boomberg bloopers

[Chloe Hoffman]

I think what you may be getting at here is predatory pricing. Price fixing 
typically involves competitors with market power setting a price too high 
and thereby harming the public who is paying above market rates (and 
consequently a competition law/antitrust wrong).
Predatory pricing is the act of someone with market power selling something 
below the marginal cost thereof with the primary intent to drive out 
competitors. The theory being that when the competitors are gone the 
monopolist can charge monopoly rents. Most economists discredit this theory 
because of the unlikelihood of being able to recover the losses in monopoly 
rents (e.g. because barriers to entry could be overcome) and that a 
reasonable actor would not take such a risk (although some network effects 
economists think differently for certain market segments e.g. software where 
they argue the barrier to entry could be insurmountable)*. As for open 
source, it seems unlikely predatory pricing can stick because there is lack 
of agreement, there is no market power, barriers of entry are likely low 
even if monopoly power should happen, and fatally the commodity (software) 
is freely available to all to distribute, sell, etc. at anytime.

* As an aside predatory pricing was never raised in MS' antitrust troubles 
probably because of the bashing this theory has had in antitrust circles. 
Further, to make that charge stick is very difficult especially when the 
facts were not there - the competitor MS was allegedly trying to drive out 
with free Explorer was already (and continued thereafter) giving away 
Navigator for free.

>From: Brian Behlendorf <brian at collab.net>
>To: Seth David Schoen <schoen at loyalty.org>
>CC: <license-discuss at opensource.org>
>Subject: Re: boomberg bloopers
>Date: Fri, 16 Feb 2001 12:43:41 -0800 (PST)
>
>On Fri, 16 Feb 2001, Seth David Schoen wrote:
> > Brian Behlendorf writes:
> >
> > > Bullocks - you may agree or disagree with the
> > > contention that swapping someone else's IP against their will is 
>theft,
> > > but you can't claim that someone who writes software and 
>*intentionally*
> > > gives it away for free is a threat to anyone.
> >
> > That person is a threat to the revenues of the people selling
> > comparable software.  That threat is real, even though it arises from
> > totally legitimate activities (from the point of view of many
> > different political philosophies and legal regimes).
>
>Good point.  There is another nuance to this, too, one that I do hear
>brought up from time to time by corporate types investigating adopting
>open source:  when a group of entities get together and decide to "sell" a
>thing at a cost substantially lower than the cost of production, *with the
>intent to affect other parties who can not make a similar unreturned
>investment*, then that is usually called "price fixing", a category of
>antitrust.  From a judge's eye, a group of companies working together on
>Linux to commoditize the OS space might not be all that far away, morally,
>from MS giving away IE for free to commoditize the browser space.  That's
>why the MS stuff is such a dual-edged sword, something the slashdotters of
>the world don't appreciate enough, IMHO.
>
>Now, whether you'd still call it price fixing when this coordination is
>public, and when the fruits of that labor are also available to the
>targeted companies on exactly the same terms as the coordinating forces,
>or whether there is no "selling" going on at all, I don't know.  I think
>those factors are the only reasons why no one's yet tried to bring
>antitrust charges against an open source project they are threatened by.
>
>Until recently, I actually worried that this
>"give-something-away-for-free, charge-for-something-else" mindset in the
>high-tech industry was doing far more harm than good - almost every
>business plan in the late 90's went on about how they'd attack the
>competitors' markets by commoditizing their offerings and making money in
>a derivative way.  I worried that for every business whose revenue
>depended on selling a "thing", there was another VC-funded company looking
>for a way to make that "thing" cost less than the cost of production to
>sell some other "thing".  I think this is more than just software, this
>applies to services, hardware, heck, even books - does Amazon losing $.26
>for every $1 they make sound like something that other legitimate book
>sellers shouldn't have a legal (or at least moral) case against?  There
>was this great opinion piece in Forbes last month, thanking Jeff Bezos for
>his $1B donation to literacy levels in the world by subsidizing all those
>sales.
>
> > If there were a big market for some kind of labor and a lot of people
> > began to do that same labor as volunteers, or as a hobby, the people
> > who did it for a living would see their livelihood threatened, even
> > though the activities of the volunteers or hobbyists are totally
> > legitimate.
>
>Another angle on this, which was covered in last month's Forbes ASAP,
>interestingly enough: there is a lawsuit underway waged by former
>volunteers for AOL, chat room moderators who in exchange for free AOL
>access spent countless hours on those rooms, building up substantial value
>for AOL.  Common sense says, they were volunteers, if they ever felt like
>they weren't getting adequate compensation, they could leave, right?
>Well, there is this labor law going back to the beginning of the last
>century that says that "individuals can not volunteer for for-profit
>corporations".  This makes sense, certainly - employers could get around
>minimum wage laws by asking people desparate for a job to "volunteer" for
>lots of time not on their hourly wage.  However, it also should send a
>chill down the spine of any corporation who has incorporated donated code
>into an open source project of theirs.  Yikes!  Open source was indeed
>mentioned; in fact, here it is,
>
>   http://www.forbes.com/asap/2001/0219/077.html
>
>other sidebars and related articles are there too, it's well worth the
>read - they definitely explore the gamut, for example companies selling
>USENET articles which I think is safely outside of this area (by
>definition, posting to USENET implies posting with a license that the
>content may be reduplicated to any USENET "node", where a "node" can be a
>CDROM, web site, book, whatever - IMHO).
>
>There's plenty of valid fertile legal ground for MS to attack OS on if
>they wanted to get nasty.  Might be best to anticipate it.
>
>	Brian
>
>

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