A Stitch in Haste

Care to guess the shape of the demand curve for iced coffee?

Starbucks announced on Tuesday that it was withdrawing an offer of free iced coffee to a limited number of employees and their friends and families in the southeastern United States.
...
The company said an e-mail offering a free Starbucks iced coffee was sent to a limited group of employees in the southeast on August 23, with instructions to forward it to friends and family.

But apparently the promotional coupon, which was widely posted on the Web, was a little bit too successful: Starbucks said on Tuesday that, effective immediately, the offer would no longer be valid at any Starbucks locations.

Amazing how the quantity demanded of a good increases as the price declines -- especially to zero. It's almost like a law or something.

Of course, a price of zero can still be neutralized by a marginal utility of zero (or lower). Stated differently: if everyone thought, as I do, that iced coffee tastes rancid, then Starbucks literally couldn't give the stuff away. Go figure.

A few weeks ago I noted, qua economist, a story about how Starbucks had to rescind a coupon offer for a free iced coffee that had been improperly forwarded around the Internet.

Economist hat off, lawyer hat on:

Starbucks Corp. was sued for $114 million Friday over its recall last week of a coupon that entitled the holder to a free large iced drink being promoted by the giant Seattle coffee retailer.

Peter Sullivan, the lawyer who sued on behalf of a 23-year-old Starbucks regular who felt "betrayed" when her coupon was not honored, accused the company of fraud and said he will request class-action status to include the "thousands who were misled" by the offer.
...
The $114 million the lawsuit asks for approximates the average cost of one cup of Starbucks coffee a day for all of the people turned away for the 38 days the offer was valid, Sullivan explained. "That's a very conservative figure," he said.

This is, of course, utter nonsense.

Last time I checked, "betrayal" was not a tort. And while fraud is a tort, it requires intent (actually a related concept, scienter). There was no intent to defraud here. An embarrassing error in marketing judgment, perhaps, but not intent or scienter.

Neither is there a breach of contract. A coupon is not a contract, just as an advertisement is not a contract or even an offer to enter into a contract.

And even if some kind of cognizable action could be shown, how to go about defining and verifying the class of plaintiffs?

And -- just curious -- what kind of attorney fees will Mr. Sullivan be seeking?

Maybe that's why it's called Starbucks.

Via Consumerist by way of TortsProf Blog. See also Starbucks Gossip by way of Overlawyered and Fark.

---

Meanwhile, here's a coupon lawsuit that might -- might -- have some validity:

Online marketing company Webloyalty.com Inc. and online movie ticket seller Fandango Inc. were named in a lawsuit on Monday that accuses them of participating in a scheme where customers' credit cards are billed monthly fees without their knowledge.

The lawsuit in U.S. District Court in Massachusetts, said when customers bought from one of Webloyalty's partners such as Fandango and clicked on a pop-up window offering a $10 coupon on their next purchase, their credit card information was automatically transferred to Webloyalty and they were unwittingly enrolled in its "Reservation Rewards," program.

Once enrolled in Webloyalty's rewards program that promises dining movie ticket and shopping discounts, consumers' credit cards are billed up to $10 each month. The lawsuit is seeking class-action status and unspecified damages.

Without seeing an example of the pop-up, it's hard to form a solid opinion. Anyone have any insight?

Consider the following defense of Starbucks:

Ever since Starbucks blanketed every functioning community in America with its cafes, the one effect of its expansion that has steamed people the most has been the widely assumed dying-off of mom and pop coffeehouses. Our cities once overflowed with charming independent coffee shops, the popular thinking goes, until the corporate steamroller known as Starbucks came through and crushed them all[.]
...
Each new Starbucks store created a local buzz, drawing new converts to the latte-drinking fold. When the lines at Starbucks grew beyond the point of reason, these converts started venturing out -- and, Look! There was another coffeehouse right next-door!
...
In its predatory store placement strategy, Starbucks has been about as lethal a killer as a fluffy bunny rabbit. Business for independently owned coffee shops has been nothing less than exceptional as of late.

A libertarian cites this research approvingly. I do not.

The problem I have with this "everybody wins" defense of corporate capitalism is that the researchers are implicitly accepting consequentialism rather than economic liberty as a legitimate analytical framework and policy criterion -- merely because, in this one instance, it happens to favor a laissez-faire position. That is a myopic and very dangerous tack.

The only basis required to "legitimize" Starbucks is the right of any private company to compete against any other private company for private customers.

Central planner wannabes, anti-corporatists and other "big is bad" malcontents notwithstanding, Starbucks simply has -- or ought to have -- the right to "destroy" every mom-and-pop coffee shop on the planet -- assuming that they do it exclusively by offering a better* good or service at a better price, without any rent-seeking, artificial barriers to entry, or other abuse of government power.

(*"Better" determined of course by the market -- i.e., better able to satisfy customer tastes and preferences.)

FULL DISCLOSURE: I loathe Starbucks coffee. Good thing I'm not a central planner wannabe, eh?