The Fine Print: How Big Companies Use "Plain English" to Rob You Blind

AUTHOR’S NOTE

1.
    Jacking Up Prices

2.
    Corporate Power Unlimited

3.
    Buffett Buys a Railroad

4.
    Railroaded

5.
    In Twenty-ninth Place and Fading Fast

6.
    Profits Upkeep Commissions

7.
    “We Lead the Industry with Integrity”

8.
    Paying Other People’s Taxes

9.
    Investors Beware

10.
    Playing with Fire

11.
    Draining Pockets

12.
    How We Beat the Garbage Gougers and Their Stinking High Prices

13.
    Fee Fatigue

14.
    “Wells Fargo Will Take Your House”

15.
    Giving to Goldman

16.
    Please Die Soon

17.
    Your 201(k) Plan

18.
    Wimpy’s Tab

19.
    Pfizer’s Bitter Pill

20.
    Hollywood Robbery

21.
    Silly Software

22.
    Pilfering Your Paycheck

23.
    Of Commas and Character

24.
    What It All Means

25.
    Solutions

ADDING IT ALL UP

ACKNOWLEDGMENTS

NOTES

INDEX

      
When Major League Baseball
came to San Francisco in 1958, someone gave my father two Giants tickets. Dad had no interest in what he called commercial sports, but Mom was a baseball fanatic, so one chilly May evening she took her third-grader to his first ball game.

Peppered with my questions, my gray-haired mother found a way to keep my mind occupied. “Imagine if you could figure out how to make everyone in Seals Stadium give you a nickel!” she said. I took the implied arithmetic problem and ran with it.

By picking a nickel, my mother had complicated the math. I diligently counted blocks of seats and multiplied by five, remembering numbers as I moved on to the next section, starting over when I made a mistake. After the seventh inning I declared my answer: $1,100, about $8,800 in today’s money. My mother folded back a page on the program that listed the number of seats and showed me her penciled-in calculation.

“Very good,” she said of my estimate, “but
how much
is only half the answer. Now, tell me
how
could you get a nickel from everyone here?”

That second question is the one that stayed with me—and that inspired this book. Half a century later, I’m still pondering, but in a bigger way, how it applies to your life and mine. As in:
How have all of us consumers ended up paying so many extra charges on electric, phone and other bills?

This book is about the many ways that corporations extract from you those extra nickels—which add up to thousands of dollars. Many of
the mechanisms require the government’s cooperation; some of them are the result of seemingly unconnected sources; others are hidden in plain sight.

I promise you, however, the explanation is right there before you, whether you’ve done the reading or not. It’s in the fine print.

1.
Friends and colleagues
have always known that Adam Leipzig husbands his own money and reliably earns profits on funds others entrust to him. As a young executive at Disney, Leipzig oversaw
Dead Poets Society; Good Morning, Vietnam;
and
Honey, I Shrunk the Kids.
Later, as president of National Geographic Films, he was behind
March of the Penguins
. His films have brought in $2.1 billion, seven times what it cost to produce them. That makes him a Hollywood rarity—a reliable steward for investors in the risky business of moviemaking.

Because it was so small, the one thing Leipzig never gave much thought to was his monthly phone bill. When it came, Leipzig checked to see how many long-distance calls, if any, had been made and wrote a check. But his casual view changed one day near the turn of the century during a meeting at the AT&T offices in Los Angeles.

Leipzig had wrangled a meeting with AT&T marketing executives to propose a strategic alliance to help him start his own film production company. Leipzig left with everything he wanted, but a decade later the terms of his successful deal were mostly forgotten. What remained vivid in his memory was what the phone guys had said about the future of his and everyone else’s telephone bills. Their private comments differed dramatically from what everyone in America had been hearing for a quarter century about the costs of telephone calls and, for the previous five or so years, about this wondrous new thing called the Internet. The promise of cheap and
abundant telecommunications service, to be available almost anywhere, was becoming a major theme in telecommunications industry marketing.

But that was not at all what the telephone guys said in private while meeting with Leipzig.

“They said their corporate strategy was that, within a few years, AT&T wanted to draw at least $100 a month from each client household,” Leipzig recalled. “They would do this with phone service, and also things they were not offering at the time, or had not expanded as much—mobile, Internet and cable.”

As your monthly phone bill probably tells you, this is exactly what has happened. At the time, Adam Leipzig’s home phone bill ran $35 a month. A decade later, the total amount due AT&T every month was more than $200, even though he buys his cable television service from another company.

What the marketing executives had forecast had indeed come to pass.

THE RISE OF FALLING PRICES

Since 1974, politicians, pundits and professional economists all have said that, thanks to competition, the cost of telephone service would fall. The Justice Department sued that year to break up the American Telephone and Telegraph Company, saying Ma Bell’s monopoly hindered new technologies and shouldered aside competitors who wanted in on the lucrative business of long-distance calls. (Back then calls were so expensive that many people kept little sand dials by their telephones when calling loved ones long distance so as not to go a second too long saying good-bye and be charged for another full minute.) Eventually the antitrust case was settled by negotiation and, in 1984, Ma Bell spun off seven regional telephone monopolies known as the Baby Bells.

AT&T kept the lucrative long-distance business, but even before the breakup, another monopoly business, a railroad, found a way to compete in long-distance calling. Southern Pacific Railroad began offering limited long-distance service in 1972. SP microwave towers, which kept the trains running on time, sent signals along the narrow rights-of-way that the federal government had given the railroad in the nineteenth century. These towers had the capacity to handle calls, too, and by 1978 SP was providing a cheap long-distance system connecting business customers in Los Angeles, San Diego and Anaheim, California, with those in three East Coast cities, Boston, New York and Philadelphia.

Southern Pacific Communications would eventually evolve into today’s Sprint Nextel, but by the 1990s, a number of competing systems were being served by a growing network of glass fibers buried alongside the tracks. These braided glass strands, each thinner than a human hair, held vastly more capacity than the microwave system, which in turn was far more powerful than the old copper wires used to make the first commercial telephone call in 1878 and still in use today in most homes and small businesses. In the last decade of the twentieth century, the whole country buzzed with talk of a new Information Superhighway that would connect everyone in America; the oft-expressed expectation was that, thanks to competition, prices would fall lower and lower. Some published studies even showed that the cost of long-distance calling would fall more than 99 percent, which was not exactly good news for AT&T as a dedicated long-distance company, nor for its nascent competitors. In Washington, awestruck lawmakers marveled at the idea that every word and image in all 22 million books in the Library of Congress could be sent in the blink of an eye to any place connected by the new fiber-optic cables.