MWR: Corporations Are Benefiting From Exploiting Against Their Customers

Haydn Parker, first year business student at Southampton, discusses how some businesses exploit their customers.
Haydn Parker, first year business student at Southampton, discusses how some businesses exploit their customers.

When did businesses start to isolate themselves from the real world? In this modern economy businesses have become impersonal; gone are the days when towns and villages were run by local entrepreneurs who made the trading experience personal, customers were their main priority. With this change comes the exploitation of customers, be it Facebook spreading fake news stories to their users (Lee, 2016), to supermarkets increasing their prices 5%, higher than the rate of inflation (Parsons, 2016).

Large corporations may benefit consumers as they are able to “capture the largest possible share of domestic and global markets … with increasing economies of scale” (Lind, 2010). Nevertheless, the increase in unethical behaviour from firms results in consumers of their products being worse off. To make matters worse, firms are even discriminating against certain socioeconomic groups. Take Tesco for example who had been victimising state school children in one of their Edinburgh branches. “Students from Boroughmuir High School had to queue outside at lunchtime while pupils from nearby private school … were allowed in” (BBC, 2016). But what causes firms to act in such a way? Unethical behaviour such as the one demonstrated by Tesco would damage their reputation, potentially leading to a loss of customer loyalty and a fall in sales. However, quite controversially these corporations are benefiting from exploiting against their customers, which raises ethical issues in the business world. To make matters worse the corruption of firms not only affects their own customers, but their employees are being exploited too. “The government estimates that up to 13,000 people in Britain are the victims of modern slavery” (Gentleman, 2015). This shows that the power these firms have in the market is so substantial that even when operating illegally, they can still make gains. “A review of the industry by the Office of Fair Trading found that 129 companies failed to adhere to current standards” (Butterworth, 2010).

Furthermore, to enhance the understanding of the corruption and exploitation of customers we should look at a particular industry, for example, the energy industry: known for the ill treatment towards their customers. “British Gas, SSE, ScottishPower, E.On, EDF and Npower – continue to dominate the supply market, more than 14 years since privatisation” (Gosden, 2014). The market, therefore, lacks competition which means that firms can take monopolistic advantage of their customers. In addition to this, the ‘Big Six’ firms can exert their power over the market as they own all the infrastructure due to vertical integration, “the same pipes and wires run to consumers’ homes whichever supplier they pick” (Buchanan, 2011). This enables the firms to charge an extortionate price. Furthermore, to enhance the understanding of the corruption and exploitation of customers we should look at a particular industry, for example, the energy industry: known for the ill treatment towards their customers. “British Gas, SSE, ScottishPower, E.On, EDF and Npower – continue to dominate the supply market, more than 14 years since privatisation” (Gosden, 2014). The market, therefore, lacks competition which means that firms can take monopolistic advantage of their customers. In addition to this, the ‘Big Six’ firms can exert their power over the market as they own all the infrastructure due to vertical integration, “the same pipes and wires run to consumers’ homes whichever supplier they pick” (Buchanan, 2011). This enables the firms to charge the extortionate prices for their services. The exploiting of customers has led OFGEM to accuse the Big Six firms of “ripping off customers at a time of steep falls in company wholesale costs” (Macalister, 2016), which shows the corruption in the market demonstrated by the power held by these monopolies. The ‘Big Six’ “collectively charged households £1.2bn a year more than they would have in a competitive market” (BBC, 2015). This unethical behaviour from firms leads to customers being worse off and results in rising inequality.

 

Haydn Parker studies Business Analytics at Southampton Business School. The views in this article are those of the author. This article is part of our ‘Making Work Real’ series.

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