There’s a fabled version of the free market that says consumers are almost always well-served by companies. If not, the story goes, consumers can just shop somewhere else. This threat — losing customers to competitors — creates an almost magical force pushing companies to act more in the interests of consumers. No need for government involvement. Competition will take care of the job.

The real world, of course, can be more complicated. What if there isn’t vigorous competition in an industry? What if consumers lack critical information before handing a company their business? What if, in some instances, making their customers’ lives a nightmare can actually help companies make a profit? Like, for example, making it unnecessarily difficult to cancel a subscription, get an airline ticket refund, or file an insurance claim.

A new initiative from The Biden-Harris administration aims to stomp out corporate shenanigans that it says “add unnecessary headaches and hassles to people’s days and degrade their quality of life.” They’re calling it the “Time Is Money” initiative, and it’s a suite of executive actions across numerous federal agencies aimed at eradicating time-sucking business practices.

“Companies often deliberately design their business processes to be time-consuming or otherwise burdensome for consumers, in order to deter them from getting a rebate or refund they are due or canceling a subscription or membership they no longer want — all with the goal of maximizing profits,” the White House argues in a press release about this initiative.

So why does the White House want to intervene in the free market in an area as fundamental as how companies treat their customers? And why do they think they can succeed? We were curious about the economic thinking behind this new initiative. And the White House offered us the opportunity to speak with Neera Tanden, Domestic Policy Advisor to President Biden, head of the White House’s Domestic Policy Council, and one of the chief architects of “Time Is Money.”

Tanden beamed in via Zoom from her office in the West Wing of the White House. I, for once, made sure to wear a collared shirt. Professionalism.

The Economics Of The Time Is Money Initiative

The Time Is Money initiative began after President Biden was watching The Real Housewives Of Washington, DC — and he just couldn’t believe executives canceled the show after just one season. The president was done. So he tried to cancel his Peacock subscription but…

Okay, no. We wish. The real backstory of this initiative is a bit more boring.

Tanden says this initiative came out of the administration’s work last year to eliminate junk fees (Our daily podcast The Indicator covered this). These are extra fees that companies often tack onto a bill at the end of a transaction. It’s been a common practice when, for example, you buy tickets to a concert or book a hotel or rent a car. Companies advertise one price but then it turns out that’s actually not the real price at all.

Within the context of fighting junk fees, Tanden says, she and her team met with the president. “And really what animated him is that he thinks that sometimes companies are kind of playing consumers for suckers,” Tanden says. President Biden instructed them to look across the government and see what sort of actions the administration could take to help consumers against shady business practices beyond just junk fees.

The Time Is Money initiative has numerous targets. The Federal Trade Commission, for example, is aiming to make a rule that “would require companies to make it as easy to cancel a subscription or service as it was to sign up for one.”

“I had a newspaper subscription where it was literally three clicks to subscribe, and then to end my subscription, it was 45 minutes on the phone,” Tanden says. “There’s really no reason that it should take so much longer to end a subscription than it is to start a subscription.”

The Department of Transportation has issued a new automatic cash refunds rule that “requires airlines to pay you back the airfare when your flight is canceled or significantly changed for any reason, and you are not offered, or choose not to accept, alternatives such as rebooking.”

The Consumer Financial Protection Bureau (CFPB) wants to make a rule “that would require companies under its jurisdiction to let customers talk to a human by pressing a single button,” as opposed to getting stuck on the phone in “doom loops,” where you have to keep pressing buttons and never get to talk to anyone. The administration also might crack down on the use of AI chatbots, which, they say, “frequently provide inaccurate information and give the run-around to customers seeking a real person.”

The Biden-Harris administration is also hoping to encourage health insurers to enable consumers to more easily submit claims online.

We asked Tanden why she believed the government needed to step into this arena and goad companies into improving customer service. In a competitive, free-market economy, shouldn’t companies already face strong incentives to treat their customers well? If one company provides shoddy customer service, wouldn’t another company adopt better practices in order to entice their customers?

Especially considering the Biden-Harris administration’s well-publicized antitrust efforts to break up monopolies and increase competition in the economy, we expected Tanden to say that the big problem is that there isn’t enough competition for that to happen. But we were wrong. She argued that, while a lack of competition can contribute to the adoption of time-wasting shenanigans in some industries, the problem is bigger than just a lack of competition.

First off, Tanden says, the issue is that consumers often shop on price, not on customer service. “Consumer experience is a gray area,” she says. “It’s hard to have a metric for it. There’s no system out in the world that’s grading companies on consumer experience.”

In other words, consumers don’t have full information about company practices when they’re shopping and may not foresee issues that will annoy them later. Even in a competitive market, she says, “I think this gray area makes it just a lot easier for companies to end up providing poor services.”

Second, Tanden says, there are many instances where the consumer has already bought a product or subscribed to a service or paid for an insurance plan — and it’s only after that they encounter the shady practices. Facing the prospect of losing a customer or having to give them a refund or a payout, companies may not actually care how customers are treated. They don’t want to lose money, so they may be incentivized to make consumer lives difficult.

Tanden suggests that competition is not enough to eradicate anti-consumer practices. If one company does the right thing and makes it easy to cancel a subscription or talk to a human support agent on the telephone, Tanden suggests, they might not see significant rewards. In fact, Tanden argues, they may become less profitable than their competitors who adopt shady practices. Nice companies apparently finish last.

Instead of competition resulting in better customer experiences, she argues, it becomes a “race to the bottom” even in industries with a lot of competition. She argues the government needs to step in and do something about this market failure.

“What we’re really trying to do is essentially even the playing field,” Tanden says. “So companies that wanna do the right thing can do the right thing because they won’t lose money to other companies that are basically holding onto your dollars when they shouldn’t.”

Cleaning Up “Sludge” Without Calling It That

The behavioral economists Richard Thaler and Cass Sunstein (who previously served in the Biden-Harris administration) coined a term for when companies and governments adopt systems that make it hard for people to make choices: “sludge.” (We spoke to Thaler about the concept of sludge in a past Planet Money newsletter).

Tanden says this academic work on sludge influenced the Time Is Money initiative. “I sort of thought a government-wide initiative on ‘sludge’ probably wouldn’t sound great to people,” Tanden says. “Another way to think about sludge is essentially friction. You create a lot of friction, so it makes it harder for people to make choices that are best for them, their families, and really most fundamentally best for their pocketbook. And we discussed this with Cass Sunstein and others and they very much informed this work.”

However, Sunstein and Thaler have made clear that sludge isn’t just about the private sector. In fact, we’d guess that if you ask people about their time being wasted by inefficient organizational practices, they’d probably cite the DMV, the post office, filing taxes, and other interactions with the government. Dealing with the government is often a sludgefest.

We asked Tanden why this initiative seems to focus only on the private sector. First, she says, the initiative will not just be about the private sector. Second, she pointed to an executive order issued by President Biden to improve consumer experience with the federal government “way back in 2021.” This initiative, she says, sought to make it easier and reduce friction when dealing with the federal government, including when filing taxes.

She says that, for example, because of this executive order — and also a provision in the Inflation Reduction Act that provided funding for reform — the IRS piloted a program that offered people with relatively uncomplicated tax situations the opportunity to directly file their taxes online for free with a simple form. For a long time, she says, even people with relatively simple tax situations have had to pay professionals to help them or use programs like TurboTax to file federal taxes.

The administration recently announced that “Direct File,” as they call it, will be rolled out nationally in the 2025 filing season, and they’re encouraging state governments to also join in and make it easier to file state taxes.

“So people who were spending hundreds of dollars before are getting a much easier tax filing experience,” Tanden says. “It’s free. It takes minutes versus hours. So that’s a good example of where we are trying to improve in the federal government. We believe it’s as important to walk the walk as talk the talk.”

Industry Responses

We were curious to get the perspective of some of the industries directly named and affected by this new initiative.

We asked AHIP, which represents health insurers, whether they objected to calls by the Biden-Harris Administration to make it easier to file insurance claims online and “take concrete actions to save people time and money when interacting with their health coverage.” AHIP didn’t directly comment on the initiative but, rather, provided a general defense of how the industry treats consumers.

“Health plans are supporting consumers by negotiating to make care as affordable as possible while ensuring access to needed care among a range of high-value providers,” an AHIP spokesperson said in a statement. “Health plans are also helping consumers navigate a complex and fragmented health care system, promoting use of preventive and primary care, and helping people manage chronic conditions.”

We thought maybe the airline industry would oppose the Biden-Harris administration’s new automatic refund rule for canceled or significantly altered flights. One could imagine that by forcing airlines to shoulder more risk of things like bad weather events or airport traffic problems, they might argue they’d have to increase ticket prices due to, perhaps, an increased probability of losing money.

But a spokesperson for Airlines For America (A4A), an advocacy group for airlines, told us in a statement that they actually support this new rule. “A4A carriers support current rules requiring carriers to provide an automatic refund when a flight is significantly delayed or canceled and the passenger doesn’t take an alternative flight or a voucher.”

The US Chamber of Commerce issued a statement making clear they oppose the Time Is Money initiative. “While we agree on the problem of all-too-high costs for American families, the regulatory burden unleashed by the so-called ‘Time is Money’ initiative will cost the American people more time and money,” the statement says. “Businesses succeed by being responsive to customers and have a far better track record of customer service, streamlined paperwork, and prompt response times than the federal government. Imposing heavy-handed regulations that micromanage business practices and pricing is the wrong approach, inevitably raising costs for consumers.”

“Fundamentally, I think that good companies should be doing good customer service,” Tanden says about industry opposition. “And if there are companies who are complaining that the government is making them do basic things like make it as easy to cancel a subscription as it is to sign up, then, you know, we’re happy to engage that argument with them.”

The Time Is Money initiative is the latest chapter in a centuries-old story of the federal government intervening in the market to try and protect consumers. It may be relatively small potatoes compared to consumer protection landmarks like the creation of the Food and Drug Administration, the slew of auto-safety measures institutionalized by the National Traffic and Motor Vehicle Safety Act, or maybe even the Biden-Harris administration’s other actions against monopolies and so on — but the administration argues that, through a slew of small executive actions, they can push companies to improve how they treat consumers and meaningfully improve the lives of Americans.

Got ideas for the administration to fight “sludge,” or “frictions,” as Neera calls them? The White House is soliciting ideas via an online portal.

We remain hopeful that Planet Money+, our premium subscription service, is considered absolutely honest and above board when it comes to shady sludge practices — and that the administration won’t put a target on our backs. “I’m sure Planet Money isn’t making it exceedingly difficult [to unsubscribe],” Tanden says with a laugh.

If you aren’t already subscribed to Planet Money+, please do. We promise we won’t make it too hard to cancel. And, if we do, we now know we could be targeted by the federal government.

And, speaking of Planet Money+, subscribers will soon get a bonus episode featuring an extended, audio version of our interview with Neera Tanden. Stay tuned!

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