Freedom of contract? Not in California

[Slypieguy]

http://tech.yahoo.com/blogs/null/99655

The 9th circus strikes again!

[Titus Ultor]

Interesting case.

Early termination fees are a bit of a bitch, but it's not as if you don't agree to them when you sign up.

There are even a couple wireless providers (Cricket comes to mind) who don't make you sign a contract of set-length at all.

Dumb move by the state imo.

[Jezrith]

Hey thanks! I've always wanted to pay more for my cell phone and cell phone service!

[Slypieguy]

California is all about overreaching to protect the "little guy" while at the same time tampling on some fundamental rights

[Reikson]

I hope this is overturned

[Surly]

When corporations make this sort of thing the norm, it's pretty crappy... and I really don't have a problem with a state outlawing that kind of practice. It's the stupidity of the people that signed the contracts which brought it on, and it's another reason I wouldn't live in California... but I don't see how doing that is unconstitutional.

[Titus Ultor]

When corporations make this sort of thing the norm, it's pretty crappy... and I really don't have a problem with a state outlawing that kind of practice. It's the stupidity of the people that signed the contracts which brought it on, and it's another reason I wouldn't live in California... but I don't see how doing that is unconstitutional.

I agree on most counts, but the early termination fee is pretty much how anyone can afford any non-Nokia-brick cell phone. I really hope this doesn't actually stick.

[Jangang]

I agree on most counts, but the early termination fee is pretty much how anyone can afford any non-Nokia-brick cell phone. I really hope this doesn't actually stick.

Uh, Cricket sells a lot of phones. None of which are Nokia-Brick phones. They cost a little more since you aren't signing a contract, but not what the other providers charge w/o a contract.

(Showing they are inflating the prices in order to make the deal sound "great" when people are signing up. This is also why phones are only available on one network, even if the technology is the same. If the competition has the same phone they might put a different base price. They can't allow this, so they all work on having their own "unique" phones.)

Early Termination Fee's are stupid. People agree to them because they really haven't had a choice. Now days there are a couple options for people who don't want contracts, but thats a new thing in the last few years.

Normally I would say let the market take care of it, but these companies have been screwing people for what 20 years now? And have no intention of stopping.

[stalwart]

When corporations make this sort of thing the norm, it's pretty crappy... and I really don't have a problem with a state outlawing that kind of practice. It's the stupidity of the people that signed the contracts which brought it on, and it's another reason I wouldn't live in California... but I don't see how doing that is unconstitutional.

agreed and agreed.

[Khumash-Gor]

how is it unconstitutional? i must have missed that part

[Uilamin]

Well early termination fees have ups and downs. The actually reasoning for them isn't too bad, which is when you sign the contract that expect xxx amount of profit from you. With that amount of money they subsidize the initial start up costs to you cutting into their profits. This however makes the phones more attractive to buy because there is less of a down payment.

What cell phone companies may do to get around this ruling is to switch their contract agreements to essentially being loans. This way the company can require full down payment of the contract upon purchase of the phone and utility (at a lower cost than what it would cost to pay the contract each month) and then give the users an option to take a loan for xxx period of time with monthly payments equivalent to what they would of been paying under the normal contract.

That or they could just unsubsidize the initial costs and then have people bitching at the price increase of high-tech cell phones...

[Malhavok]

I agree on most counts, but the early termination fee is pretty much how anyone can afford any non-Nokia-brick cell phone. I really hope this doesn't actually stick.

Uh, how do you figure that?

IF (and that's a big if) this really gets overturned then the carriers will begin to compete more with one another. The cell phone deals were the "signing bonus" used to attract customers. Lose that and you need to find a new one. It costs next to nothing to provide service so you might see the subscription rates drop.

Even if you don't there's a whole array of decent phones for $100-200. If you can't afford that you shouldn't be looking at a $50-100 a month cell phone subscription. Seriously amortize a $500 phone over 24 months and its $20 a month. And unless you're getting something like the iPhone (list $800, $199 after contract) you aren't getting anywhere near $600 off. $100-200 discount is typical on high end phones. Nothing more.

[Jangang]

Well early termination fees have ups and downs. The actually reasoning for them isn't too bad, which is when you sign the contract that expect xxx amount of profit from you. With that amount of money they subsidize the initial start up costs to you cutting into their profits. This however makes the phones more attractive to buy because there is less of a down payment.

What cell phone companies may do to get around this ruling is to switch their contract agreements to essentially being loans. This way the company can require full down payment of the contract upon purchase of the phone and utility (at a lower cost than what it would cost to pay the contract each month) and then give the users an option to take a loan for xxx period of time with monthly payments equivalent to what they would of been paying under the normal contract.

That or they could just unsubsidize the initial costs and then have people bitching at the price increase of high-tech cell phones...

I would expect them to just change the wording, and make it so you "Buy" the phone at full price. But you only have to pay say 30% of that price up front. The rest will be billed to your phone bill over 12, or 24 months.

They could then offer a rebate with a contract, which effectively gets rid of that part of your bill. But if you cancel your contract before the rest of the phone is paid for, you are responsible for the rebated amount.

This would give them benefits in two seperate ways.

As a replacement for the "termination fee's" they'd get to charge that 70% which they had rebated, or a prorated percentage of that anyway.

Additionally, it would allow them to sell expensive phones to people who don't want contracts. They'd get the same deal, getting billed for the 70% monthly, but instead of prorating it, they'd just keep billing that portion even after the account was canceled. (Unless you just pay the balance or something.)

That's how I'd do it were I them.

[Lacker]

Another cricket customer here. Only hassle I've had with them is my first phone was a dud. Sure they're coverage areas are small, but I don't plan on leaving any time soon.

I got burned pretty bad from sprint years ago. Never again contract, never again.

[losinglife]

you dont HAVE to take a contract with cell phone companies you know. You can buy phones straight up and then your auto month to month.

[Kheiron]

Contracts should be fully binding in my opinion. You sign something, you stick to it, you dont go whining to a judge when the other guy expects to collect.
Maybe if people weren't so insistant on having the government being the overbearing protective parent then we'd have some real freedom instead of the illusion.

[Killuminati]

Freedom isn't popular.

[Slypieguy]

First of all, no one ever said this was unconstitutional. I just think it goes against the valued legal principal of freedom of contract. If the marketplace comes to a situation where there is no longer freedom of contract due to monopoly or something, then I can see the case for courts stepping in, but this clearly isn't the case as we have providers like Cricket.

Second, this ruling is only for CA, which is known for plenty of kooky state laws, so it's not like other states will adopt this ruling automatically. If this comes up in other states and they rule the same way, then we can start worrying about the fallout.

[Arkh]

Freedom isn't popular.
Because it isn't free.

[Durindana]

look up "contract of adhesion" on wikipedia. There's a reason early termination fees are the norm in the US, and prepaid deals generally suck, while the rest of the world cleaned up that act a long time ago. It's called collusion