A Stitch in Haste

A silly, stupid Euro-meme that I thoroughly debunked several months ago has returned to cause mischief in what is an otherwise unmitigated technical and cultural success:

The [U.K.] Office of Fair Trading (OFT) has referred Apple's iTunes service to the European Commission on grounds that it overcharges UK customers.

The move follows a complaint from Which? that iTunes charges UK users 20% more than those in France and Germany.
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Whereas iTunes customers in the UK have to pay 79p to download a song, those in Germany and France are only charged 99 cents or 68p.

Back in September Apple defended the price differential, saying that "the underlying economic model in each country has an impact on how we price our track downloads. That's not unusual -- look at the price of CDs in the US versus the UK," an Apple spokesman said. "We believe the real comparison to be made is with the price of other track downloads in the UK."

Ed Averdieck, European sales and marketing director for OD2, which runs music download sites for everyone from HMV to Wanadoo, Tiscali and MTV, said there was no reason why firms should charge UK customers anymore than those on the continent.

"Our retailers charge everyone in Europe the same price, and we believe there should be such a unified pricing policy." he said. "If you look at MSN, for example, it charges 99 cents in the eurozone and 69p in the UK [the same amount]. We believe this is right and that there is no reason why UK consumers should have to pay any more."

Um, no. To recap my earlier post:

The busybodies have it exactly backwards. The very fact that Apple can charge different prices proves that there are different markets. That's the very definition of a "market."

Of course, the real complaint of the busybodies is that Apple ought not to be allowed to charge different prices even though they can. To which the only proper answer is "why not?"

There is nothing intrinsically immoral about price discrimination (i.e., charging different buyers different prices for the same good). In fact, there can be powerful social-utilitarian arguments in favor of allowing it, if you're into that sort of thing (I'm certainly not). In any case, if Apple can extract different prices in different countries, then they have every right to do so, as long as they do not engage in any anti-competitive practices (and exactly what should constitute "anti-competitive" is a whole different violent rant thoughtful post).

The fact pattern has not changed, so my reasoning and conclusion do not change either. Let Apple charge whatever price it wants wherever it wants.

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What is it about DRM that makes IQs drop so sharply?

Apple Computer Inc. said Friday it is facing several federal lawsuits, including one alleging the company created an illegal monopoly by tying iTunes music and video sales to its market-leading iPod portable players.

The case, filed July 21, is over Apple's use of a copy-protection system that generally prevents iTunes music and video from playing on rival players. Likewise, songs purchased elsewhere aren't easily playable on iPods.

The plaintiff is seeking unspecified damages and other relief. The court denied Apple's motion to dismiss the complaint on Dec. 20.

This is, of course, utter nonsense.

First things first: iTunes is free! How is a company being a "monopolist" (i.e., charging "unfair" prices and reaping "unfair" profits) when it is giving the thing away for free?!? (The fact that you pay for the files is irrelevant — the software is free and by definition can therefore not be"monopolistic.")

As for the iPod, it is essentially nothing more than a portable hard drive, and is, even if clumsily, usable as such without iTunes.

Second, there is simply no monopoly in the market for "storing music software on music hardware." iPod/iTunes has competitors. The fact that Apple is kicking those competitors' iButts does not make it a "monopolist" or its trade practices "unfair."

If you don't like the terms of the contract that Apple is offering for download of audio and video via iTunes/iPod, then simply don't do business with them. Leave the courts out of it.

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Why is this difficult concept for so many people? Possibly because some folks, including some libertarians, have trouble distinguishing between property rights and contractual rights. Many people only think in terms of absolute ownership of property — what the law call "fee simple." The idea that you can buy something, but with "strings attached," is counterintuitive and even abhorrent to some.

Thus, for example, a person may buy a house in a planned community, subsequent to a voluntary contract restricting his ability to fly flags in his yard, then suddenly declare, contrary to that same voluntary contract, that "my property is mine" and demand his "right" to fly the flag anyway. And what does Congress do about it?

So too with DRM: "I bought it, it's mine, and if Apple gets in my way then it's a 'monopolist' and I will sue for my 'rights.'" The fact that the original purchase was entirely voluntary and the terms fully disclosed upfront is blanked out.

Simply preposterous.

It is perhaps the single most asinine claim in all of antitrust law, if not in all of economics: the idiotic assertion that lowering prices can somehow be bad for consumers.

But the notion just keeps showing up in malcontents' playlists:

Apple Inc., along with its chief executive and exclusive U.S. iPhone wireless partner AT&T, have been hit with a new lawsuit from a disgruntled customer who charges the trio with a variety of offenses stemming from the recent iPhone price cut.
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Li included in her 8-page complaint historical stock graphs that show Apple's share price to have risen in between the time it released iPhone in late June and when the company instated the price cut. She argues that this is proof that there was no sound reason for the cut, which she equated to "underselling."

"Market conditions did not require Apple to change its price," Li's attorney, C. Jean Wang of Wang Law Offices, PLLC wrote in the filing. "iPhone was selling very well because Apple's stocks [sic] were increasing since August 16, 2007 and rose as high as $144.16 on September 4, 2007, the day before Apple announced that it was cutting the price of iPhone."

A few hasty stitches:

First and foremost, could someone please explain how, exactly, lowering prices hurts consumers?

Second, please point out where, precisely, in Apple's EULA, TOU, etc., they promise never to lower prices in the future?

Third, what exactly are the "market conditions" at issue here? Who, other than Apple and its customers, gets to be the arbiter of which "market conditions" matter, how they matter, and what they "require" Apple to do?

Fourth, a consumer has the ultimate power over a business: the power not to buy from it. What greater power could one possibly want? Steve Jobs (unlike the government) cannot hold a gun to your head and say, "Buy this!" What better definition of "impotence" could one conceive?

There are other elements to the lawsuit (e.g., the two-year service agreement, termination fees). But this case would be as good a time as any to slay once and for all the fantasy-land dragon of "underselling." Lower prices are better for consumers. Always.

(Via Catallarchy.)