Was anyone else surprised when, on 21 February, the Halifax agreed to pay £500m for confusing mortgage customers with small print?
I thought that was the point of small print: to bully and bewilder people. In what amounts to a market failure, every insurance agreement we sign, each contract we now put our names to, is so constrained by legal jargon as to be virtually meaningless to the ordinary customer. Even when a clause seems clear, often you will have no understanding of its true legal meaning.
When a corporation (or state authority) tells me that I owe it money - an extra charge for water supply, a penalty for asking for a posted insurance certificate, or a contractual exit fee - I shrug and pay up, as I assume they are right. It's just another cost of modern life. But, as the political scientist Robert Putnam has noted, falling levels of social trust have been matched by a spurt in numbers of lawyers in the past 40 years and are a sign of declining social capital.
Surely this could be a "big society" issue for the Tories, to press for transparent contracts between corporations and their clients. Last year, for instance, having persuaded ten million customers to sign up for packages that included free evening phone calls after 6pm, BT quietly changed that to 7pm. It announced the change down towards the bottom of a letter telling customers how they could make 0845 calls at no extra cost. That's dishonest, and many people continued making calls between 6pm and 7pm believing they were free.
In the US, AT&T has even tried to get the courts to establish in law its legal and financial advantage over individual customers. Fed up with losing group actions over unclear contracts - it once covered an agreement that severely restricted customers' legal remedies for breach of contract with a letter asking them to "please be assured that your AT&T service or billing will not change . . . there's nothing you need to do" - the company has now asked the US Supreme Court to allow it to bar customers from joining class-action suits.
Such legal tussles between consumer and corporation are in part a by-product of the internet and the opportunity it offers now for everybody to shop around for rock-bottom prices, for everything from car rentals to travel insurance. If all you compare is the headline price, then companies are forced to offer prices so low as to be unsustainable without resorting to trickery. So you rent a car for £200 for two weeks, but discover (too late) that the late return fee is £100 a day, or that there is a £50 administration fee for every missed toll, or a charge for having wheels on the car. Or you take out travel insurance and discover that it isn't valid because you didn't spend hundreds of pounds on tests in an American hospital to have a child certified sick.
Usually it doesn't matter all that much, but it is a hidden cost. The theory that all the information we have will force the market to settle on a perfectly competitive price hasn't been proven; what has happened is that the true costs have gone into the small print.
Some economists think there is a role for public policy here in making the market more transparent. The Financial Services Authority (which forced Halifax to pay up this month) has a good, clear comparison website for financial products: moneymadeclear.org.uk. Unfortunately it doesn't cover insurance policies. And on consumer websites that provide forums for people to discuss the honesty of different corporate contracts, it can be very hard to tell whether the people complaining have a genuine complaint, or whether they've just been caught out by their own cheapskate tendencies.
This problem of market efficiency is going to hit the Conservative health reforms - it is hard for a consumer to judge accurately between the quality of care offered by various hospitals. Usually people will choose the small local hospital, which in many cases is less safe. Unlike with schools, where a market may work because the outcomes are comparatively easy to judge (whether that is fair is another matter), the standard of medical care, especially when it comes to complex operations, is hard to grasp. Yet the Tory reforms will create a financial incentive for GPs to select cheap care over good care, meaning the family doctor's recommendation may no longer be as trustworthy as you once thought it. So, who will provide the information?
Just a second
The argument usually made by companies against some form of regulation is that the market is policed by an informed minority who do read the small print - and that this is sufficient to force sellers to offer the terms preferred by all buyers. But this, too, is dubious. An American study last year by economists and lawyers at New York University and Berkeley tracked the visits of 45,000 households to 66 software companies over a month. It found that one or two in every 1,000 buyers read the end user licence agreements (EULAs) for at least one second, not nearly enough for the informed-minority theory to hold true. Customers were more likely to check the EULA of smaller companies, which suggests that we tend to trust the larger corporations more.
You would hope that a buyer of a mortgage might spend a little longer reading the small print than a buyer of a software package. I have some sympathy with Halifax in the mortgage case. It is paying out for not telling customers something that it didn't predict would ever affect them - and which fewer than 50 out of the 300,000 customers who might have been affected even noticed.
This was carelessness, not conspiracy. Yet it's a moot point, in today's corporate-consumer climate, whether carelessness isn't worse: at least you should be able to trust them to know when they are ripping you off.