Joe Sugarman: Free Enterprise Hero?
I want to believe that Joe Sugarman, the president and founder of JS&A Group Inc., is the all-American hero he bills himself to be. But I rarely buy anything through the mail, and I'm especially wary of things that sound too good to be true. Joe Sugarman sounds too good to be true.
Sugarman is the marketing whiz who promotes mail-order electronic gadgetry through long, wordy ads in the Wall Street Journal, Playboy, and New Yorker, and other national publications. His advertisements just reek of candor. Take the copy Sugarman wrote for the recent promotion of the Bone Fone, a radio you drape around your neck. (Somehow, you "hear" the music through your bones.)
JS&A Group has sold 10,000 AM/FM Bone Fones at $69.95, he claims in the ad. "So it seemed logical that a less expensive unit at $39.95 that played only AM stations would be a winner, too." But "it really flopped," he confided in his ad, and his company still had 29,940 AM Bone Fones in stock. "We're anxious to dump the little buggers," Sugarman wrote.
"What do you do when everybody goofs?" he asked his reader. "Simple. You lower the price.But, from experience, we know that even at $29.95, we're not going to sell out even if we triple our sales. The price had to be dramatic. A real shock. The price had to be so low that a sellout would be assured. 'O.K. $24.95,' said our executive vice-president. But she was vetoed. '$19.95,' announced our president. And so it was."
The Sugarman style, applied to Bone Fones, ion generators, digital watches, pocket calculators, and electronic chess games, has sold a lot of gadgetry. After only eight years in business, JS&A Group had $12 million in revenues and employed 70 people.
That was in 1979. These days JS&A isn't doing quite so well.Sales are closer to $2 million and only 10 people remain on the payroll. The reason the company has floundered is that Joe Sugarman has found a different kind of product to sell, one that doesn't necessarily bring in revenues, one that's tinged with a little bit of religion. The product is himself and his mission is to free our free enterprise system from the clutches of our government.
In early 1979 the Chicago regional office of the Federal Trade Commission visited JS&A Group to check out a few consumer complaints. What followed that visit nearly four years ago is a long story: Sugarman has his version and the FTC has another.
The federal agency claims to have found evidence that JS&A violated its rules governing mail-order sales. The company, according to the FTC, was late in shipping products to buyers; it didn't enclose business reply envelopes in its mailings to allow customers to cancel their orders; it had advertised products without knowing when it could deliver them; and it failed to give customers prompt refunds. The FTC never accused Sugarman of deliberately bilking anyone, just with not complying with its rules. The agency suggested that JS&A pay a fine of $100,000, then later upped the amount to $275,000, and finally asked for $75,000.
Sugarman's version of the story isn't quite so straightforward. JS&A may not always have complied with the letter of the FTC's law, he says, but it always abided by the spirit of the law. Frequently, he says, the company went beyond the spirit and did more than the rules required. A computer breakdown and three consecutive blizzards in January 1979, did create havoc with thousands of the company's orders, Sugarman says, but what could he have done about the whims of nature and machine?
So Joe Sugarman decided not to settle with the FTC or pay their fine. In fact, he decided to fight them, but on his own turf. He took his case public in the advertising pages he was so comfortable with already. In his first ad, which ran nearly 500 words, Sugarman accused FTC officials of blackmailing him, of prosecuting him only to enhance their own careers. He painted himself and his company as the hapless, hardworking victims of harassment by malevolent, self-serving bureaucrats.
"I always felt," wrote Sugarman, "that the rule was intended to be used against companies that purposely took advantage of the consumer. Instead, it appears that the real violators, who often are too difficult to prosecute, get away while JS&A, a highly visible and respected company that pays taxes and has contributed to our free enterprise system, is singled out."
Besides the ads, Sugarman distributed "JS&A/FTC Battle Reports" to his customers and supporters. He also engaged cartoonist Dick Hafer to produce a comic book, entitled The Monster That Eats Business, based on Sugarman's version of the dispute.
Sugarman's campaign against the FTC has brought him a lot of letters. A typical one reads: "Run for President! You're what we need! I am confident your victory will put an end to all this foolishness! Stand up Americans before its [sic] too late."
But his ads and his comic book and the letters have not yet won any support from powerful people in high places, the kind of people Sugarman has to sell if he's ever going to win his case or advance his cause. The Oversight and Investigation Subcommittee of the House Committee on Energy and Commerce, for instance, convened a hearing in mid-September of last year to hear Sugarman's complaint. The subcommittee crucified him. Sugarman wanted to talk about FTC harassment of small business. But Rep. Mike Synar (D-Okla.) wanted to talk about a letter from the mother of a crippled boy who hadn't received his Christmas present from JS&A in time for the holiday.
Joe Sugarman is clearly a great salesman, but he hasn't learned how the halls of power work. Get him away from the hearing rooms and ignore the written hype, and Sugarman is clear, concise, convincing. He speaks quietly and sticks to the facts of his case.
Sugarman really has only two beefs. First, the FTC went after JS&A after receiving only a handful of consumer complaints while ignoring other mailorder houses with much worse records. Second, the FTC wanted to fine JS&A as much as $275,000, far in excess of the agency's average fine of $40,000 for infringement of these particular rules, according to Jere Glover, Sugarman's Washington attorney. He has evidence to support both complaints.
If his case is so straightforward, why has Joe Sugarman let his business wander while he drapes red, white, and blue around his legal position? He hasn't learned something that Ronald Reagan learned long ago in California: Never get your case confused with your cause.Work on your case if you want to get something done; work on your cause if you want to get elected.
And here's another piece of advice for Joe Sugarman that he didn't ask for: A lot of businesspeople would like to see you pursue the cause of free enterprise, Joe, but don't try to promote fundamental principles the same way you advertise Bone Fones. There are limits to what even Joe Sugarman can sell through the mail.