tMichaelB is the web site for Tom Bengtson, who writes about business, religion, family and politics.

Saturday, December 23, 2006

Memo to lawmakers: Focus on the big stuff

Christmas is the day after tomorrow and I know the state’s Democrats who recently took control of the Minnesota legislature are feeling in a holiday mood. One of the very first initiatives they identified for the session which will open next month is gift cards. They want to outlaw those pesky fees and expiration dates that accompany some of the cards. I say they are wasting their time; they really should focus on much more important issues.

True enough, gift cards are big business. In 2006, U.S. consumers will purchase $72.8 billion in gift cards. In my view, that is an argument to leave the gift card industry alone; lots of cards are being sold and used with the laws just as they are. It doesn’t seem any change is needed. But some legislators say they want to help us consumers.

However, this is not something we need any help with. Let’s face it, we give gift cards when we really don’t care what we are giving. It’s a default product we can always give to that someone we don’t know very well and really don’t expect to get to know any better. Certainly if we cared, we’d take the time to get them something unique. That’s the reality from the giver’s side of it.

Now consider the recipient’s side of it. It’s a gift. We may not have been expecting anything in the first place. We are lucky to get anything at all. What does it say about the value I place on the gift card I received if I let it sit in a drawer for a year without using it? Clearly I don’t value it all that much, and so if the merchant starts deducting fees from the card after of year, I don’t really care. Either way, I am ahead.

But lawmakers have a solution so they need to identify a problem. And the Democrats in Minnesota are not alone. Twenty-five states already have beefed up laws related to gift cards in recent years. In Connecticut, Montana and Rhode Island, it is actually illegal to offer a gift card with a fee or an expiration date.

Legislators abuse their authority when they exercise it to interfere with pricing negotiations between buyers and sellers. In most cases where the stakes are small, the market weeds out the bad players as consumers naturally migrate to the best offers. I can see where a case can be made for lawmakers to get involved in major purchases, such as a home or car, or situations where consumers are in a particularly vulnerable situation, like when they are paying for a funeral. But lawmakers don’t need to get involved in the purchase of a $50 gift card.

Bans on fees and/or expiration dates will ultimately reduce the availability of gift cards. Oh sure, the big guys like Wal-Mart and Target will continue to offer gift cards – as they do now – without fees or expiration dates. But the specialty stores and family-owned one-of-a-kind shops are less likely to offer them. At a smaller shop, the time value of money actually means something. If these merchants are not afforded the opportunity to recoup their costs for keeping a gift account open for years, then they may just decide not to offer them at all.

There’s not a legislator in Minnesota who was elected to “do something about gift cards.” Our elected officials should focus on the big things – doing something about the rising cost of health care, improving our transportation networks and bringing our schools into the 21st century. These are the issues to which lawmakers should be directing all their energies. Once the session opens next month, I hope they don’t waste any energy on something as trivial as gift cards.

No comments: