Re: bundling is inherently unfair to consumers

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

Ethical,

Ethical at One of One dot Net wrote:
> 
> To date, I have not responded directly to even one of Lewis Mettler's
> posts.  As one of the few lawyers on the list, and one who also
> happens to have a degree in economics, it has seemed to me to be
> unsporting, like shooting fish in a bearrel.  But this bait finally
> got me to rise:
> 
> In <3852A62F.B448BD6D@lamlaw.com>, on 12/11/99 at 02:44 PM,
>    "Lewis A. Mettler" <lmettler@lamlaw.com> said:
> 
> |If I can not take aspirins (for whatever reasons) no convoluted
> |logic is going to make my being forced to buy aspirins appear to
> |make sense.
> 
> |What you can not get straight is that some consumers do not want
> |your stupid products.
> 
> |And, there is no logic that makes sense forcing consumers to buy
> |products they know they do not want.
> 
> |That is all that bundling does.  It forces the sale of an unwanted
> |product upon the consumer.
> 
> |Thus: "Bundling is inherently unfair to consumers and causes harm to
> |almost all of them".
> 
> |It has nothing to do with theories or perspectives.
> 
> |It only has to do with whether consumers are forced to buy products
> |they themselves know for a fact that they do not want.
> 
> |Idiots on this list continue to try to force the sale via bundling.
> 
> |What happened to the idea of advertising?
> 
>     Bundling is one form of advertising.  Period.

Sorry. Bundling is a form of a forced sale. All advertising respects the
right of ALL consumers to not buy the product. Bundling is not
advertising.  In fact it is the precise opposite of it.

See the "bubblegum deal".  No one in their right mind would suggest that
being forced to buy a case of bubblegum is "advertising".

It is a "forced sale" designed specifically to take away a choice the
consumer would otherwise have.

> 
> |What happened to the idea of allowing the consumer to decide which
> |products they buy?
> 
> |Bundling is an insult to consumers everywhere.
> 
> |No one on this list is willing to give up their right to pick and
> |choose the products they buy.  No one.  Not a single person.
> 
>     <raising my hand>  Exception.

Send your $100.  I'll forward the software you just bought.

> 
> |Bundling attempts to force consumers to give it up.
> 
> |But, we all demand our right decide which products we buy.
> 
> |You do too.
> 
> |If you promote "bundling" you insult consumers.
> 
> |Many on here only seek to force consumers to buy what they are
> |selling.  That is called promotion.  Those that disagree are only
> |promoting certain products and certain brands.
> 
>     Mr. Mettler has repeated the vile and base canard that all those
>     on this list (excluding, presumably, only himself) are posting
>     only to try to sell some product several times with no evidence
>     to support it.  It is, in fact, not only unsupportable by any
>     evidence from the content of posts on this list, but it is a
>     statement that I know from personal knowledge to be untrue.
>     Mr. Mettler knows that it is untrue, and yet intentionally and
>     with malice, repeats it.  Intentionally repeating an untruth is
>     known by a very technical term,  It is called "lying," and,
>     sometimes, "lying through one's teeth."
> 
> |They are only attempting to screw consumers by forcing the sale of
> |unwanted products.
> 
> |I am not the one trying to force others to buy this or that product
> |via bundling or any other means.  Many on this list have that as
> |their only objective.  That is very clear.  They refuse to respect
> |the right of any consumer to decide what they might buy and use.
> 
> |It is sick.
> 
>     Suppose the following hypothetical situation:
> 
>     I am a producer of Product A, which differs from other like
>     products, but not by enough that the market behaves other than
>     as a commodity.  In a commodity market, the price for competing
>     products, by elementary Adam Smith principles, is driven down
>     to barely enough to cover each producer's costs plus a minimal
>     profit margin.
> 
>     Now, I can buy advertising to differentiate my product, but the
>     cost of advertising is a true cost, and I must raise the price
>     of my product in order to continue to make what (by definition
>     in a commodity market) already was a minimal profit.  In a
>     commodity market, my sales will go down if I raise my price.

Not if the product is forced upon consumers.

You may be falsely assuming the consumer can avoid the purchase.

> 
>     Some very good marketers have been able to buy advertising
>     sufficient to allow them to sell at a premium price compared
>     to equal quality products.  Nikon cameras, Nike shoes, Calvin
>     Klein T-shirts, and Bose loudspeakers are examples. However, the
>     strategy is successful only _after_ an image has been created.
>     [In that situation, _after_ the image is created, the seller
>     "bundles" -- I need not use the quotation marks because the
>     bundling is not analogous but real -- an inchoate image with
>     the actual product.  Is the consumer harmed by the higher price
>     for an effectively identical product?  Not if what he or she
>     wants is to show off the label, not primarily to use the
>     product.]
> 
>     Another strategy -- we shall call it the "toaster at the savings
>     bank" strategy -- is to give away a separate product (usually
>     _not_ a commodity product, but a non-commodity product which we
>     shall call Product B) that has less production cost than Product
>     A for "free."  

Keep in mind the half a billion in R&D.

>     Now, I do not mean _literally_  for
>     "free-to-the-end-user," which is why this time I _must_ use
>     quotation marks.  By "free" here, I mean that the producer of
>     Product A bundles it with Product B, which it buys at quantity
>     purchase cost and distributes for very little marginal cost
>     because the distribution chain for Product A swallows it.  The
>     consumer price for Product A _plus_ Product B is less than the
>     price of Product A on the commodity market plus the price of
>     Product B on the retail market.  The seller of Product A can get
>     his full margin from the sale of Product A and lose no money on
>     the pass-through sale of Product B, even though it makes no
>     profit from the sale of B.  The seller makes money only from the
>     increased volume of sales of Product A.

I have always suggested that Microsoft can overcharge for Windows, the
monopoly product and simply include IE at no higher price.  Or,
Microsoft can simply charge a fair price to both Windows and IE.  The
price to the consumer could be the same.

Is IE $140 and Windows $60?  Or, is IE only $35 and Windows $165?

The only stupid suggestion is that IE is zero while the entire cost
applies only to the OS.

Economically speaking it matters not which value is allocated to the
parts.

A monopolist can and does either one.  The consumer must buy both
products regardless.

> 
>     This form of advertising -- and it is naught but a form of
>     advertising -- works best, of course, if Product B is not
>     available from other sources.  Star Wars action figures sold
>     together with Big Macs are one example.  In my childhood, Sky
>     King decoder rings sold a lot of Peter Pan peanut butter to
>     my family, and presumably, to a lot of others.

Forcing the sale of a product is not advertising.

Who is supposed to believe that Star Wars action figures packaged with
burgers is equivalent to IE being force sold on millions of consumers?

Who is supposed to believe that?

> 
>     But that form of advertising works even with commodity products.
>     At one time, I did most of the legal work for the largest tire
>     retailer in the world.  (If you do not live in the Northweat,
>     you likely have not heard of Les Schwab, which is larger than
>     the retail divisions of GoodYear and Bridgestone/Firestone).
>     Once a year, Les Schwab has a promotion where it gives away
>     "free" beef with the purchase of sets of tires.  Les Schwab's
>     prices generally are higher than other tire retailers, but the
>     price of a set of tires from Les Schwab with the beef included
>     is generally lower than the price to the consumer were he or she
>     to purchase the same tiree elsewhere, plus the retail price of
>     the same beef -- and most consumers are not able to buy the beef
>     at the wholesale price.
> 
>     The tires-plus-beef sale is a true bundle, unalloyed.  You _can_
>     leave the beef behind, but why would you?  If you take the
>     bundle, you get the bundled products for cheaper than you could
>     buy the tires (elsewhere) and beef (elsewhere) separately.

However I seriously doubt the vendor of either the beef or tires
requires all consumers to buy both if they buy only one.

There is a huge economic difference between a bundle and a suite.

The tire and beef example is only a suite.  It is not a bundle simply
because not everyone buying the tires is required to buy the beef.  Or
vice versa, right?

No tire manufacturer would be so stupid to only sell tires if the
consumer also wanted hamburger with it.

> 
>     Now, it may be argued that Les Schwab _could_ sell the tires
>     alone at a lower price, and thus consumers are harmed by the
>     higher-than-competition prices at which Les Schwab generally
>     sells.  That argument would ignore the indisputable fact that
>     (mainly because of unsurpassed service) Les Schwab is able
>     to sell the same tires at the same prices about 50 weeks of
>     the year _without_ the beef promotion.  In other words, if you
>     argue that the consumer is harmed, then you must refute the
>     free and open market forces upon which capitalism is supposedly
>     based.

No consumer harm can be shown any number of ways.

See the findings of fact for a few of them.  See the consumer class
action suits for other ways.

> 
>     In summary, it is simply not possible to say _truthfully_
>     that bundling is _always_ harmful to consumers.  If Mr. Mettler
>     persists, in the face of real-world examples, to insist that
>     bundling _always_ is harmful to consumers, than there is a highly
>     technical term for what he is doing.  It is called "lying," or,
>     sometimes, "lying through his teeth."  In that case, the jury is
>     instructed to weigh the testimony in accordance with the pattern
>     now well established.

I have shown how Bill Gates himself is harmed by the bundling of IE.

That same example applies to all intelligent buyers of the OS who know
or should know that IE is available freely the day before.

Who is going to be so ignorant not to download IE the day before?

The answer is only those who know they have no choice but to buy IE
anyway.  Otherwise, they would.

So we have proven direct financial harm to the most ardent die-hard
Microsoft supporters due directly to bundling.

How much is the harm?

The competitive price of IE.

Anyone who has any economic training at all knows that although a
competitive price is hard to ascertain in a monopoly marketplace, it is
a significant price.

If everyone is not harmed by the bundling of IE, then those who suggest
someone is not should clearly identify the class of those customers who
are not harmed.

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