they require arbitration but bar class or consolidated proceedings. Because of financial disincentives, no consumer will realistically bring a claim for $2 or even $200. The upshot: No claims at all are brought, and a company can commit widescale fraud with impunity. The Supreme Court has blessed this scenario and held that attempts to ensure that consumers have viable remedies via class actions violate the Federal Arbitration Act.
The FAIR (Forced Arbitration Injustice Repeal) Act—recently passed by the U.S. House of Representatives—provides an answer. It would prohibit forced arbitration of consumer claims (along with employment, civil rights, and antitrust matters) and prevent companies from using arbitration to bar class actions, which are often the only feasible method for holding corporate wrongdoers accountable for systematic misconduct. The FAIR Act is an essential step in combating corporate schemes that cheat consumers, employees, and others. The Senate should pass the Act immediately, and everyone should urge their Senators to sponsor and vote for the bill.
For more updates and stories about consumer fraud and related laws, be sure to visit our blog frequently. In the meantime, buyer beware—or else you could be in for a price tag scare!