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How Social Neworking Magnifies Consumer Clout

THE SAN FRANCISCO CHRONICLE

Social networking sites such as Facebook and Twitter are transforming the speed and power of consumer revolts. What once took many months - and a vast network of determined consumers willing to write and badger companies - can now go viral and deliver near-instant results.

Just ask Verizon.

Within a day of announcing that it would start charging customers a $2 fee to pay their bills online or over the phone, Verizon was backing down, citing customer feedback. In the era when word spread by snail mail and water-cooler chat - or even e-mail - it might have taken weeks, or even months, for the rebellion to reach critical mass. But the rapid-fire ricochet on Facebook and Twitter convinced Verizon executives that they had a problem, a serious problem, on a policy that was rolled out on the usually quiet week between Christmas and New Year's.

"The social media platform has become a cyber slingshot for Davids who are angry at Goliath corporations when they abuse their power and position," said consumer advocate Jamie Court, author of "The Progressive's Guide to Raising Hell."

This rise of social networking as a playing-field leveler is an encouraging trend. It was evident in the way Bank of America retreated from its plan to start charging customers $5 a month to use debit cards - a response to new federal rules that limited the extent to which banks could gouge retailers for transactions. It was evident in the way Netflix, woefully miscalculating its customer affinity for mail-order rentals, backed away from its scheme to spin off its DVD business to a new division called Qwikster.

Both Bank of America and Netflix were forced to backpedal in the face of a consumer revolt fed by social networking.

This phenomenon is emerging against the context of an increasingly difficult environment to advance consumer protections in Washington or Sacramento. In fact, President Obama had to take the controversial - and legally questionable - step of appointing Richard Cordray to the Consumer Financial Protection Bureau
during a Senate recess to circumvent the Republicans who were using the confirmation process to try to extract some of the teeth of the watchdog agency.

The perpetual Washington gridlock and the emergence of social networking as a means to turn up the heat on companies have not gone unnoticed by consumer advocates.

"With things the way they are in Congress, where it's difficult to get anything done these days, we've been focusing our efforts on change through the marketplace," said Michael McCauley, a spokesman for Consumers Union in San Francisco.

Consumers Union was heavily involved in the campaign to stop Bank of America from leading the way on the assessment of a $5 monthly fee for debit-card holders. Several other major banks were testing similar ideas, and it might have become the industry standard if not for Kristen Christian of Los Angeles. She was the one who came up with the idea - posted on her Facebook page - of encouraging Americans to switch their accounts to local credit unions. Her proposal went viral. But Bank of America pulled back its debit-fee scheme just days before "Bank Transfer Day."

Netflix, a once-golden tech stock, lost 800,000 customers and a huge share of its stock value with its miscalculation of the readiness of its customers to switch from by-mail DVDs to streaming videos.

There is something very inspiring about consumers realizing the power of their voices. In talking about the need to fill key positions and fulfill the mission of the federal consumer-protection agency, Obama spoke of the imbalance between ordinary Americans and the businesses that have legions of lobbyists to do their bidding. It is the case in Washington and it is the case in Sacramento, where it really does not matter whether Republicans or Democrats are in charge. The monied interests always find a way to get their way.

They may have met their match with social networking. Consumers Union has a million people on its "e-activist network," and it is pledged to stay on the lookout for other efforts by banks to assess unfair fees on their customers. "If we see something egregious, we're definitely going to go after it," McCauley said.

Consumers: Be ready. Banks: Be forewarned. Social networking is a force.

Making a difference
Consumer uprising stopped these bad ideas in their tracks:
Verizon

- What it did: Decided to start charging customers a $2 fee to pay bills online or over the phone.
- Customer revolt: Objections to the announcement went viral over Facebook and Twitter.
- Result: "At Verizon, we take great care to listen to our customers," CEO Dan Mead said in a statement announcing the fee idea would be dropped - just one day after it was made public.

Bank of America
- What it did: Announced last year that it would start charging a $5-a-month fee for debit cards.
- Customer revolt: Reaction was fast and furious. Even President Obama weighed in. But the fee rebellion really took off when 27-year-old gallery owner Kristen Christian suggested on her Facebook page that angry BofA customers should shift their money to a "friendly local credit union" ... leading to "Bank Transfer Day" on Nov. 5.
- Result: BofA dropped the fee idea on Nov. 1, citing customer concerns and a "changing competitive marketplace."

Netflix

- What it did: Moved to push customers away from DVD-by-mail into video streaming by raising prices, and then announcing that DVDs would be spun off into a new division called Qwikster.
- Customer revolt: The social networks hummed with outrage, and the once-dominant video service lost 800,000 customers and a good chunk of its stock value in just a few months.
- Result: Netflix relented, dropping the Qwikster idea, and restoring its dual services - although a hefty price increase remained.

John Diaz is The Chronicle's editorial page editor. E-mail: jdiaz@sfchronicle.com.