Companies Put on Notice
RC: You sent a letter via certified mail to 30 home improvement companies last October warning them that you were conducting an investigation. Why?
JZ: The letter that was sent out was meant to put companies on notice about practices that we believed were in violation of our Consumer Protection Act. And to let the good businesses know that we are out there and going to correct this problem, this aberration. It was not meant to label the companies we sent it to as violators. We put that message out from the beginning and we want to continue to put that out there. Just because a company received that letter doesn’t mean they were a violator.
RC: How did you develop the list?
JZ: We looked for companies that were out there in the market and represented a cross section of it. We selected companies on both the west side and east side of the state. The model we were looking at is the one-call-close type company. We sent the letter to let them know we’re on the job and we’re planning to take a hard look at the way they do business so that, if they have issues, they may want to consult an attorney.
RC: Do you use secret shoppers?
JZ: From time to time we do secret shopping. It depends on the target. In our view, secret shopping is an incredibly effective investigative tool to determine what really goes on at the point of sale. We have used our investigators in some cases, and in other cases we have used law clerks. There is no filming and no tape-recording. It’s just somebody who is trained in observing and [mentally] recording. They’re not looking for anything, they’re just collecting facts, and we take those facts and determine if it is a potential violation or not.
RC: Where does the balance of the information used as evidence in the charges come from? Training materials, data bases, scripts, consumer complaints?
JZ: All those and more. With this particular industry, the deviance had gotten so normal that we had all we needed. The training manuals were especially damning. A lot of it was laid out in black and white in the training manuals themselves. The CID materials that we get, we can’t release to the public. They’re kept confidential since there is litigation and then they’re used as evidence. You had training manuals that laid out the bad acts in black and white. I’m not identifying any particular company here.
RC: Is it the number of complaints or the kind of complaint that would bring a company to your attention?
JZ: It’s not just the number of complaints; it’s the nature of the complaint. We look for situations where the complaints about a practice do not appear to be about a rogue employee but are rather a part of the standard operating procedures of the company. If that seems to be the case, then we would want to take a closer look at that company. You can tell the difference.
We are still looking at companies.
RC: What’s the procedure? You notify the company that it’s under investigation, then what?
JZ: Generally, the process is that we identify a target through complaints on the Internet, ads we see in the paper, TV ads. We look at the company’s website. We look at the complaints that have been filed either with us or with the BBB. And after identifying a target [company], it all depends on the situation. We could go ahead and send a CID to the company asking for training materials, a customer list, asking them to identify former employees. We may decide to secret shop.
At some point ? and this is not a science ? we offer a reasonable settlement. And in this particular effort, that is ongoing. Our main task is to get the industry back in compliance. We are not out there to put people out of business. We are not there to punish the businesses. We recognize that there is a significant minority where these practices became so ingrained that they were second-nature and far too common and we want to get that righted. So our initial efforts and settlements were not punitive in the sense that we were imposing huge penalties. Part Two is we will check on each of these companies to make sure they’re in compliance.
Price Conditioning ? Unfair
RC: You allege deception in the practice of offering a discount to customers who buy on the first night. But the homeowner who buys on the initial visit is saving the home improvement company the time, money, and trouble of one or more further visits. Shouldn’t that be taken into consideration in the pricing? What do you consider a legal offer as far as a discount for a first night purchase?
JZ: That I can’t answer and here is why: the deceptiveness and unfairness of that practice, which in essence involves making the consumer believe that he or she is purchasing at a substantial discount from a retail price when, in fact, they are purchasing at the price the company would normally sell this product at. The companies make people believe that that initial price that has them gasping is the price you normally sell at. So, from the beginning all the way through the sales presentation, you price-condition them [against a figure that’s false].
That’s the unfairness and deceptiveness of that practice. The perniciousness of it is amplified because it is being used in the context of a one-call-close sales call. The whole purpose of a one-call is to make the sale there and then so that the homeowner doesn’t shop around. The whole presentation is designed to prevent the consumer from discovering that they’re not buying at a substantial discount.
RC: Isn’t it the case, however, that discounts are a common practice in most kinds of retailing?
JZ: I hear that a lot. Why don’t you go after Macy’s? They’re always having a sale. But a customer can walk out of the store at Macy’s. You’re not being pressured by someone to stop shopping and buy there and then.
RC: Do you consider first-night discounts the most objectionable practice that home improvement companies engage in?
JZ: With these companies it’s a well-choreographed process, from the initial lead collection all the way to the close. We look at the whole megillah, the whole presentation, to determine deceptiveness and unfairness. We can’t say a discount of a certain percentage is OK because the rest of the presentation may make that untrue.
RC: If the salesperson offered $500 off for not having to return to the house on a second call, would that be legal?
JZ: I wish I could give everybody a safe harbor and say this is OK. We are not in that business and our job is to spot violations and correct them so we have a fair and nondeceptive marketplace. It’s up to their in-house counsel and to these businesses to stay on the right side of the line. It [a $500 first-night discount] may be fine and it may not. There are some companies that will do that ? offer $500 off ? and say, “Here is the price, and it’s good for today only. We aren’t going to get any better than this.” And the homeowner says No. Then what happens at some companies, if the salesman doesn’t make a sale, is that they have rehash programs where they will sell the same product and same program for less than that “one-day-only” price. That puts the lie to the salesman’s presentation. So you have to look at the whole presentation, not whether a particular part of it is naughty or nice.
RC: Are you saying it is illegal to have a rehash department?
JZ: It all depends. A rehashing in and of itself can be totally fine. It all depends on what happens beforehand and what’s represented [in terms of price and quality] beforehand. If you’re telling them this is the best price that they’re ever going to get, and that if they don’t buy today it goes away forever, and then two days later you’re offering the same job at a lower price, that puts the lie to that presentation.