The four words that explain the Gotcha economy: ‘No material financial impact’

Just the cost of doing business.
Just the cost of doing business.

If you want to know why Gotcha Capitalism persists, so stubbornly in America — corporations surviving mostly on their ability to trick consumers — I can explain it to you in four words. No material financial impact.

Recently, 45 states attorneys general thought enough about complaints about satellite radio firm Sirius XM that they bothered to initiate legal action against the firm. Plenty of folks (myself included) complained that they were surprised by credit cards charges from the firm, which engaged in the old automatic renewal game.  When Sirius decided to settle, it paid some spare change for its trouble. How little spare change?  When asked for a statement by a consumer reporter (me) about the settlement, the firm was quick to stress how little it was: “we agreed to make a payment of approximately $4 million to the States that has no material financial effect on the Company.”

Yes, I know that’s specific language intended for Wall Street.  The payment won’t hurt impact earnings guidance, etc. etc.

How can an intelligent person also not read that as a thumb in the nose (being polite here) at 45 states’ top legal authority?  Sure, you came after us, and we paid, but it didn’t hurt.  Nah Nah Nah.  You can’t hurt me!

How can it not feel like a Bronx cheer to you?

Companies routinely invent bad business practice, inflict them on consumers, get caught, use the legal system to delay, eventually admit guilt without admitting guilt, and make a token payment that’s considered the cost of doing business.  This is why we don’t have a free market anymore. We have a lawless, gotcha capitalism economy.  Free markets required perfect information on all sides of a transaction.  They require clear price tags.  Here, we have little idea what things cost. Maybe they cost $10 a month, until they cost $25 a month at some point in the future. If I’m a company, I don’t want intelligence consumers who appreciate the value of the product they get. I want suckers who are too busy to check their credit card bills and too worn down to file official complaints (which is the only way you’ll get a refund from Sirius).

Sure, this is annoying. But it’s more than that.  Gotcha Capitalism rewards bad behavior. It turns the normal reward functioning of markets on its head. Instead of good companies with good products and creative innovation rising to the top, we have companies that refine their gothca mechanisms at the top.  Just enough surprise to walk the thin line of the law…or slip over it, but not enough to do something that might actually have a material impact on the bottom line.

If you like my line of thinking, I’ve written an entire book about this — you can buy it here.  But for now, known this. Until bad behavior starts resulting in material impact, companies won’t stop.  And we’ll remain stuck in the sucker economy.

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About Bob Sullivan 1342 Articles
BOB SULLIVAN is a veteran journalist and the author of four books, including the 2008 New York Times Best-Seller, Gotcha Capitalism, and the 2010 New York Times Best Seller, Stop Getting Ripped Off! His latest, The Plateau Effect, was published in 2013, and as a paperback, called Getting Unstuck in 2014. He has won the Society of Professional Journalists prestigious Public Service award, a Peabody award, and The Consumer Federation of America Betty Furness award, and been given Consumer Action’s Consumer Excellence Award.

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