Outside the Box

Text Spam, Stitch Fix, Amazon, Food Lawsuits, and Gamestop

Text Spam

We have talked a few times about robocalls, and how they’re out of control and nearly impossible to stop. Guess what! Text spam is bad now, and likely to get worse, because it’s even more profitable than robocalls:

Essentially, the scammers have designed a computer that turns cents into dollars, and they're only just getting started.

Wonderful. So how does it work? Insider has provided us with a primer:

This is the messaging and tracking portion of the scam, which allows spammers to figure out who’s likely to click on links, so they can bombard them with more in the future. To deliver the texts, many use spoofed numbers and “wholesale carriers”:

Wholesale carriers are smaller providers that sell access to the same phone system used by your carrier, which could be AT&T or Verizon. There are thousands of theses smaller carriers: following the deregulation of the US telecommunications industry, anyone can technically set up a carrier that can get their message into the US phone system, at which point it's treated equal to any other text. The scammers simply need to find the weak link in the chain, a carrier willing to take money from sketchy texters.

Text messages are very cheap when bought in bulk - fractions of a cent per send. So, in order to be profitable, a spam texter only needs one in many thousands of people to click on a link and do something - typically fill out a form with their personal data, which can then be used for identity theft. Cool, right?

We’ve talked a lot about unemployment fraud, and many of the scam texts being sent these days reference unemployment or other benefits for people impacted by the pandemic. People may be unwittingly handing over their personal information, which scammers then use to defraud the unemployment system.

So, what can regulators do? Well, here’s a depressing statistic:

The FCC ordered TCPA violators to pay $208 million in fines from 2015 to 2019, but it only collected $6,790 as of 2019.

Many of the spammers are located outside the US and can ignore civil penalties. Carriers are gradually implementing their own filtering and spam reporting systems, but while wholesale carriers exist and foreign actors can overwhelm our phone and text networks with spam, it’s unlikely we’ll see meaningful changes any time soon.

Stitch Fix

Stitch Fix is a company that sends people boxes of clothing for them to try on. Customers can keep what they like and return what they don’t, but they pay a “stylist” fee for each box they receive. The idea is that, prior to sending the box, customers can chat with a stylist to make sure they’re going to get things they want. Who are the stylists on the other end of the computer? They’re underpaid, overworked gig workers, as it turns out:

…stylists from Stitch Fix are leaving the service en masse because of a scheduling change that they say takes away the flexibility that once made this job attractive to them.

[…]

For many, the schedule changes, which restrict workers to a maximum of 20 hours a week—only between the hours of 8 a.m. and 8 p.m.—are simply the straw that broke the camel's back.

Many Stitch Fix stylists were part-time by design - they had other jobs, or enjoyed the flexibility of doing styling work here and there. The company didn’t stop at capping hours, it also instituted a “points” system to wring more productivity out of stylists:

Some stylists told Motherboard that the company has recently started tracking those metrics using a points system rather than an hourly system. Each work task is assigned points and categorized as one among different types of tasks, which stylists must log. The points you earn per hour are then calculated to determine your "efficiency," with the goal being 100%.

Stylists also had to contend with a technology backend that made their jobs harder and more time consuming:

Stylists for Stitch Fix told Motherboard that they were often given on average between 5 and 15 minutes to style each box for their clients. But completing this task involved wrestling with the technology they used to complete their orders for clients.

Stitch Fix uses software to suggest items to customers, but it doesn’t work well either:

According to stylists, the algorithm often just picks up on keywords in these sentences without understanding context. If you tell the system that you don't want jeans, you may very well end up with multiple pairs of jeans in your Fix Preview.

"And sometimes our clients don't know that the algorithm is picking stuff," a stylist told Motherboard. "They'll respond, like, 'Why did you send me this stuff?'"

Customers unhappy with the technology take their frustrations out on the stylists, which slows down their work and costs them productivity points, et cetera.

Then there’s the company culture, which it calls “SF OS” for Stitch Fix Operating System. Really. It’s not computer code, but it is unfriendly to criticism:

There’s no rule against stylists talking to each other at Stitch Fix, but for many, it feels impossible to do so. Stylists say that conversations over GChat are monitored, and while they once had an internal message board to talk to each other, it no longer exists.

[…]

The only way to voice complaints is to comment on The Thread, an internal board where managers make announcements. If you leave a comment with any negativity, it will be deleted, stylists said. Sometimes making negative comments leads to a one-on-one meeting with a manager.

So what are stylists being paid for all of this? Not a lot:

Currently, stylists say that salaries are determined by ZIP code, and stylists who spoke to Motherboard said they make between $15 and $16 an hour. To order a box from Stitch Fix, clients pay a non-refundable $20 as a "stylist fee." But stylists say they don't know where that money goes, and many of them make less than that per hour.

Stylists are expected to complete a box in six to thirteen minutes, meaning they could potentially process five to ten an hour, but they’re being paid a fraction of the styling fees charged to consumers. Stitch Fix is a publicly-traded company, on track to make a couple billion dollars this year, though it’s still not profitable despite its best efforts to cut labor costs to the bone.

Amazon

I often say that Amazon’s marketplace is a mess - a mostly lawless platform full of shoddy or outright fake products, many of them shipped by Amazon’s own fulfillment service. Well, Amazon has decided to take action against some of the many offenders, stripping access for more than 50,000 Chinese vendors for violating Amazon’s policy of paying for positive reviews:

Starting in the second quarter, Chinese industry observers say, the company abruptly changed course and began suspending retailers and freezing their inventory at its U.S. warehouses. More than 50,000 Chinese retail accounts have lost their place on the platform, resulting in lost sales of 100 billion yuan ($15.4 billion), according to the Shenzhen Cross-Border E-Commerce Association.

While it’s somewhat suspicious that Amazon has only targeted Chinese sellers with this latest sweep, it is a step in the right direction:

For years fakes flourished on the site, and Amazon’s terms of service let it avoid legal responsibility when its customers complained about allegedly shoddy or defective marketplace products.

So what prompted the sudden change of heart? Bad press, obviously:

The crackdown came after reports of a data breach in May that exposed correspondence between Amazon sellers and fake review writers, and soon after, Recode reported that the Federal Trade Commission wanted Amazon to do more to fight fake reviews.

American sellers on the marketplace complain Chinese competitors also use the same services to flood their products with negative reviews. Amazon’s mostly unregulated platform has been a real boon to Chinese companies who want to sell direct into international markets:

China-based retailers account for about half of Amazon’s marketplace top sellers, up from 13% in 2016, according to Marketplace Pulse.

[…]

During [2020], Amazon’s marketplace business continued to expand and overtook its online retail business, where Amazon buys inventory from wholesalers like a traditional store.

There’s the key, really. Amazon makes more money when third party sellers on its website absorb the costs of inventory and production. And, as evidenced by the latest crackdown, Amazon can turn off the spigot at any time, effectively seizing a company’s goods in their warehouses for terms of service violations:

Amazon’s terms of service don’t allow marketplace retailers to sue, though they can take the company to an arbitration hearing.

So, Amazon has total control over who sells what on their platform, and they can terminate vendors with no notice, leaving them little legal recourse. They allowed tens of thousands of Chinese merchants to run review scams for years when it suited them, and shut them down when it didn’t.

Food Lawsuits

I love a good food lawsuit. Here is an enjoyably exhaustive round-up of what’s going on the world of food lawsuits these days:

Despite the COVID-19 pandemic, 2020 saw more false advertising food and beverage cases filed than any year prior, continuing a trend in this area.

Excellent. Tell me more!

In February 2021, consumer groups filed a complaint letter with the FTC against Smithfield Foods, claiming the company’s portrayal of its farming process as environmentally friendly is deceptive and misleading.

[…]

In May 2021, a class-action suit was brought against Hefty’s recycling bags, which were marketed as "perfect for all your recycling needs." The lawsuit alleged the bags were not recyclable and were indistinguishable from regular plastic bags.

This trend is called “greenwashing”, when companies advertise their goods as eco-friendly while they aren’t. Smithfield foods is one of the largest meat producers in the country, and it’s somewhat hard to believe the company that cares little about worker safety is a friend of the environment.

We’ve got more flavoring lawsuits too! Vanilla is old news, we’re on to bigger, better things:

…a case was filed in Illinois against Frito-Lay North America alleging that the snack maker falsely advertised its Tostitos chips as having a "hint of lime" when, in reality, the chips' lime taste comes from artificial ingredients, not actual limes.

The same plaintiff's firm filed a similar case concerning TGI Fridays branded onion ring snacks, alleging that manufacturer Inventure Foods falsely advertised the product as "onion snacks" when the product does not contain any actual onions.

No onions! Come on, man. Sparkling water is in the crosshairs as well:

The consumer complaint filed against Kroger in the Northern District of California alleges the packaging for Kroger sparkling water products sold with flavors such as "Black Cherry," "White Grape" and "Kiwi Strawberry" is misleading because the waters are purportedly flavored artificially rather than with extracts of the fruits.

I mean, I don’t really expect they put kiwis or strawberries in my fifty cent bottle of sparkling water, but that’s for the legal system to sort out.

A big source of food lawsuits is “all natural” labeling, which continues to be thorny because the FDA won’t issue clear guidance about it, a fact I am certain plaintiff’s lawyers are happy about:

On March 24, a federal judge in New York certified three classes of plaintiffs in a litigation against Kind LLC in which plaintiffs allege that Kind deceptively marketed several products as "all natural" and "non-GMO" when in truth the products contain synthetic and genetically modified ingredients. The court granted certification despite the fact that the plaintiffs could not provide a concrete definition of the term "natural."

It must be incredibly frustrating to lose a court ruling when the person suing you can’t properly define what natural means. Some cases are a bit more cut and dried:

In June, a federal judge in northern California approved a $15 million class-action settlement in a case involving Post Foods' cereals. Plaintiffs allege that Post violated a number of state consumer protection laws by deceptively marketing high-sugar cereals with health and wellness claims.

[…]

Similarly, in March, the plaintiff, in a near-identical lawsuit involving Kellogg cereals such as Raisin Bran and Frosted Mini-Wheats, sought approval of a settlement agreement reached between the parties.

This seems good, but once again the FDA may be partially to blame:

The increase in settlements is likely tied to the FDA's failure to create an official definition for "healthy" labeling, despite asking for public comment in September 2016. Without official FDA guidance, industry confusion and consumer class actions on "healthy" labeling are likely to continue.

I have said previously that I am a little sympathetic to companies who are being sued for saying their water is strawberry flavor when it doesn’t contain strawberries, but since our government seems to want to avoid taking a stance on how much sugar should be in things, or whether a granola bar can be considered natural, this is the system we’ve got to hold companies accountable for their marketing tactics.

Gamestop

A fellow named Ben Mezrich wrote a book about the Gamestop “short squeeze” in January of this year. Or, rather, he sold the idea for a book in order to sell a movie about the book, which he hadn’t written yet. Mezrich is the author of the book that went on to become The Social Network, which he wrote the same way, apparently:

Mezrich says that as he wrote the latter he’d hand off each chapter, oven-warm, to the screenwriter Aaron Sorkin. (Sorkin has said that he did not see any of the book until the screenplay was nearly done.)

The book is ostensibly non-fiction, purporting to tell the “real” story of what happened when Gamestop’s stock price went crazy. Except, it seems to be mostly made up?

The Mezrich house style is light on formal quotation: He employs omniscient third-person narratives, rotating chapter by chapter through a stable of characters.

[…]

The other major voices — an anime-loving Duke senior who grew up on a boat, an Obama-then-Trump-voting nurse at a psychiatric hospital the author made up, a pregnant woman whose wedding and lifestyle upgrade were waylaid by the pandemic — appear to be either anonymized or composite characters, stand-ins for the WallStreetBets rabble, motivated alternately by vengeance, fun, desperation, boredom. All these characters can be ventriloquized whenever Mezrich needs to explain a concept in finance; they experience convenient revelations whenever the plot needs advancing.

That’s…not how non-fiction works? When Mezrich does name check real people, he takes a lot of artistic liberty:

One chapter is written from the perspective of, and could be confused with a love letter to, Elon Musk. In it, the billionaire uses a flamethrower to hunt down a rogue A.I. drilling machine and sips a glowing smoothie made with gourds from Mars.

Excuse me? Anyhow, it seems that what Mezrich actually does is pitch made-for-film plots only loosely based on real events, create the characters to fit the narrative rather than doing actual research, and sell the rights for a lot of money to studio executives who don’t care if it’s true. I can’t wait for this one to hit theaters!

Short Cons

CFPB - “The Consumer Financial Protection Bureau (CFPB) today filed a lawsuit in federal district court accusing LendUp Loans, LLC of violating a 2016 consent order and deceiving tens of thousands of borrowers.

Bloomberg - “For more than a decade, the Grenons had enriched themselves by selling Miracle Mineral Solution, or MMS, a “sacramental” drink that promised to cure ills such as Alzheimer’s and cancer but that scientific consensus holds to be potentially lethal and have no medical value whatsoever.

ESPN - “Portis was one of 10 former NFL players charged in December 2019 with allegedly defrauding the health care program of more than $3.4 million by filing false claims for hyperbaric oxygen chambers and other expensive medical equipment.

Tips, thoughts, or food lawsuit updates to scammerdarkly@gmail.com