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Comment by rayiner | Hacker News Reader

There isn't "one company." Different departments of corrections have contracted to hire companies to handle deposits, just as your business might contract with a company to outsource some service.

More generally, I'm not saying that the free market doesn't work. I do think market solutions are merely tools to be used in appropriate situations. And when the potential for abuse is high, as with prisons and other traditional functions of government, private organizations are not appropriate, because private industry has the wrong values and the wrong culture for the situation.

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> There isn't "one company."

Ok, so lest we shift the conversation - as right now we're talking about the specific prison and the specific banking corporation that this prison is using as described in the full article - please tell me who is the competitor to JPay.

Don't give me "different departments of corrections" blah blah blah. I'm arguing the system as explained in the article is broken specifically because JPay is not competing in a free market, i.e. it has no competitors. You seem to disagree. So please tell me the names of JPay's competitors.

Thank you.

Is your assertion that there is no free market just because any given prison only contracts with one payment service? Is there no free market in cleaning services because my building only contracts with one provider? Is it only a free market if every individual transaction is put up for bidding?

Who makes the decision to contract with that one payment serivce? Is it the government? If so, is it the government that's making the bad decisions or the payment service?

Does it matter? It is the inmates and their family who get scammed in the end.

Arguing between "oh is it the government, or the market? don't know let's have a long discussion about it". The article clearly shows there isn't much of a separation between. These companies (in this case single company) is heavily lobbying and bribing government officials with kickbacks and such tricks.

I wouldn't be surprised that when some prison official retires she/he gets to work as a "consultant" for JPay.

Hell, these people are infants compared to what is going on in the rest of the industries -- military, healthcare, agrobiz, telecoms.

Repeat after me "the there is no effective difference between the governmental agencies and the large companies and conglomerates". It is the same people just playing musical chairs. FDA chairman worked for Monsanto (as an example). Ex procurement general works for Northrop Grumman and so on.

Objectively, can anyone say that isn't a rational outcome of a the "free market"? I can't. The best and easiest way to turn a profit at that scale is regulatory capture. A few millions in bribes have a chance of getting back billions in profits in the future.

It's not a free market because the people sending the money (the customers, in this case) don't get to choose which provider to use.

But when the government privatizes services, that agency problem always exists. Instead of contracting to one service like any other entity, government would always need to contract with several. You're just making a stronger argument for not privitizing government services.

Moreover, laying all the blame at the feet of government for these companies being scumbags is precisely why I said private industry has the wrong culture for this sort of thing.

>Instead of contracting to one service like any other entity, government would always need to contract with several

No, the government is the entity making a selection among several choices, and is the entity in the position to negotiate the rates.

Therefore they could bargain for lower rates if they wanted.

Misrepresenting the choices isn't making your case.

As far as I can tell, JPay is picked because it's the biggest. Any evidence the competitors wouldn't do the same once they got the contracts?

Write it into the contracts that they cant?

The government is the entity with power here. The government regularly dictates all kinds of terms for their contracts. All the time.

If you read the article you will see that they do it most likely cheaper than the prison can do:

JPay’s rapid rise stems in part from the generous deal it offers many prison systems. They pay nothing to have JPay take over handling financial transfers. And for every payment it accepts in these states — prisoners typically receive about one per month — the company sends between 50 cents and $2.50 back to the prison operator.

The government does have the power, and they most likely are outsourcing this part of their non core infrastructure like most other companies do, to save money.

They will still save money without the kickbacks, which should be illegal as payola.

> and is the entity in the position to negotiate the rates.

But Lower rates for whom? Inmates. Why would prison officials care if inmates get lower rates?

Sure, but that's not a failing of the free market, that's a failing of the government.

how about answer his question? Who is currently JPay's competitor?

You can't answer the question for a reason bub.

After 20 seconds on Google: Keefe

There are a lot of prisons out there, state, local, federal, private and public and they use a wide range of companies. However, they have little incentive to allow multiple venders at the same time so there is little real completion after the fact.

Naming the competitors is irrelevant. What is relevant is that these states are not procuring contract services with a competitive process.

In other payment related areas where honest procurement happens, there are a number of companies in the market -- for example welfare EBT card systems are managed nationwide by 5-7 different large payment processors.

Sounds to me that JPay found a loophole in contract law that allowed them to burrow into the bureaucracy. Once a vendor digs in as an incumbent, it's hard to dislodge them.

It is a competitive process but like you said, once they get in it his hard to dislodge them. JPay has been dislodging other incumbents more rapidly in the past few years. There are a few other companies that are out there but their name isn't in the news like JPay.

The article mentions Touchpay and NIC Inc...

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