Tech Paladin

Back in college, I once discovered the BlueHippo company. They’re a firm that sells laptops to poor people with the enticing prospect of no-credit-check financing. But under the hood, they’re an incredibly sleazy, predatory company that makes their money based on their target market’s financial ignorance. Take, for example, the following ad from back in 2006, when I found it (I took a screenshot, and it’s obviously not around anymore):

See how many scummy things you can find in the ad! Wow, a shitty laptop for only 52 payments of $50; what could be better!? A couple of my friends and I were so outraged by this that we prank-called them a couple of times, just to see if they were really as unscrupulous as they seemed. It turns out they pretty much were, dodging questions and offering half-answers when asked about the pricing structure, and simply lying outright regarding the product itself. Don’t take my word for it; we actually recorded one of my friends! The resulting conversation is enlightening, in a sad sort of way:

Here are a few of the outrages revealed by this conversation:

1. The sales rep allows the customer to believe that he will only be making 5 weeks of payments and pay only a total of $380, rather than the full lifetime price of $2730 (!!!).
2. She lies about the length of the creditworthiness payment period: it’s actually 13 weeks, not 5.
3. She lies about the free printer deal, though the website clearly features it on the laptop page.
4. She lies about the computer’s specs: it has a 256K cache, not 256 Megabytes of RAM, and it has only a CD-ROM drive, not a CD-DVD combo drive.
5. She lies about the included software, saying it comes with word, which it obviously doesn’t.

Thus it was with glee that I found an article on ArsTechnica today describing the FTC’s probe into BlueHippo’s affairs. They’ve discovered that BlueHippo raked in 15 million dollars and only shipped one PC. That’s right, only one PC. Based on the tactics their sales staff uses, I can believe it.

It sounds like the FTC is finally getting its act together to bring down the hammer, and I say it’s about time! My friends and I were shocked three years ago when we discovered that a business like this actually existed, and I’m still shocked today that it hasn’t been shut down yet!

On a somewhat related note, I’ll mention that I’m often asked how the poor will be protected from predatory scams like this in a Libertarian society. The answer is actually pretty close to what the FTC is already supposed to do: enforce anti-fraud laws. The sales rep my friend talked to over the phone flat-out lied to him, a potential purchaser. That should be illegal. Like, Federal-pound-me-in-the-ass-prison illegal. The functioning of a market economy relies on sellers’ and purchasers’ abilities to make informed decisions. When participants lie to each other, bad products get bought and sold; wealth is squandered; trust is lost; people feel cheated.

A more Libertarian society would recognize that the free flow of information is paramount to voluntary exchange and therefore harshly punish deception and fraud. BlueHippo’s business is a textbook definition of these abuses. The ArsTechnica article mentions some fees it has so far been forced to pay; a truly just restitution would see the company forced to return all the money it accumulated from its customers in a fraudulent fashion, and 100% of that money would go back to the victims, not the enforcement agency. This would reduce the company’s lifetime revenue to zero, and its profit to something negative, thus putting it deep into debt and almost certainly probably out of business. That sounds like a fair punishment to me, and it’s more than has actually happened in this case.

This entry was posted on Friday, November 13th, 2009 at 7:37 pm and is filed under Finances, Hardware, Politics, WTF. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.