In a previous column, I covered two important lawsuits -- one on the subject of dubious sales tactics and one about unisex insurance pricing. Naturally, you've been hanging by your thumbs, waiting for results. And here they are.
The first case addressed the troubling issue of maintenance agreements, which thousands of merchants sell to buyers of TV sets, autos and appliances. If you purchase one of these contracts and the product fails under normal use, you can have it repaired at no additional cost. The question: Is the contract worth its price?
In a lawsuit against Sears, Roebuck & Co., Maine attorney general James Tierney complained that it wasn't. He argued that service contracts generally cover repairs that Sears would have to make anyway, and for free, under Maine's warranty laws.
Worse, he said that Sears salesmen often frightened consumers into buying service contracts by exaggerating how often the product would need repair.
The court disagreed with Tierney on the first point. Service contracts do give added protection. But the judge found some real problems in Sears' selling techniques.
For example, if a Sears customer said he didn't want a service contract, the salesman was instructed to say that the store's new products break down more often than the old ones did. But, said Judge Donald Alexander, Sears' own repair records don't support that statement.
Such sales techniques are "troubling," Judge Alexander said. Nevertheless, he decided that the law shouldn't stop Sears salesmen from using them. A court, he said, cannot "interfere in the private market to protect consumers from every minor rhetorical excess wafted their way by eager salespeople."
Remember that, next time you shop at Sears or at any other store that tries to pressure you into buying a service contract.
But Judge Alexander did think that Sears' telephone-sales operation was illegal. These salesmen are trained to call people who just bought a Sears product and say such things as, "It is our experience that modern appliances require from one to four service calls a year." That isn't true.
In fact, the judge found, 80 to 90 percent of 11 major consumer appliances will be in operable condition 10 to 12 years after the date of purchase, if properly used. About 25 to 40 percent require a service call or shop repair in the first three years -- but principally because the buyer didn't know how they worked or else misused them.
The telephone salesmen also told consumers that after the written warranty expired they would have no protection at all, ignoring the fact that they might be entitled to free repairs under Maine's law on implied warranties.
Sears telephone-sales practices not only violated Maine law, the judge found, but also a 1980 order by the Federal Trade Commission, ordering Sears to quit making false statements in connection with the sale of major home appliances. Sears agreed to retrain its telephone-sales employes.
The second case grappled with the higher price that insurance companies charge women for health insurance, compared with men. The National Organization for Women sued Mutual of Omaha in Washington, D.C., complaining that its dual rates violated the District's law forbidding discrimination in public accommodations.
The judge dismissed the case. He found that the District's anti-discrimination law requires only that women have an equal opportunity to buy insurance, specifically auto insurance, and doesn't insist on unisex rates. NOW is appealing the decision, but it smells like a loser to me.
NOW has filed a similar suit against Metropolitan Life Insurance in New York state, which prohibits discrimination in "accommodations, advantages, facilities or privileges" on the basis of sex.
Metropolitan argues that insurance companies aren't even mentioned in the New York law, which will be a tough hurdle for NOW to overcome. But attorney Emily Spitzer told my associate, Virginia Wilson, that NOW is optimistic. Metropolitan has moved to dismiss the suit.
I'm cheering for NOW. The health-insurance industry claims that women ought to pay more because their medical bills are higher. But the publicly available statistics on this point are sometimes contradictory and not scientifically developed. Women might be much better risks than they appear.
When I wrote about this issue once before, the industry association promised to prove to me that it was right. But then it started making excuses and never delivered. I'd like to see one of NOW's cases come to court, if only to force the facts of women's health-insurance costs into the light.