Great Britain is awash in a scandal that mixes high-stakes corporate blundering, international travel . . . and vacuum cleaners.
They call it "Hoovergate."
Already, the fiasco has sent executives' heads rolling at Hoover Europe, cost the company at least $30 million and left more than 200,000 of the manufacturer's customers demanding free airline tickets.
Amazingly, Hoovergate seems to be rooted in a wayward mathematical equation that a 10-year-old could have flagged. To wit: It's tough to make a profit when you're handing out promotional freebies worth more than the product you're trying to sell.
Nonetheless, Hoover Europe, a money-losing subsidiary of the Iowa-based Maytag Corp., felt it was a formula that would ignite sales in the stagnant vacuum-cleaner market. So it launched two separate campaigns, lasting from August to January, that promised two free airline tickets to cities in the United States or continental Europe to anyone in Britain or Ireland who spent at least $150 on a Hoover product.
With a pair of seats to those destinations costing an average of $660--while Hoover's cheapest vacuum costs just $178--the offer seemed too good to be true.
But whereas consumers might normally have displayed a healthy skepticism about such an incredible offer, there was a key factor that diluted normal incredulity: Hoover's reputation.
Over the decades, Hoover's British operation has built the kind of public image that corporations covet. It is known as trustworthy and reliable. And its name is synonymous with the activity of its most popular product.
In Britain, you don't "vacuum the carpet." You "Hoover the carpet."
So people rushed out to buy vacuum cleaners--despite the recession, despite the fact that many people didn't even need one.
The results were immediately palpable. Appliance stores quickly ran out of Hoover vacuums. The Hoover factory in Wales shifted into a seven-day workweek to meet the demand. And newspaper classified sections across Britain began swelling with ads for secondhand but "never-used, still-in-box" Hoover vacuum cleaners.
The promotion worked beyond Hoover's wildest dreams. And that meant disaster.
Airline ticket applications began flooding into Hoover headquarters. The company says it received more than 200,000 claims for free travel. That translates into requests for 400,000 airline seats.
Travel agencies working for Hoover were overwhelmed. More travel agencies were recruited.
Hoover executives have never specified how they expected their campaign to work and did not return calls from the Los Angeles Times. But comments from travel agents affiliated with the Hoover promotion, along with private and government consumer advocates investigating the debacle, reveal a company that apparently thought it had embedded enough stumbling blocks into the small print to prevent most people from qualifying.
From those who did manage to qualify, Hoover apparently expected to reap profits by selling pricey travel extras such as accommodations, car rentals and insurance.
Finally, there is evidence that Hoover and its travel agencies eventually began giving flights to customers who spent big on the extras, while purposely creating huge logistic barriers for those who did not.
"I think Hoover was relying on most people not getting over all the hurdles," says Keith Richards, a senior lawyer with Britain's Consumers Assn. "They didn't realize how diligent people would be."
To qualify, Hoover customers had to negotiate a maze of rules and regulations with strict deadlines all along the way. After the date of purchase, they had two weeks to send in a receipt and application, followed by a time limit on mailing in requests for destinations and flight dates.
Customers whose first choices couldn't be met then had to send in another set of requests. And if those couldn't be met, they had to accept whatever Hoover offered them.
Consumer agencies began receiving stacks of complaints. Applicants were not getting their flights and were unable to get any information from Hoover. Hoover told some people their applications had never arrived and must have been lost in the mail.
A British consumer-advocacy TV program called "Watchdog" took up the cause with a series of reports last month but could not get a response from Hoover, which denied there was a problem.
Then "Watchdog" sent a reporter to work undercover at one of the travel agencies handling the Hoover promotion--and everything began to unravel.
Armed with a hidden camera, reporter Hilary Bell found that she and others working in the telesales department of Free Flights Europe were supposed to dissuade customers from taking their free trips by making things as difficult as possible.
For example, one day she was given a list of applicants who wanted to fly out of Glasgow, Scotland. She was instructed to tell them they could only fly from London, more than 400 miles away. At the same time, another employee was phoning people who wanted to fly from London and telling them they could only leave from Glasgow.
Bell secretly taped one executive who told her, "Each time they go, it costs Hoover money. So we're obviously trying to stop them from going."
Last week, before the TV program even aired, Hoover took preemptive action and fired the president of Hoover Europe and two senior marketing executives (although it later said one of the marketing men had merely had been laid off).
Maytag, Hoover's U.S. parent, also set aside $30 million to pay for free flights and created a special company task force to sort out the mess.
When the "Watchdog" report finally aired this week, a contrite Hoover executive appeared on the show to apologize and promise that everyone who qualified would get their flights. How many that will be is not known.
"We have admitted that the promotion was, in fact, flawed," says Hoover executive Richard Rankin, a member of the company task force. "We had an overwhelming level of response, which we were not able to manage at the time."
Rankin steadfastly refused to comment on the allegations contained in the program, however.
Meanwhile, whether lawsuits or even criminal action will result from the haywire promotion remains to be seen. A team of investigators from the government Trading Standards office in Wales, where Hoover is headquartered, has begun sifting through company records. "We want to satisfy ourselves that no criminal offenses took place," says John Frow, an officer working on the case.
Although Hoover is trying desperately to extricate itself from this public relations nightmare, it won't be easy for the company to win back the public confidence it once enjoyed.
As it stands now, the vacuum maker's reputation--how to phrase this?--is drawing in air at a fantastic rate.
But on the bright side, the affair may herald the dawn of a golden age for the British consumer, long considered among the most passive in the world. At least that's the view from The Times of London.
In an editorial headlined "Caveat Vendor," it said recently, "This is a cautionary tale for marketing managers who assume, as Hoover's seem to have done, that people will be daunted by an obstacle course of bureaucracy and circuitous regulations. A nation which spends much of its time wrestling with bureaucrats and enforcers of regulations in the ordinary course of daily life is not about to be deflected from valuable booty by laborious form-filling.
"Indeed, modern Britain may have produced a generation of experts in form-filling and the deciphering of perverse official stipulations. . . . Management had better beware. The British are not the pushovers they once were."