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Fraud By Companies That Don’t Serve Consumers

When I recently wrote Capitalism Means Policing Big Companies, I was thinking about big companies that sell to consumers or about the system as a whole which sells to consumers. I wasn’t thinking about a large dairy farm that sells to a middleman that sells to Kraft that sells to consumers, and then considering the dairy farm or middleman as independent companies who can perhaps say “Whatever Kraft tells consumers is not our responsibility; we disclosed everything about our product appropriately to the people we sold it to.”

I suspect fraud is a bigger problem for how consumers are treated than for how businesses are treated. This is partly because consumers are more vulnerable and unsophisticated. Advertising to consumers is different than advertising to businesses.

But companies don’t like taking the dishonesty or fraud on themselves. For example, trucking companies aren’t happy for their drivers to accurately disclose everything and then have the trucking company itself lie to regulators. Instead, they pressure their drivers to hide all problems and falsify documents so that the trucking company can keep its hands cleaner.

I imagine it’s the same throughout supply chains. Kraft doesn’t want its suppliers to disclose problems to it that it will then have to knowingly, purposefully hide. Kraft would instead pressure its suppliers to do some of the dishonesty themselves instead of pushing it all on Kraft. And that would extend all the way down the chain. The middlemen don’t want all the dishonesty either. They want their suppliers to cover some stuff up so they don’t have to. Each company wants its business partners to lie to it, so they can keep their own hands cleaner, and they will tend to do business with whoever is willing to do that for them. That’s actually similar to how consumers tend to do business with companies that lie to them and tell them what they want to hear.

On a related note, Amazon tries to get out of liability and responsibility for what many of its delivery drivers do by having them superficially work for other companies even though Amazon exercises a ton of micromanagement and control over their jobs (so their independence seems more like facade than reality). Amazon puts a lot of work into trying to have a lot of the dirt be on other people’s hands instead of their own. They aren’t just happy for their suppliers and service providers to be honest and clean, which would make it clearer that Amazon is dirty.

The facade of the independence of many Amazon drivers reminds me of Uber. From what I saw a while ago, Uber pretends that its workers not only aren’t its employees but also aren’t its contractors. Uber claims they are just a service provider for drivers, and that drivers contract directly with riders. So rather than Uber paying its workers at all, Uber claims that actually the drivers pay Uber for Uber’s services (primarily providing software). So Uber is allegedly like a company that makes an online appointments calendar app that some e.g. dentists and hair salons pay for. This facade is not kept up consistently and I don’t think it’s gotten much media attention.

To double check about Uber, I just did a web search. First thing I clicked:

Uber Driver Agreement updated JAN 2022: defines that Drivers Pay Uber

Uber doesn't pay drivers...
Drivers pay Uber for access to the driver app..

Uber’s contract terms from that post:

We are not hiring or engaging you to provide any service;
You are engaging us to provide you access to our Platform.

Another example is many companies, like Tesla or Apple, use natural resources which have to be mined, often in countries with less law and order. A lot of that is indirect – they buy e.g. batteries from someone else who bought raw resources like lithium. Or companies like Nike or clothing brands use sweatshop labor in poorer countries (often indirectly via some other companies who own the sweatshops). The U.S. companies who sell to consumers like me never want to know about any abuses going on out of their direct sight. They want their suppliers to tell them everything is wonderful and humane (maybe they want it to actually be that way, or maybe not, but they tend to make a lot of decisions based on lower prices not humaneness). Apple isn’t telling Foxconn, “Don’t worry; just tell us the truth about your abusive practices; we don’t care; we’ll just lie to the public but we want all internal documents to be truthful.” That would result in whistleblowers exposing Apple. Apple and others actually make some inadequate attempts to police their suppliers and get them to clean up their acts. Or Apple will go through several layers of indirection (other companies) to limit their connection to abuses. Sometimes they stop using suppliers, even indirectly, who are caught doing human rights abuses (especially if it gets media attention). But on the whole, they keep profiting off of human rights abuses in foreign countries – my point is that they put work into having deniability on their end.

Another example of wanting dishonesty from companies you do business with is carbon offsets (more). Really offsetting carbon is hard, but companies like Apple want to market themselves as carbon neutral, and are happy to pay for carbon offsets with very low, inadequate standards. If challenged, Apple would blame their suppliers of carbon offsets and say they had no idea that some of them were committing fraud. Apple doesn’t want to know about the fraud in the carbon offset business; they want to be isolated from it and protected from liability, responsibility, or being the ones doing the lying. But actually Apple should know better and should do reasonable due diligence. Apple’s marketing about being carbon neutral appears to be fraudulent to be an example of the lack of reasonable enforcement of “no initiating force (including fraud)” by the government.

(I have not investigated specifically which carbon offset suppliers Apple uses. Although I’m convinced that the carbon offset industry does a bunch of fraud, there could be a few better providers, and it’s not impossible that Apple in particular sought out and used those providers. Apple is just an example. Throughout this article I’ve named some well known example companies, which I think is useful for readers, but they’re meant to be representative of much wider problems involving many other companies.)

In conclusion, although I have less familiarity with large companies that don’t sell to consumers, I don’t think they’re innocent. I think fraud and force are spread out through the supply chain, not just concentrated in the last step which advertises to consumers. Often the last step in the global supply chain is a U.S. or European company which tries harder than average to appear to have clean hands.

Elliot Temple on September 4, 2022


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