University of Virginia Library

Corrupt Business Practices
Prompt Need For Regulation

By Steven Leichter

There is no Better Business
Bureau in Charlottesville.
According to the Chamber of
Commerce, the local merchants do
not believe we need one. Better
Business Bureaus supposedly belong
in big cities where ruthless
competition and unethical business
practices abound. Charlottesville, in
contrast, is thought to be a small
town with personalized, honest
merchandising. The lack of
organized, vociferous consumer
protest is offered by the
businessmen as proof of this
scrupulous attitude. Therefore, the
merchants and corporate executives
in this area have refused to support
the establishment of a Better
Business Bureau.

To others, this picture is
self-deceiving or optimistic. It is not
that the Charlottesville business
community is all exploitative and
corrupt; but expectedly, as any
grouping of individuals, it is not all
fair-minded and ethical either.
Charlottesville and its environs,
with a rapidly expanding
population now approaching eighty
thousand, is no longer a small town,
and the lack of collective consumer
discontent is insufficient
substation of individual consumer
satisfaction. Moreover, the unique
composition of the population,
which contains a large number of
students, significantly alters the
need for added consumer
protection.

At present, the dissatisfied
consumer is restricted to two
methods of obtaining relief. He can,
of course, seek to negotiate a
settlement directly with the
company involved. However, if he
is unable to reach agreement with
the seller, his only available
resource is to press legal action.
Piratically, this is a limited
alternative. In many instances, the
amount of money in question is
inadequate justification for a
potentially expensive or
time-consuming suit. Sometimes,
poor intelligence or education
prevents the buyer from
understanding his legal options. In
any case, only a fraction of
unresolved disagreements are ever
brought to court.

Companies, also, tend to absorb
many small losses due to consumer
default, instead of pressing legal
action. However, businesses,
especially the large corporations,
with more powerful financial
resources than individuals, are more
capable of using the courts. In
addition, local merchants, who
deny the need for organized
consumer protection, maintain at
least one form of co-operative
business protection - a credit
union. Just as a Better Business
Bureau would discourage unfair
business practices, the business
community has an organization
which helps to police consumers:
buyers who fail to pay their bills
are blacklisted, in a sense, and have
future credit denied by subscribing
companies. Philosophically, it is
inconsistent for the business
community to support such
protection against consumers while
denying the need for similar
consumer regulation of the
marketers - unless, of course,
buyers cheat while sellers are
honest. Obviously, that is
preposterous.

Charlottesville, as any other city,
has both honest and dishonest
merchants, scrupulous and
unscrupulous technicians, and
exploitative and fair corporations.
It is either deceit or conceit for the
business community to argue
differently. The lack of
institutionalized forms of consumer
protection, short of legal action,
may encourage unethical practices.
Certainly, instances of unjust
business policy and action are
well-known to many residents of
Charlottesville.

Case-in-Point: A medical student
ordered an easel-backed picture
frame with a tinted glass front from
a local merchant. He agreed to pay
almost $40 for this frame, but
specified that the verbal contract
had to be fulfilled within two
weeks. At delivery, the proprietor
of the store presented this student
with a naked frame which lacked
both easel-backing and a glass front
of any kind. He demanded the $40
from the student and informed him
that an easel back and tinted glass
would cost him an additional
amount of money, and he claimed
that neither feature had ever been
discussed before.

Case-in-Point: A nurse bought a
used car from a local dealer. Within
a month after the purchase, the
battery went dead and had to be
replaced, and a leak developed in
the gas tank.

Case-in-Point: A store on the
"Corner" held a special record sale,
in which it advertised a reduction
from $4 to $1.98 on some records.
The records the store offered for
sale listed for $2.50 and were
always sold for $1.98.

Case-in-Point: A local
department store offered a special
sale on baking dishes. The dishes,
unfortunately, could not withstand
more than 400 degrees of heat. This
was not advertised.

Case-in-Point: An appliance
company sent a repairman to one
home to fix a washing machine.
After an inspection the repairman
declared that the machine was
irreparably damaged and had to be
replaced. He charged the housewife
$7.50 for the visit. Later that day, a
neighbor found that the trouble
was a loose connection, tightened
it, and repaired the appliance.

Supposedly, under the free
enterprise system, such concerns
would lose their customers and be
forced to change their policies or
they would fail. While this does
happen occasionally, certain
conditions must exist for the
balance to work properly. Among
these are sufficient competition to
present the consumer with better
alternatives than the unreliable or
unscrupulous store, and
knowledgeable, mature consumers
who use their options
advantageously. Unfortunately,
these two criteria are met only
partially, at best.

All local residents can see
evidences of expanding competition
in Charlottesville. The opening of
many neighborhood shopping
center, as well as the continuing
expansion of the Barracks Road
shopping area, has provided more
outlets for the same goods.
Nevertheless, some areas of the
market still have limited or no
competition, and some may have
more than one marketer with little
practical difference between the
sellers. Probably, one of the most
significant examples of poor
competition and its effects is to be
seen in local car retailing. There is
not more than one franchise for the
various types of cars. True, the
demand may not call for
duplication, but Charlottesville
residents pay high prices for the
autos they buy. One students who
was pricing new cars last summer
was told by two dealers handling
major American cars that the
end-of-the-year discount offered on
1968 models was 10% off the list
price. In contrast, franchises in
Washington and New York were
giving as much as 25% off at the
same time. Another expensive
commodity here is housing. This
may be due to the student
population. A third expensive
commodity is skilled services, such
as appliance repair. Not only are
such services expensive, but, as a
staff member at the local Chamber
of Commerce notes, they are often
of inferior quality. It costs, for
example, $7 to $10 to get a black
and white portrait made by a
professional photographer in
suburban New York or Washington.
It costs $20 or more here in
Charlottesville.

A Better Business Bureau will
not solve all of these problems. In
the end, more discriminating,
cautious buying habits by the
individual consumers will do far
more. Charlottesville consumers,
says an executive of the Chamber
of Commerce, are not as prudent
and even demanding as they should
be. This may be partly due to the
large student population, which
represents a body of less
experienced, often less responsible
buyers. A Better Business Bureau
could not lower prices or coerce a
recalcitrant company into satisfying
its customers more than a more
articulate public, using its own
buying options and, in the last
resort, the courts.

However, an organization like a
Better Business Bureau could
provide a functional base for
consumer pressure. It could also
guide the individual shopper, and
help him avoid unfair companies. In
both aspects, the Bureau would be
an institutionalized consumer
representative, which would
discourage inequitable business
practices through easily accessible,
extra-legal channels.

It would also aid responsible
merchants. According to the local
Chamber of Commerce, part of the
effect of a Better Business Bureau is
the decline of policies which
promote sales through
unscrupulous devices. It thus
removes some unfair competition
from the market.

The local Chamber of
Commerce, itself besieged by many
consumer complaints about local
businesses, has initiated two efforts
to establish a Better Business
Bureau. Both have failed through
lack of merchant support. Yet, the
need for such a group is increasing
as the population, and especially
the university population increases.
Everyone stands to benefit from a
Better Business Bureau -
consumers, and merchants, who
would not have to compete with
unscrupulous companies. The
formation of such a bureau would
represent a real mark of progress in
Charlottesville.