Buyers Band Together
What are consumers doing these days that is different from ten years ago? Banding together!
Buyers doing together what they cannot do separately is not a new concept. About one hundred and fifty years ago unemployed workers in an English village started the first formal consumer cooperative. Today, what is new are the ways buyers pool their interests and efforts to keep up with an economy dominated by fewer and ever more gigantic corporations.
In New York City and other parts of the Northeast, home fuel buyers associations are growing and having a market impact serious enough to induce sharp reactions from some heating oil distributors. One group now has 7000 families saving 20 cents or more on each gallon of such fuel. Group buying simply gets a better price from business firms who like the certainty and the volume of the sales arrangement.
Another form of banding together is seen among people who have bought the same defective product from a manufacturer. From Seattle, Washington, a group made up of buyers of GM diesels has formed, calling itself “Consumers Against General Motors” (CAGM). With the help of a home computer, this group has sparked affiliates in several states from coast to coast. Information is pooled, lawsuits filed after direct group negotiation with GM officials failed to produce a settlement. Newsletters with detailed technical advice on how to deal with a lemon engine, while waiting for justice, are circulated. With the spread of home computers there will be many more such common product or service hazard consumer groups forming. And they will be looking to basic reforms not just responses to their grievances.
In addition to consumer group buying and group complaint action, there is the banding together to make large umbrella service purchases. The American Association of Retired Persons (AARP), with millions of elderly people as members, accepts bids from insurance policies for their large group health policy. It is an understatement to say that the insurance companies are knocking on the door of ARP to offer their best deals.
Consumers are banding together to obtain just policies from government regulators over energy companies and utilities. The struggle against decontrol of natural gas has become an intricately coordinated campaign based on door—to—door canvassing of thousands of homes daily all over the country. Called the Citizen/Labor Energy Coalition, this community drive has made many members of Congress think twice about price decontrol and has blocked Mr. Reagan’s campaign promise in its tracks.
Legislation is pending in several states to establish a requirement that utilities include periodically in their monthly bills a notice inviting consumers to band together in professionally staffed consumer action groups on such matters as telephone, gas and electric rate determinations. Wisconsin already has such an entity, called the Citizens’ Utility Board (CUB), with 800)00 members. Illinois has passed such legislation and sent it to Governor James Thompson for signature. California and New York are getting closer to enacting such laws each year. New York’s Governor Cuomo has called CUE: one of his favorite priorities.
In an economy whose efficiency and equity is too often eroded by monopoly (one seller) or oligopoly (a few large sellers), the stage is set for consumers to band together into a monopsony (one buyer) or oligopsony (a few large buyers).
Within the next fifteen years, large consumer member associations may be instructing their staff lawyers and economists to renegotiate installment loan contracts, insurance policy terms and warranties with the likes of Sears, Prudential and General Motors. Or consumers will really run their health maintenance organizations and make insurers like Blue Cross and Blue Shield represent patient interests in quality and efficient health care for a change.
We need consumer-side economic policies that drive home to the Fortune 500 the truth that the economy should be shaped by informed, organized consumers. For these are the people whom the economy is supposed to serve in the final analysis. The informed bargaining power of consumers’ banding together max be the real megatrend of the next generation.