Posted on June 21, 2007 by Jerome Noll

"Fuel Surcharges": We don't just pay at the pump

With record high oil prices, and gasoline almost four dollars per gallon in some urban areas, it seems anybody who can possibly tack a fuel surcharge onto an invoice does. And these usually unauthorized fuel charges are hitting consumers right in the pocket.

When costs rise, most companies face two choices. They can raise their prices or they can sacrifice profits to keep prices steady. But these days, some companies have found a third way: fuel surcharges. For some unsuspecting consumers, fuel surcharges seem like a reasonable way for companies to recoup their expenses for the high price of gasoline. But as they spread into every conceivable industry, fuel surcharges more and more seem as if they're just anotherway of raising prices, while deceiving customers into thinking they're not really paying more.

Business Week magazine recently reported on this phenomena, pointing out two distinct ways fuel surcharges are calculated: some companies calculate fuel surcharges according to fuel indexes such as the U.S. Energy Dept. index that tracks the price of diesel fuel. In these cases, a nearly 50% rise in the price of diesel over the last two years has added as much as 14% to shipping bills. The bigger problem for consumers however is when a company decides to charge flat-fee surcharges, basing the surcharge on nothing more than the opportunity to get away with additional charges. And unlike surcharges based on the U.S. Energy Dept. index, which go down when prices fall, flat fees don’t change because the link to actual fuel costs is nonexistent. In fact, flat-fee surcharges are showing up on everything from garbage collection, cab and limousine rides and airline tickets to deliveries of bottled water and coffee.

Companies impose surcharges -- instead of raising prices – because they are hoping consumers won’t notice. The America's Independent Truckers' Association, Inc. (“AITA”) has even posted a primer on its website detailing how its members can charge customers fuel surcharges. The title of its statement is: “Fuel Surcharges: Somebody is getting them, and it should be YOU!!!” The fuel surcharge, we're told, is needed to pay for the marginal increase in costs due only to the higher cost of gasoline or diesel. Apparently, if you weren't shipping the package, or ordering a service, the company wouldn't need to buy the gas. The reality of course is much different: most companies would still have to fill up their delivery trucks to service other customers. Moreover, you are already paying for the cost of fuel when you pay a delivery charge. It’s no wonder then that the U.S. Postal Service can't impose surcharges. It can hike prices only through a government-approved rate increase.

You may have noticed small fuel surcharges creeping onto your delivery invoices. For example, your garbage collection or home water delivery invoice may now have a dollar or two added, designated as an “oil surcharge.” With just a couple of deliveries a week, the extra dollar or two here and there add up fast. Fuel prices are expected to climb at least through the summer. And whether you're a consumer or in business, you'll be paying more. Possibly a lot more.

If you have been charged a fuel surcharge, please post your thoughts and reaction on our blog.

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Posted on June 6, 2007 by Jerome Noll

Fees, Fees and Restocking Fees

If you have ever returned an item to a retailer, you probably know that many charge various fees on returned items. In particular, certain retailers are now charging their customers a 10% or 15% "restocking fee" when merchandise is returned in an opened box or without all of the purchase’s original packaging and accessories. Other retailers are charging a "restocking fee" even when the item is returned unopened or unused.

Consumer groups and websites devoted to airing consumer complaints have pointed out that restocking fees and the terms under which they are imposed are not adequately disclosed, and consumers who return certain items are not given the opportunity to make an informed purchasing decision. Moreover, because restocking fees are imposed uniformly as a percentage of the purchase price and without regard to the actual costs of actually "restocking" the merchandise, consumer watchdog groups believe that the practice of imposing restocking fees is deceptive and intended to create an additional source of revenue for retailers.

Retailers respond that the vast majority of fees are imposed upon items that have been returned in opened boxes. The retailers claim that once the boxes are opened the store can no longer sell the item as "brand new" and must therefore re-sell the merchandise at a deep discount. Retailers also claim that a restocking fee is needed to cover penalties imposed on the store by manufacturers.

Consumers reply that the price of doing business as a retailer has always included the possibility that customers would return certain products. Indeed, Walmart – the country’s largest retailer – does not charge restocking fees. In fact, most retailers in the U.S. don’t charge any fees at all when a customer decides to return a product.

Whether or not restocking fees are being charged for legitimate reasons, it is commonly agreed that they are costing consumers tens of millions of dollars each year. As such, many states have rules regarding how customers must be notified about the fees. For example, in New York and California customers must be made aware of restocking fees prior to making their purchase. Retailers who print their return policies on the back of their receipts -- which are then issued after a purchase is made – can be found to be deceiving consumers.

In 2005, the New York City Department of Consumer Affairs charged seven retailers a total of $4,250 for failing to properly disclose their restocking fee. The companies charged were American Design Furniture, Best Buy, Best C&N Furniture, Bombay Company, Futon Warehouse, and Sharper Image.

Also in 2005, a report issued by the Public Advocate for the City of New York found that 44 percent of stores surveyed charged restocking fees, and, of those, 27 percent did not post conspicuous signs to let consumers know about their policy.

Companies that violate consumer protection statutes, including those that are deemed to encompass retail returns and the imposition of restocking fees, may be compelled to pay consumers actual damages, punitive damages and attorneys’ fees.

If you have been unfairly or unreasonably charged a restocking fee, contact us to discuss your options.

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