Spark Energy & the Failures of Libertarian Thinking

Spark Energy is a gas company that operates in several states, including Massachusetts, California, and Texas. Their business model, as far as I can tell from reviews, is largely based on committing brazen mass fraud. Now, it is not uncommon to find a company that offers consumers low rates, then screws them with all sorts of hidden contract provisions later down the line. If that was simply what Spark were doing, it would be one among many such companies that preys on the poor and elderly, hassling them into signing unfavorable contracts and then bilking them for exorbitant sums. Free market capitalists generally have little sympathy for the consumer in these cases; their response is almost uniformly something along the lines of “Well, they signed the contract, they should have been more careful. Nobody made them sign, and once you sign, you promise to abide by the terms.”

The case of Spark Energy therefore wouldn’t pose a significant challenge to libertarian thought if we simply looked at the hundreds of consumers who were lured by Spark’s promise of cheap energy and then saw their gas bills suddenly double as soon as they signed up. Even though Spark also charges large fees for people to escape their contracts, for a free-market thinker, this is all part of the deal that was made.

But the Spark case is interesting because the company goes beyond this practice. Many consumers report having another kind of experience with the company’s representatives, one that I also had when a Spark employee showed up at my door in a (failed) attempt to get me to join their company. What they do is this:

The Spark representative outright lies and says they represent your current gas company (Mine told me they had been sent by Eversource.) They inform you that due to a new law, your gas rates are about to rise, but that under the law you are eligible for an exemption. They then ask you for your personal information, so that they can process your exemption. Once you give it to them, they begin to bill you.

Now, this is outright fraud. There’s no way around it. My representative didn’t just carefully avoid the truth, she told me actual untruths. She didn’t simply say “I represent your gas company” in a way that could have been construed to mean that she represented one of many gas companies that served my area. She said she worked for Eversource, which is my actual gas company and is unaffiliated with Spark Energy. She made up a fake law, and tried to steal my financial information under false pretenses.

The unsympathetic free-market capitalist response about the sanctity of contracts, then, is inapplicable to these cases of Spark’s deception. Spark didn’t just try to get me to sign a contract without reading it, then enforce a bunch of provisions I was unaware of. They simply impersonated another company and never let on that they were trying to sell me gas. Even if we presume that consumer choice is the most effective way to get bad companies to fail and good companies to succeed, if I can simply put on a UPS uniform and pretend I’m UPS, without any punishment, how can a consumer effectively show his preference for UPS?

Of course, the free-market capitalist has a response to this argument. “Well, I always exempt cases of fraud,” says he. “Fraud is a crime, it’s different from a contract. Of course I don’t think companies should be free to commit fraud. What you are talking about is not capitalism, it’s criminality.”

All very well, there’s no inconsistency in the free-market philosophy, then. The trouble, though, is twofold: in the absence of effective punitive enforcement, a company has every incentive to lie like this. And second, free-market capitalists are always pushing for less enforcement (through tort reform and the elimination of consumer protection agencies), thus making it more likely that this kind of fraud will be gotten away with.

The Spark case is illustrative. It seems as if they have been doing this for a long time, operating freely with no punishment whatsoever. Why? Because there’s no way to stop them. The hassle and costs of litigating against Spark, considering the comparatively trivial financial burden Spark inflicts (usually a $100 cancellation fee), make it not worth pursuing them in court. So they continue to operate in an open theft ring that is no different, except in scale, from the actions of con men. There’s every incentive for them to continue, and nobody has an incentive to stop them. It’s a complete failure of free markets, and anyone who defends unregulated capitalism should concede that they are not just defending one-sided contracts, but are in practice defending a world in which companies like Spark can build a business model off impersonation and open lies. And if they’re not defending that, they either have to make clear what part of the state they’d like to expand the enforcement power of, or how they expect consumer choice to function in a world where every company can lie about its identity.