Corporations behaving badly

Behaving badly is literally in the DNA of large corporations, if you make the reasonable assumption that a corporation’s DNA is its articles of association.

This is because the articles of association put the maximising of shareholder value as the primary aim of the corporation. So, the directors and managers look after themselves and the shareholders whereas consumers, employees, and the environment can go to hell.

I have had a few examples recently, to add to such egregious corporate behaviour as Qantas selling tickets on flights they have already cancelled.

The classic is the letter that begins: “We are making changes to your . . . “. You know what follows. In opaque language usually near the bottom of the letter is small type will come some lessening of consumer benefit and an improving corporate profit.

The consumer has often chosen the goods or services of a corporate provider after comparing all the benefits and price of competitors, so to change the terms after the event is bad behaviour, but, alas, not illegal. So, a health fund can remove coverage for certain procedures; credit cards can reduce reward points (this happened to me this week); and so on – usually with little notice.

Contract law used to provide that changes made after the event are unenforceable. A famous case decided in the 1970s (Thornton v Shoe Lane Parking) held as much. Francis Thornton drove into Shoe Lane car park through a boom gate after he had paid for the ticket. Only once inside the car park, having paid his fee, could he see the notice on the wall that the parking company purported to exclude itself for liability for personal injury.

He was injured in the car park because of the car park’s negligence. The court held the contract had already been made before the exclusion clause could be seen and Thornton was awarded damages.

But these days corporations present customers with screeds of exclusions clauses and clauses saying they can pretty much do what they want when they want, including changing the terms of the contract. And they evidence it with an “I accept” button, even though no-one could possibly read all the terms of these contracts and lead a normal life.

The late payment fee is another nasty. Telstra charges $15 if the payment is late. Last month, I forgot to transfer the email with the invoice to my “Bills to Pay” folder and it languished in the entrails of my inbox. I got a late-payment fee.

I rang Telstra, and after an inordinate amount of time managed to get someone to waive the fee. 

I pointed out that the bill was for $100, so the $15 fee for the month’s delay amounted to 180 per cent interest and that amounted to an unenforceable penalty. And in any event, I was a good customer.

It is a matter of degree. Obviously, Telstra could not charge and have enforced, say, a $1 million late fee. The courts might say that a, say, 10 per cent fee is reasonable, but it is a fair bet a court would say 180 per cent is an unreasonable, unenforceable penalty. But it is also a fair bet no-one could afford the time a cost of challenging it, unless we had a massive class action of half a million late-fee victims.

I asked Telstra’s media team a few questions, the pertinent ones of which they did not answer. How much does Telstra collect in late fees each year? What policy does Telstra have on waiving the fee?

Interestingly, the media team justified the fee as necessary to cover the cost of debt-collection. Now that really damns the fee as an unenforceable penalty because they are not applying the fee to the cost of the late payment in question but to chasing up non-payers which is not the fault of the late payer.

I suspect Telstra knows the weak basis upon which their late fee lies and they tell their call centres to waive the fee for anyone who has the patience to ask for it.

And therein lies the rub. Big corporations can get away with levying legally unenforceable fees; changing the terms of the contract; and making consumers go through time-burning hoops to talk with a human being who can understand a complaint and act reasonably to resolve it.

And don’t you hate it when the recorded message directs you to the website. If I could find the answer on the website, I would not be putting myself through the torture of ringing you.

Most big corporations only respond to legal threats or media exposure. They don’t even care much if a customer threatens to go elsewhere. Mostly, there is no elsewhere because competition is so poor in Australia. Many industries have just a few players who hog the lot.

De facto collusion rife and it contributes to inflation and cost-of-living rises. 

In all, it seems corporations are increasingly behaving badly. Consumers on their own cannot, by and large, get redress for bad behaviour. We need a much stronger Australian Competition and Consumer Commission with even larger penalties. The ACCC should be able take up individual consumer complaints.

Yes, there is a government review of competition law, but they really need to get on with it.

The important point is there is a danger that the seething resentment tapped into by populists gets directed at government. But government has to be the main part of the solution and not be seen as part of the problem.

Government can do away with the nonsense of self-regulation and approved co-operation between corporations. Corporations say that these things help improve efficiency and the benefits flow to consumers. In fact, they enable corporations to take sort cuts and increase prices to the detriment of consumers.

With tougher regulations, higher fines, and splitting up of monopolies, government can rely on the DNA of corporations to kick in. It should not be in shareholders’ interests if the cost of misbehaviour is high enough and certain enough to outweigh the allure of ill-gotten profits.

Crispin Hull

This article first appeared in The Canberra Times on 10 October 2023.

4 thoughts on “Corporations behaving badly”

  1. Dead right. The other motivation of corporate managers is being able to add millions to their paychecks by simply taking over competitors because executive salaries (and directors’ fees) are determined by size of the business not by any sensible measure of effectiveness. Majority shareholders are superannuation funds, local or overseas, who don’t care much about returns because they get their money from a percentage levy on members’ balances not on earnings.

  2. Your article about John Howard was excellent. I cam from holland after the war in 1955 studied at uni under Whitlam free education then. I never have voted but labour and I will continue doing that until I die

  3. To make my life easier, I had set up direct debit with Telstra. Nevertheless, three months in a row, Telstra charged me with that late fee, not wanting to admit it was their own fault. At the end of long and frustrating phone calls, I eventually win.

  4. Fair enough Crispin. I’ve had Kate fees waived on the basis of being a good customer and or a mistake. However, a simple way to avoid late fees is to set up direct debits, especially for regular bills. Then you don’t have to remember!!

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