In response to articles pertaining to gratuities, mandatory fees, service charges, tolls, and other expenses that are initially hidden from the advertised price of products and services when traveling, some readers of The Gate With Brian Cohen criticized that people should simply pay those fees and not whine, argue, or complain about them: in other words, just shut up and pay.
Just Shut Up and Pay. I Disagree.
The common argument in many of those articles is not to not charge consumers appropriately for products and services so that the establishment profits enough and the employees are adequately paid at the minimum. Frankly, they absolutely have a right to do so; and they cannot stay in business if they charge too little.
More to the point of the problem is that a price is clearly advertised — but the consumer is hit with extra charges along the way. Perhaps the extra fees are not revealed until some point during the booking process; or immediately prior to the conclusion of the service…
…and regardless of the amount, these charges, fees, and gratuities add up — not only for the consumer who pays them; but also for the establishment when multiplied by the number of consumers who pay them.
Many complaints about hidden charges, fees, and gratuities have been voiced in many forms by many people…
…so why have they not been minimized or eliminated after so many years?
The Possible Problems
The problem is that hidden charges, fees, and gratuities have become so engrained in the economy in the United States that people simply accept them — and David Leonhardt of The New York Times used the travel industry to explain the reasons in this opinion piece from Thursday, February 9, 2023.
The market solution to sneaky fees seems straightforward. When Marriott starts charging $50 nightly “resort fees,” Hilton can call out its competitor and try to steal Marriott customers. And some companies do take this approach: Southwest Airlines advertises a “Bags Fly Free” policy, an obvious swipe at rivals.
But the mushrooming number of fees has made clear that competition does not usually eliminate the practice. Why not? Academic research has suggested that there are two main reasons.
First, human beings are not the efficiently rational machines that economic theory pretends they are. An entire branch of the field, behavioral economics, has sprung up in recent decades to make sense of our limited attention spans.
If you are familiar with the best-selling book “Thinking, Fast and Slow,” by Daniel Kahneman, you will recognize these ideas. We lead busy lives that keep us from analyzing every purchase, and we get distracted by salient but misleading information (like a low list price). Big companies, with the resources at their disposal, have learned to take advantage of these limitations. The economist Richard Thaler refers to practices like these as “sludge,” the evil counterpart to nudges that use behavioral economics to improve life.
True, one company could call out another for using sludge. But doing so often requires a complex marketing message that tries to persuade people to overcome their psychological instincts (like the appeal of a low list price). For that reason, Hilton can probably make more money by charging its own sneaky resort fees than by criticizing Marriott’s.
“Once some subset of hotels start charging these fees and generating a significant amount of revenue,” Bharat Ramamurti, a Biden adviser, told me, “that creates pressure on hotels to do this, or otherwise they’re getting left behind.”
Monopoly power is cited as the second — and, arguably, more obvious — reason for hidden fees: because they can. Ticketmaster was used as an example, as it can charge whatever fees it wants. Consumers may be angry; but if they want to see that Taylor Swift concert, they have no choice to pay by emptying their wallets or purses on significant fees for those expensive tickets — or have ticket sales for that concert canceled “due to extraordinarily high demands on ticketing systems and insufficient remaining ticket inventory to meet that demand”.
Due to extraordinarily high demands on ticketing systems and insufficient remaining ticket inventory to meet that demand, tomorrow's public on-sale for Taylor Swift | The Eras Tour has been cancelled.
— Ticketmaster (@Ticketmaster) November 17, 2022
Two Of Many Examples
In response to this recent article pertaining to credit card surcharges, Bob — who is a reader of The Gate With Brian Cohen — wrote: “What an incredibly whingey article. So many small merchants are struggling. If you want the option of only Target or Walmart then keep going. If you want actual choice, pay the damn fee that allows the small merchant to continue to exist.”
Why advertise one price and charge a credit card surcharge fee to unsuspecting customers? Why not simply increase the prices to include the credit card surcharge fee? If the argument is because advertising the lower price is to attract customers, then that practice is arguably deceptive because the customer is going to pay the higher price anyway in the long run. Some customers should rightfully be more offended about feeling deceived than about higher prices.
Michael W of Michael W Travels wrote this article recently pertaining to his experience at Bonnie’s, which is a restaurant in Brooklyn — but at the bottom of the dinner menu was this statement:
5% kitchen appreciation service charge
by applying a kitchen appreciation service charge to our checks, it assists us in working towards bridging the large pay gap between the front + back of house who are unable to receive tips. we are extremely grateful for your patronage and welcome any questions you may have about this policy!
Why not just increase the menu prices by five percent across the board instead of surprising guests with this service charge? Moreover, what if the customer does not “appreciate” the work that personnel in the kitchen performed for the meal? Can that customer have the five percent kitchen appreciation service charge removed from the check?
Final Boarding Call
Leonhardt concluded in the aforementioned piece that “The U.S. government over the past half-century has moved toward an economic policy that often allows corporations to behave as they want, based on the theory that the free market will solve any excesses. The results haven’t been very good. During that same half century, economic growth has slowed, corporate profits have risen faster than wages, income inequality has soared, and living standards have grown slowly.”
I agree with that to a point — and only to a point — as I generally oppose intervention by governments to dictate how the free market works. Rather, when people develop the resigned proletariat dogma to “just shut up and pay”, that attitude essentially gives corporations and companies free reign with the license to conduct business as they see fit — whether or not the practices of conducting business are considered ethical or even legal.
Combine that with a lethargic government whose threats of stricter laws are little more than theater to give the illusion that it is fighting for the consumer; and we are left with a sea of hidden costs — gratuities, mandatory fees, service charges, tolls, and other expenses — which are designed to significantly drain pockets of as much money as possible…
…and as is typical human nature, if a company can get away with such business practices without penalty, they will only get more brazen and increase those gratuities, mandatory fees, service charges, tolls, and other expenses even more — whether rental car companies charge a daily fee simply for using a toll transponder in a rental vehicle; lodging companies add mandatory fees per day whether what are included in the fees are used; or airlines charging fees for adding the selection of seats and the allowance of carrying a bag aboard an airplane.
The best way to resolve this issue of hidden fees — which can as much as triple the cost of the original price that was advertised or quoted — is to simply not do business with companies which resort to what can arguably be considered extortion when the consumer otherwise has no choice.
In other words, don’t “just shut up and pay.” That will not resolve this problem. Whether you can afford the supplemental fee is not the issue here. You should not be surprised with hidden fees. You have a right to know the total cost of a product or service from the outset. Vote with your wallet or purse. If enough people did this, a clear message would be sent to companies that people are fed up with doing business this way — and perhaps they would change their ways towards commerce that is friendlier to consumers.
Photograph ©2016 by Brian Cohen.
