FedEx Overcharged Customers for Years, Sealed E-Mail Says

http://www.bloomberg.com/news/2012-12-11/fedex-overcharged-customers-for-years-sealed-e-mail-says.html

by uptown • 14 years ago

84 59 14 years ago

jrockway• 14 years ago

This doesn't seem that damning to me. It probably costs FedEx the same regardless of whether or not the address is business or residential these days, and it's not like there's some law that requires FedEx to charge a certain rate. The lawsuit could easily be worded "FedEx systematically undercharging residential customers for years, sealed e-mail says."

The tone of the article indicates that I'm supposed to be angry about this, but I'm just not feeling it today. Sorry.

prawks• 14 years ago

This is how I interpreted it as well, but I'm not a lawyer, either.

DannyBee2• 14 years ago

Fedex publishes rates and is supposed to be bound by them.

Here you go, from http://www.fedex.com/us/service-guide/terms/express-ground/i...:

"Rates and service quotations by our employees and agents are estimates and will be based upon information provided by you, but final rates and service charges may vary from the quotes based upon the characteristics of the shipment actually tendered to us. Any conflict or inconsistency between the FedEx Service Guide and other written or oral statements or quotes (except those found in a FedEx Sales or FedEx Express Customer Automation agreement) concerning the rates, features of service, and terms and conditions applicable to FedEx Express service will be controlled by the FedEx Service Guide, as modified, amended, changed or supplemented. "

Note: Rate differences are controlled by the service guide.

If the service guide says there should be no residential delivery charge, and they are adding one, that's a problem.

They also only reserve the right to charge the residential surcharge on certain places:

"We reserve the right to assess a Residential Delivery surcharge on any shipment delivered to a home or private residence, including locations where a business is operated from a home, or on any shipment in which the shipper has designated the delivery address as a residence, including shipments where the delivery location has been designated as Residential Delivery in error. "

The last part is what part of their defense will almost certainly be. As this email shows, however, they've apparently deliberately designated a large number of shipment delivery locations as residential delivery, meaning it was not "in error", but intentional.

Ignoring all of this, they are also usually forming binding rate contracts with businesses and governments (IE you agree to ship this many packages a year, we agree to charge you the rates in this service guide with 80% discount). Throw on top of that that deliberately overcharging the government is serious business in the US. It's often criminal, and IIRC, even in the civil side, you can keep a percentage of the money you recover by suing on their behalf.

sethg• 14 years ago

they've apparently deliberately designated a large number of shipment delivery locations as residential delivery

More likely: they have a database or some other kind of service that maps addresses onto “residential” or “not residential”, and either they put off upgrading the database or have some flakiness in their code, so that a lot of addresses get incorrectly marked “residential”, and, well, when you’re prioritizing which bugs you need to fix, the bugs that make your company more money than it deserves usually don’t end up at the top of the list.

IanDrake• 14 years ago

Same. I read it and though, if they didn't like the price they should have used UPS or USPS.

thedufer• 14 years ago

The problem is that they were tacking surcharges on that didn't apply after signing an agreement. That's breach of contract, which is somewhat different from just charging high prices.

pixl97• 14 years ago

I want you for a customer. I'll sign a contract to bill you for $100 an hour. Then when I send you the bill I'll make sure it's for $125, because hey if you don't like the price, you should have used someone else.

rscale2• 14 years ago

The allegation is that FedEx established contracts with customers with a rate schedule that included surcharges for residential and extended-range delivery, then improperly charged those surcharges on deliveries to commercial/government locations where they did not apply, and did so knowingly and repeatedly.

Systematically overcharging customers strikes me as a valid tort.

mikeash• 14 years ago

There is a law that says FedEx has to charge the rates they advertise, though. I believe that is what is at issue here.

mikeryan• 14 years ago

It probably costs FedEx the same regardless of whether or not the address is business or residential these days,

I sincerely doubt this is true.

There's probably significant economies of scale when delivering to commercial properties where the drivers can drop off multiple deliveries at once as opposed to home deliveries which would usually get a single package per stop.

Id think that the drivers that deliver to offices can drop 5-10x as many deliveries in a day compared to the residential drivers

cdcarter• 14 years ago

Additionally, a commercial delivery has a lot lower chance of a delivery exception.

Alaskan0053• 14 years ago

“My belief is that we are choosing not to fix this issue because it is worth so much money to FedEx,”

They will pay some money to make the lawyers rich, no one goes to jail and FedEx will repeat it again after a few years. Rinse, repeat. Cost of doing business.

TDL2• 14 years ago

It's a civil issue why would anyone go to jail?

Alaskan0053• 14 years ago

This is civil, but if they broke the law (overcharging the Government on purpose) it can go criminal. If they want to pursue it of course.

notJim2• 14 years ago

Or maybe, having been called out, they'll pay whatever it costs, and then fix it once, and it won't happen again? Sorry, but I'm not impressed by mindless cynicism.

Alaskan0053• 14 years ago

Anyway, they were called out before being sued but did nothing about it.

I am cynic because many big corps still have this attitude. See http://www.bbc.co.uk/news/business-18866018 and http://www.latimes.com/business/money/la-fi-mo-hsbc-confirms...

Shivetya2• 14 years ago

This would be an issue if they were the only game in town, last time I checked they have some pretty stiff competition in package delivery, UPS being the one that comes to mind.

Look at it this way, if they are overcharging for delivery but are still getting business then they are charging appropriately for their market.

wting• 14 years ago

The presence of competition does not imply a fairly priced market, e.g. US telecom companies.

paulgb2• 14 years ago

FedEx were sued for breach of contract. Presumably the plaintiffs shopped around and compared rates before entering a contract with FedEx.

spoiledtechie• 14 years ago

If all companies that deal with governments should be sued for going over budget or charging too much after a contract was set in place, then federal contractors would all be in court.

cygwin98• 14 years ago

It's called Oligopoly, which is much better than Monopoly, but still far from a competitive market.

Shivetya2• 14 years ago

How is the market not competitive? UPS, FedEx, and USPS, are the three big carriers that come to mind. The logistics for nationwide delivery pretty much insure your not going to have a large number companies. You might get some that specialize in particular types of delivery, but generic deliveries is self limiting.

nickpinkston4• 14 years ago

Well, assuming there's no price collusion, which there's a good chance of the implicit type. "Charging appropriately" isn't the best measure pro-socially, AIDS medication was still selling well in the West as millions died.

FedEx could be prohibiting whole business models that are waiting to be profitable with cheaper shipping.

Yes, I know it's speculation, but what we often forget here is that capitalism is a deal of state-based enforcement of your property rights so that you create value for society. If your company, like Comcast, is systematically overcharging / under-delivering, you're not holding up your end of the deal - so the state might just step in to ::realign your interests::

Gormo3• 14 years ago

> we often forget here is that capitalism is a deal of state-based enforcement of your property rights so that you create value for society.

Are you saying that the protection of one's property rights is contingent upon the delivery of some arbitrary metric of "value" to "society"? That doesn't sound quite right.

FireBeyond• 14 years ago

"like Comcast, is systematically overcharging / under-delivering"

Whilst I understand that Comcast is a really easy target for customer service complaints, I pay for a 27mbps / 7mbps service.

Per my speed tests (not speedtest.net), I get upwards of 40mbps down, 15mbps up on sustained transfers. And service is excellent, on the few occasions I've needed it.

enoch_r• 14 years ago

If I could say what I wanted, but only if the government determined that my speech provided "value for society," I don't think I'd consider myself to have state-enforced "speech rights." Speech privileges, maybe, but "rights" is definitely not the word I'd think of.

rscale2• 14 years ago

The only appropriate charge is the one that was agreed upon for the services rendered.

Permit• 14 years ago

You mustn't have read the article.

It's not "FedEx's prices were too high".

It's "FedEx told me it costs $x.xx to mail a package and I was charged $x.xx + $y.yy".

bdcravens2• 14 years ago

FedEx and UPS have been known to collude, and there's currently a lawsuit pending related to FedEx and UPS colluding to shut down third-party negotiators.

notJim2• 14 years ago

Can anyone explain this? If you tell me a candy bar costs $2 (e.g., that's the posted price), and then at the register, you actually charge me $10 and I don't say anything, can I sue you later? I realize that's a ridiculously simplified example, but it seems in principal/by analogy the same.

DannyBee2• 14 years ago

Like anything in law, it depends. To answer, I'd first need a clearer example.

Define "didn't say anything". Did you notice there was a problem, but didn't say anything Or did you not notice until later?

debacle• 14 years ago

Businesses are huge, and contract law isn't that simple.

The reality is that the person sending the package is not the person who brokers the relationship with FedEx - they're paid mailroom wages (10-15 an hour).

ericcholis• 14 years ago

Close, but not really the same. FedEx and UPS tack additional fees on to packages for various delivery scenarios. In this example, they were charging a "Residential" delivery fee for places that were clearly not residences. I'm not sure how it works with FedEx, but with UPS you can override this fee when creating the shipment...but you could get charged anyway as a correction on your bill.

maratd• 14 years ago

That's far too simplistic. FedEx, UPS, and other couriers charge more for residential deliveries. This is fine, because it is more difficult to deliver to a residence.

However, frequently, these couriers charge a base rate and then tack on a residential "surcharge" at a later time. Most shipments aren't paid for at the counter. You get a weekly bill. If you ship more than a few packages a week, it's very difficult to tell which surcharge is attached to which shipment. All they give you is a tracking number and unless you spend all day memorizing their tracking numbers, you won't know which end is up.

Also, are you going to spend 15 minutes on the phone every time you get dinged for two bucks unfairly? No thanks.

At this point, it's not so much ripping off ... everybody knows it's happening. Just a hidden cost of shipping.

isleyaardvark• 14 years ago

To go with the candy bar analogy, it's as if you paid $2 with your credit card, then were charged another $10 a week later. Close?

endersshadow• 14 years ago

Because organizations aren't the same person. So Jan calls from purchasing, and she gets a quote from FedEx of $2/package. Bill in shipping is told by Jan to use FedEx using this company code. Bill ships it via FedEx and just sends the bill off to Accounts Payable. It doesn't really pop up until much later when you're closing out the quarter or year and go, "Hey, wait a minute, why is our shipping so high?"

bcoates• 14 years ago

There's a little sign at the cash register of most stores in California to that effect, that you are entitled to buy at the lowest advertised price.

Negitivefrags• 14 years ago

My company recently had to ship out a lot of small parcels in bulk (Think kickstarter style rewards). We had never done that before, and it is very difficult to actually work out how much it is going to cost.

The rates are confusingly specified, you can't get a per package breakdown and you don't get invoiced until weeks later.

Because of all that it's actually very hard to say if you are getting the rates you agreed to. At best you can try to estimate what it is going to cost you.

Thankfully in our case our estimates were actually higher than what we eventually paid, but I can see how it would be very difficult to know if you were over charged.

joe_the_user• 14 years ago

Not really.

More like: I ask you how much a candy bar is, You say $2, I give you a ten and you "forget" to give me change.

Can I sue you later? You bet your sweet bippy!

rsbrown• 14 years ago

There are businesses whose sole offering is a service to audit your shipping invoices to ensure that you are not being overcharged. One, started in Memphis in the late 90s to specifically audit FedEx deliveries, is now a division of IronData:

http://transportation.irondata.com

bdcravens2• 14 years ago

I guess it'd be remiss of me to not link to Refund Retriever, the company I've developed software for:

http://www.refund-retriever.com

DavidBradbury• 14 years ago

"The e-mails were unsealed yesterday in a class-action, or group, lawsuit claiming FedEx Corp. and FedEx Corporate Services Inc. overcharged commercial and government customers as much as $3 each for millions of packages delivered."

Come on Bloomberg, don't talk to me like I'm five.

Coax• 14 years ago

When will the lawsuits begin?

the_economist• 14 years ago

Having run an import / distribution operation for over 10 years, I can say a high degree of confidence that this practice is widespread across the industry.

The "mistakes" are frequent, and they error on the financial side of the freight company approximately 95% of the time.

FedEx Overcharged Customers for Years, Sealed E-Mail Says

Related Stories