Financial Poise
Rent-seeking behavior

Shakedown Street: A Tale of Unethical Business Practices

Rent-Seeking Behavior is Bad Business Ethics

Stealing takes many forms. We all know the obvious ones like armed robbery, burglary and pickpocketing. Enlightened minds also recognize more subtle forms, like spending too much time on LinkedIn while on the job (ahem) or shoddy workmanship. But the most infuriating thefts are policy. Let me explain.

On a recent, two-day visit to Portland, Oregon—my only visit to Oregon in my life—a friend pressed me to take her car on Sunday morning for sightseeing. I immediately went to downtown Portland and found a parking space on a quiet corner near the museum. Being vigilant about parking legally, I carefully located the parking lines, asked a passerby if my space was legitimate (being so close to the corner), read the sign announcing the times for paid parking and paid my parking fee at the exact time required. I glanced at the ticket and saw something about displaying it inside the window, so I posted it between the seal and the glass of the driver’s side window and went about my business.

When I returned, I discovered a full-fee parking citation for the “crime” of putting my ticket in the wrong window. That’s right. Portland will fine you if you put the ticket on the driver’s side when you curb park. It has to be on the passenger side.

As I researched the rule and how I might get out of the fine, I discovered several things that make this citation look like a deliberate revenue generation scheme and downright unethical business practice:

  • Fine print gotcha: There is no warning of how to display the ticket on the sign that tells you about paid parking hours. Instead, you have to read the fine print on your receipt or the parking payment station screen after paying.
  • Rule switching gotcha: Turns out they can still fine you for putting the ticket on the passenger window if you angle park (also a fine print item on the back of the ticket), because then it does have to be on the driver’s side.
  • Tourist gotcha: If you don’t live in Oregon and need to contest the fine by mail, you have to pay the full fine and accept the court’s determination in advance of knowing it. I reflected later that my friend’s car had Arizona plates, which the officer must have noticed while writing the ticket, so this money was easy…like Sunday morning.
  • Take the deal gotcha: The city has a special fee reduction (not elimination) form all ready to go if you got a ticket for posting your fare incorrectly. You have to agree to the reduced fine by using it (no contesting it later), and you only save $16.
  • Known issue gotcha: The city website lists displaying the fare incorrectly (e.g., on the wrong window) as one of their top 20 parking violations. Their justification for the rule is that it might endanger an officer to check the window on the street side (even on a sleepy Sunday next to a crossing). But if your goal is really just officer safety, why limit such a warning to fine print on a small piece of paper?
  • Honorable mention gotchas: You have to give them months to decide your case. It appears they won’t get back to you at all if they decline your request. To find out their determination, apparently you must request a public record, which I’d imagine might cost an additional fee.

To its credit, Portland finally overturned my parking citation seven months later. But the experience made me wonder how I could channel my frustration with Portland’s Orwellian bureaucracy into some relevant and useful business topic for a blog. I settled on real value creation versus rent-seeking behavior.

How a Portland Parking Ticket Relates to Rent-Seeking

The beauty of human endeavor as it relates to economics is that each of us has the chance to create things of real value through industry and creativity and to get rewarded through voluntary transactions that increase our and society’s overall wealth. This is a noble and even a divine calling. In an ideal world, businesses and governments would provide only what consumers needed or wanted and would garner revenues that were generally subject to market-based pricing related to their true economic value.

In economics, rent-seeking behavior is the act of using economic resources and one’s own power (typically at the expense of others) to obtain wealth without injecting resources back into society. Some businesses don’t seem to create sufficient value to attract revenue voluntarily and rely on tricks to squeeze it out of you. Notable rent-seeking examples include cell phone contracts, forced valet parking, the car wash that doesn’t reveal its exorbitant prices until you are trapped in the entrance (also in the Portland area). And some states’ laws (including Oregon’s) fine you for pumping your own gas because they have had to force-create low-skilled jobs —which you of course pay for in higher gas prices.

Besides seeking catharsis for an unpleasant experience, I hope with this post to warn others about parking in Portland, Oregon or in other cities that employ such traps. Always read all the fine print, even if it’s on a gum wrapper. Most importantly, I hope to remind people in business to strive to create products and services of real value that people actually want to pay you for. If you have to extort money out of your customers, then you are missing the mark and need to rethink your business strategy.

Make something I want. Price it competitively. Don’t play games that insult my intelligence. And I’ll pay you a fair price and not withhold what you have earned. We can all feel proud when we gain our wealth legitimately rather than through unethical business practices.

[Editor’s Note: To learn more about this and related topics, you may want to attend the following webinars: Hot Off the Press – Recent Cases & Decisions and Foreign Corrupt Practices Act Compliance.]

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About Peter Eickelberg

Peter Eickelberg currently serves as a Managing Director and Chief Compliance Officer of Alpha Fiduciary, a $500 million+ investment advisor based in Phoenix, AZ. Prior to this position, he led the investment department for a large cross-border wealth management firm that specialized in Canadian migrants, and before that he was a broker with a highly-ranked…

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