Re: bundling is inherently unfair to consumers

["Lewis A. Mettler" <lmettler@lamlaw.com>]

Marty,

Marty Leisner wrote:
> 
> My understanding is bundling is only unfair when you have
> monopoly power in another good.

Having power in another good and then using bundling makes it illegal.

Fairness to the consumer is a general concept of concern only to the
consumer and those vendors who care about the welfare of their
customers.

> 
> What's interesting is I've read that Intel internally took steps to
> inform their people what was allowed and not allowed.
> 
> Microsoft never took any such steps...
> 

Almost all major corporations have an active antitrust prevention
program.  Microsoft does not.  They just ignore the laws.  Always have.
Always will.

All you have to do is read the company names contained in the case
decisions used by the DOJ in support of their proposed conclusions of
law to realize how many companies run afoul of those laws.

> Microsoft says how more thinks are bundled in Windows than before (true).
> But the price of a windows license is a much higher percentage of the
> price as PC prices drop (10 years ago, $600 was an unheard price, now
> that price is commonplace).

Bundling always causes two affects:

1) the price is either raised or kept high to cover the bundled products
2) choice is limited in the short and long term

In the case of pricing Windows 98.

It is completely not relevant that Windows 98 is priced the same as
Windows 95 or any previous product.  It just does not matter what the
absolute price is.

What matters is the relative price to other products in the same
category that are in the same market.  The judge found that Apple was
not in the same market.

You can claim they are in the same market but it is the view of the
consumer that counts.

If you run on Intel now, I challenge you to tell me how cheap the Apple
OS must be before you yourself will switch to the Apple OS.  Do not
suggest other unknown people can buy Apple.  Answer for yourself.  If
you think you can take your own applications over and run them on Apple
then fine, Apple competes.  If you can not, then Apple does not compete
as far as your business is concerned.

Read the judges findings of fact in this regard.  He correctly concluded
that consumers do not have alternatives to Windows.

If you need more help thinking about this, read the "bubblegum deal". 
Tell me whether you buy the bubblegum or switch your OS.  And, then tell
me how much it costs you to switch.

Back on pricing:

Windows 98 has a suggested retail price of $200.  (Street price does not
matter since we are dealing in percentages.)

The real question is "How much is charged for IE and how much is charged
for the other components?".  The kernal is not $200 and everything else
is free.  That is pure "deceit" and "fraud".  Properly so, the price of
Windows 98 is allocated between all of the components.

Is IE $140 and the OS $60?  Or, is the OS $140 and IE $60?  Which is
it?  Microsoft is not saying.  At least they have not submitted any
evidence in court as to how the money is allocated.  Their financial
reports required of the SEC do claim that IE is "free" in one place but
also claim that 20% of all OS revenue is attributed to "unearned
revenue" which they say includes IE.  All OS revenue, I assume, includes
NT server moneys.

The court only finds that IE is free when distributed separately from
Windows (proving separate products positively).  The court makes no
finding about the price of IE when bundled with Windows.  Unless you can
find the allocation figures.  I did not find $200 for the OS and $0 for
IE when bundled.

Microsoft only argues $200 for the OS and $0 for IE as a highly
deceitful and fraudulent campaign for consumers.  It is pure fraud. 
There is absolutely no reason not to suggest to consumers that a 70/30
split occurs with Windows revenue.  None at all.

In fact, Microsoft suggesting that IE is free convicts it of predatory
pricing of IE.

Read the proposed conclusions of law.  The judge will find that
Microsoft used predatory pricing.  But, please have the intelligence to
separate the price of IE when distributed separately and when bundled. 
They are not the same price.  They simply do not need to be the same
price.  There is no reason for them to be the same price.  Consumers
have no choice when IE is bundled with the OS.  So the price matters not
one bit.

Again, it was pointed out on another post that even die-hard Microsoft
customers are harmed by bundling IE with the OS because they are forced
to buy yet another copy of IE even if they freshly downloaded the same
version the day before.

Please do not be so stupid to suggest that if I give you a free stick of
gum today the sticks you buy tomorrow will be free ones.  If you pay
money, as a matter of fact and law it is not free.

Microsoft Corporation defrauds consumers by suggesting IE is free with
Windows 98.  Aside from the direct benefits of the fraud there is
absolutely NO reason to say that.

-- 
Lewis A. Mettler, Esq.(Attorney and Software Developer)
lmettler@LAMLaw.com
http://www.lamlaw.com/ (detailed review of the Microsoft antitrust
trial)