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Should Companies Be Fined For Bad Service?

That's the intriguing question raised today in Spain, where the government is considering punishing its phone companies for failing to meet minimum customer service standards.

Spain's telecoms reportedly have a reputation for poor customer service. Complaints like overcharging, high-pressure sales tactics and technical problems are said to be running rampant.

"Spain, with its regulation, is leading what has to be done in Europe in terms of consumer protection and we are not going to allow legislation to be broken," Juan Junquera, the country's secretary of state for telecoms, is quoted as saying.

Sound familiar?

Here in the States, our telecoms aren't any better. The latest numbers from the authoritative American Customer Satisfaction Index give fixed-line phone services a dismal average score of 73 out of 100.

Wireless carriers fared even worse, receiving a barely-passing grade of 71.

Could it happen here?
What if the government stepped in and fined a company like AT&T (it received a failing grade of 66) for every point under 70? What if Comcast (it got a 69) was subject to a federal fine for failing to provide a minimum level of customer service?

Actually, the government does fine companies for screwing up. But it rarely happens.

In 2008, Montgomery County (Md.) fined Comcast more than $12,000 in liquidated damages for violating customer service standards required in the franchise agreement.

"Fining companies that fail to fulfill their contractual obligations is an important part of good government," Councilmember Duchy Trachtenberg said at the time. "Damages force violators of customer service standards to change or face further penalties. The Council holds Comcast to the same high standards it would apply to every important service provider."

Comcast has also faced fines for not answering its phones quickly enough.

But what if this kind of enforcement happened at the federal level, like in Spain? Perhaps as part of the new Consumer Financial Protection Bureau?

Bad idea?

Before all of you free marketers out there dismiss the idea, consider a few things. Market pressure can force a business to do better by its customers â€" but not always.

I can think of at least two cases where customers will be ignored, no matter what they do. The first is when they have no choice: airlines, cable companies and telecoms with de facto monopolies know they can do whatever they want and customers will continue using them because they have no other options.

The other â€" a subset of the first â€" are the often onerous contracts of adhesion that lock you into a service provider for one or two years. If a wireless company has you under contract, why bother to do anything for you?

Maybe, just maybe, Spain is on to something.

Christopher Elliott is a consumer advocate, syndicated columnist and curator of the On Your Side wiki. He also covers customer service for the blog. You can follow Elliott on Twitter, Facebook or his personal blog, or email him directly.

Photo: ChrisDag/Flickr