The EconomistJuly 27th 2019 Finance & economics 63“T
erms andconditions apply” vies for
being the most morale-sapping four-
word phrase of modern times, along with
“The plane is delayed” and “You’re trending
on Twitter”. Consumers read about a juicy
offer, but fear a catch is hidden in the small
print. The obvious solution—to read that
small print—is not always feasible. Face-
book’s online terms and conditions run to
more than 3,200 words. Not too daunting?
One section lists another 11 “other terms
and policies that may apply to you”, includ-
ing “community standards” on the content
that users may post. A lot of further reading
will be required.
Even when users do read, they may not
understand. Last year Which?, a British
consumer-advice group, asked 24 volun-
teers to read the fine print on a selection of
40 insurance documents and answer a se-
ries of questions. They gave the wrong an-
swers to between a quarter and a third; only
four got top marks. Language analysis
showed that the documents were harder to
understand than the late Stephen Hawk-ing’s “A Brief History of Time”.
All this matters because “freedom of
contract” is fundamental to the economic
system. If two parties freely contract to
make an exchange or enter a long-term re-
lationship, both must perceive that it is to
their advantage. But there is an asymmetry
of information between an ordinary con-
sumer and a corporation with lawyers paid
handsomely to craft terms in its favour.
Some economists have argued that con-
sumers’ rights will be protected, even if
only a few read the small print. By com-
plaining about unfair terms, those few will
keep sellers up to the mark. But one paper*
found that only one or two of every 1,000
retail shoppers buying software read the li-
cence agreement, and of those most exam-
ined only a small part of the text. This does
not suggest there is a hard core of consum-
ers who will keep companies in line.
The issue clearly bothers the Competi-
tion and Markets Authority (cma), a British
regulator, which launched a campaign in
April under the banner “Small Print, Big
Difference” to encourage travel and tour-
ism operators to treat customers fairly.
As things stand, markets may be work-
ing less efficiently than they should. Con-
sumers may fail to buy the best product on
offer. This is easy to imagine with services
such as mobile phones or energy, where
there may be several points of comparison,
such as a flat rental rate plus fees for usage.
But another new paper** suggests it may be
the case even with relatively simple pro-
ducts. The authors conducted a random-
ised trial with 124,000 British savers with
savings accounts at five institutions. These
are simple products and the main salient
feature is the interest rate.
Savers were given information about ri-
val accounts that offered higher rates. On
average switching would have taken
around 15 minutes and made them £123
($153) in the first year. But only around 3%
were prepared to switch. The academics ex-
perimented with ways of displaying the in-
formation to make the benefits clearer. En-
hanced disclosure made switching a bit
more common, but not much.
The most successful approach in-
creased the share of customers switching
to just 12%. Neither a saver’s age nor the
balance in the account made a difference.
The authors concluded that savers doubted
the benefits of shopping around and were
put off by the perceived inconvenience.
“Caveat emptor”, it seems, may apply in
principle but not in practice. 7Many consumers neither read nor
understand the contracts they signSmall printCritical conditions
................................................................
* Does Anyone Read the Fine Print: Consumer
Attention to Standard-Form Contracts? by Yannis
Bakos, Florencia Marotta-Wurgler and David
Trossen, Journal of Legal Studies, vol 43
** Testing the Effectiveness of Consumer Financial
Disclosure: Experimental Evidence from Savings
Accounts by Paul Adams, Stefan Hunt, Christopher
Palmer and Redis ZaliauskasB
uying tickets to a marquee music
show can be a miserable experience.
You go online as soon tickets are released
only to find they are sold out and available
only on resale sites at a hefty markup. Touts
often use bots to buy up tickets. But it has
long been a dirty secret in the music indus-
try that some end up on the secondary mar-
ket at the behest of performers themselves.
A secret, that is, until July 19th, when
Billboard, an industry magazine, reported
on a phone conversation in 2017 between
an executive at Live Nation, a concert pro-
moter, and someone claiming to represent
Metallica, a heavy-metal band. The repre-
sentative asked Live Nation to place 88,000
tickets for an upcoming tour on ticket-
resale sites, bypassing outlets where they
could be bought at face value. Live Nation
admitted that it had previously placed con-
cert tickets on resale sites for other artists.
“None of the bands who had tickets on
the secondary market would ever take re-
sponsibility,” says Paul Hutton of Cross-
town Concerts, a British music promoter.
“It was always blamed on an unscrupulous
manager or agent.” Live Nation’s admis-
sion has destroyed that defence.
The reason for the ruse is that perform-
ers want to be rich, but not to make fans
think them greedy. In an article in 2016 for
The Ringer, a sport and pop-culture web-
site, Nathan Hubbard, the former boss of
Ticketmaster, a large primary-ticketing
agency, wrote that “the biggest artists sign
contracts that guarantee them money ev-
ery time they step on the stage, and that
guaranteed amount is usually more than
100% of the revenue if every ticket is sold at
face value.” Sending marked-up tickets
straight to resellers closes the gap.
Some artists are exploring more cre-
ative ways to maximise revenues without
arousing fans’ ire. For Taylor Swift’s “Repu-
tation” tour last year, fans who shopped in
her online store had more chance of getting
tickets. These were released in batches, be-
coming progressively pricier, like airline
seats. Garth Brooks extends his tours until
demand is sated, adding extra dates until
shows stop selling out. Bruce Springsteen
and Madonna have played in theatres,
where high prices are more palatable—the
average ticket for “Springsteen on Broad-
way” last year cost more than $500.
Historically, tours were loss-leaders
used to promote albums. As revenues from
recorded music have collapsed and pro-ductions have become increasingly elabo-
rate to draw the crowds, ticket prices have
risen steeply. The cost of a concert ticket in
America increased by 190% between 1996
and 2018, compared with 59% for overall
consumer prices. But as the continued suc-
cess of scalpers demonstrates, they are still
far below the market-clearing price. 7How big stars maximise their takeLive musicTouting for
business
Send me money, send me green