It’s time to ponder the absurdity of the fees around us. And maybe it’s time to do something besides argue.
Our recent story about travel agencies adding refund fees — here’s someone who got an airfare refund, but the agency kept half the money anyway, and here’s another troubling case where an agency helped itself to a refund — really got you talking. And together, the stories drew a lot of clicks, which means many of you are worried about these fees.
You should be. Airlines collected a cool $11 billion in fees last year. Hotels racked up $2.47 billion. Wireless companies do a great job of hiding their fees amid $187 billion in revenues last year, but one estimate says taxes and fees account for a full 18 percent of a wireless bill. Do the math.
So why not travel agencies, too? Because, you know, they don’t charge enough fees.
Strangely, some of you think cancellation fees are justified, even when the money clearly doesn’t belong to the agency. But that’s beside the point. Today, I want to talk about the fees that surround us and what we’re going to do about it. All of us.
Do fees represent the free market at its very finest, where companies can charge you whatever the market will bear? Or are these unconscionable, anti-consumer “gotchas” that regulators must stop now?
Let me see if I can represent both sides of this discussion fairly, because I think this issue deserves an impartial hearing.
My free-market friends think that fees are absolutely fine and that regulators should keep their hands off. In a competitive marketplace, you’re free to choose the company you want — presumably the one with the lowest fees and the best service.
That argument has a lot of appeal to those of you who don’t trust the government and believe market forces — in other words, people taking their business elsewhere — are all we need to address an issue like fees.
That may work in a competitive industry, like the lodging business. Indeed, it may be the reason hotels collected less than $3 billion in fees last year. If you don’t like the resort fee at a Hilton, go to a Marriott. Problem solved.
But what about airlines? That industry is most generously described as an oligopoly, but in most markets, it’s more like a monopoly. Choices are limited, and the only way to create a more free market is to lift America’s antiquated cabotage laws and let the world’s best airlines compete with our domestic airlines. (Would I pay more money to fly to New York on Singapore Air? Heck yeah!)
So the “free market” argument really falls apart when you start talking about almost-monopolies like airlines, wireless companies or — don’t get me started on this — cable companies. On this site, those are the most complained-about companies, and with good reason.
The pro-regulation folks think fees should be banned quickly. These well-meaning readers believe the government can save corporate America from itself, particularly when it comes to issues like junk fees. Perhaps.
Here’s the problem with that approach: As we’ve already seen, companies quickly change the name of their fees when they’re banned by law or regulation, and then it’s back to business as usual. Watch out! Here come the fees again.
There has to be a better way.
I think we need to acknowledge that in some industries, the “free” market is dead. There’s no meaningful competition. Consolidation in the airline, wireless and cable industries has left us with a few big players that have their way with us. Playing whack-a-mole with the fees, which is what the pro-regulation side would propose, may not work either. At the end of the day, there’s still a strong incentive to base your entire business model on fees, some of which are poorly disclosed or even deceptive.
The fix is to adopt a standard everyone can agree on. One price, no surprises. To get there, we have to first stop fighting. The free-marketers have to acknowledge that the thing they so admire no longer exists; the gung-ho regulators have to stop putting Band-Aids on a gushing wound and look for a cure, which lies within.
The only beneficiaries of a protracted skirmish between the free-marketers and the pro-regulators are the industries that continue to amass record fees from you and me. They laugh while we fight.