The Wall Street Journal reports today on Best Buy’s aggressive anti-returns policy. The reason this looks, and is, ugly, is that it appears that the electronics retailer is violating consumer advertising fraud rules. We’ll get into more detail, but at a high level, Best Buy has hired a snoop service, Retail Equation, which apparently also serves other retailers.
Return fraud is a legitimate problem. Customers can and do try to return stolen items, or ones they’ve broken or even merely used. The Journal reports that 11% of items bought at retail are returned, and of that, 11% (no typo) are believed to be fraudulent returns.
However, some online vendors are encouraging customers to view returns as integral to the purchase, and go to great lengths to make returns easy. For instance, many stores that sell shoes will include a UPS return tag. You don’t need to call, you can just give the box to the UPS man if he comes regularly to your building or call to have him pick it up. You will be charged something modest for the return, like $6.95. But it is as close to frictionless as it can be made.
The problem with what Best Buy is doing is that it is advertising a not-very-restrictive returns policy, when in fact if you try returning goods “too often,” even if you are adhering perfectly to Best Buy’s advertised policy. Even though Best Buy is somewhat restrictive, it’s rules are supposedly clear: customers can return products in 15 days if they have a receipt.
But there is the stated policy versus the actual policy. From the Journal:
Jake Zakhar recently returned three cellphone cases at a Best Buy store in Mission Viejo, Calif., and a salesperson told him he would be banned from making returns and exchanges for a year. The 41-year-old real-estate agent had bought cases in extra colors as gifts for his sons and assumed he could bring back the unused ones within the 15 days stated in the return policy as long as he had a receipt.
The salesperson told him to contact Retail Equation, based in Irvine, Calif., to request his “return activity report,” a history of his return transactions. The report showed only three items—the cellphone cases—totaling $87.43. He asked the firm to lift the ban, but it declined. When he appealed to Best Buy and tweeted his report, the company referred him back to Retail Equation.
“I’m being made to feel like I committed a crime,” said Mr. Zakhar. “When you say habitual returner, I’m thinking 27 videogames and 14 TVs.”
It is not clear that this policy is even remotely legal in light of Best Buy having a published policy that says nothing about limiting returns and that Best Buy is not claiming that Zakhar engaged in any kind of fraud. In fact, if he wanted to make an issue of it, he could pay on a credit card, return the merchandise, and then dispute the charge if Best Buy tried to refuse his attempt to return undamaged goods. He might need a buddy to film or otherwise provide proof of his effort to return goods.
While other merchants have been tightening their policies (the famously generous LL Bean standard of “lifetime satisfaction” has now been dialed down to a mere “return in a year or less), discriminating by using an unaccountable third party also raises questions of discrimination that ought to raise red flags. It is not hard to imagine that these programs also filter by ZIP code, which is a proxy for general income ranges and also have their ethnic mixes well tracked by companies that specialize in consumer market segmentation. And this is consistent with the fact that the Journal depicts Retail Equation as giving consumers a score. Retail Equation lists some of the that can get you dinged:
Returning an item after a certain period
Returning items that tend to get stolen at the retailer
Returning a high dollar amount
Returning an item just when a store closes
In other words, if you are a perfectly upstanding customer making a return that is kosher (goods in fine shape, valid original receipt), you still get dinged simply because someone who is engaging in fraud could engage in a behavior that has an element in common with what you did (return a costly item, show up near closing time).
And Retail Equation makes clear that having the misfortune to overlap with what they deem to be bad behavior, they deem you to be guilty:
The company said its system is designed to identify 1% of shoppers whose behaviors mimic return fraud or abuse.
This sounds like the statistical version of treating every black person in a hoodie as a thief. Seriously.
Per the Journal, Retail Equation’s other big name customers include Home Depot, J.C. Penney, Sephora and Victoria’s Secret, but they use the service mainly to report actual or strongly suspected fraud cases, not just “We don’t like them even if they are permitted” returns. For instance, the story gives a second example, of a customer who was hassled for returning a mere digital scale and router extender, even though he had proper receipts. Best Buy made all sorts of sanctimonious noises about this being about misconduct, and they’d never never be doing this just to fatten their wallets by discouraging or denying returns, but their actions say otherwise.
Many Journal readers piped up in comments to argue that Best Buy was engaging in consumer fraud. For instance:
There are at least two clear aspects to this heretofore undisclosed and material omission about the stores policy on returns. First, it would appear to be a deceptive trade practice. Second, since the third party service keeps return risk information and presumably provides information about customer A’s activity related to return risk, it very possibly could constitute a boycott and thus raises antitrust issues. A possible third aspect realates to privacy acts and ‘credit’ reporting opening up thise state and federal issues as well as the possibility of libel actions in some states. Although the courts have clamped down on class action lawsuits this may be fertile ground for plaintiff lawyers as well.
What Best Buy is doing violates every consumer protection law I know about. And I’ve been a lawyer since 1972.
What they are doing is a version of the old “Bait and Switch” ruse. They lie to you about their return policy to get you to buy things when you are not sure you need them. But then, when you try to return them in accordance with their return policy, they tell you that you will be “banned” for a year or worse.
That is illegal….
The problem I have with Best Buy’s policy is that they create the “illusion” of transparency when they are anything but transparent. What they need to do is let every customer know that they view them as a potential criminal and are tracking their every return. If they are clear and upfront about their policy, what they are doing would be perfectly legal. But to blatantly lie about their return policy is illegal, IMHO.
Some cooky creep in Cucamonga, California casting bones and figuring out if you are a fraudster based on some algorithm he pulled out of his left nostril doesn’t override the laws of the State in which the retailers are operating. Every single State requires retailers to post their return policy and many retailers also print their return policy on the receipt they provide a customer at time of purchase. Once the purchase is made, by law, the policy is valid as written/stated. This after-the-fact – ooooops, I’ve changed my mind if I like you anymore – tactics by retailers are ILLEGAL. A deal is a deal and if the retailer says that he takes back merchandise and then reneges on the contract then you can file a complaint or you can sue.
Learn to love what Lambert calls “code as law”. It’s not going away any time soon.