Hacker News Reader

Comment by TimGebhardt | Hacker News Reader

Did you actually read the story? It's not that the books were low priced. It's that they were priced predatorily. Preditory pricing is bad for consumers in the long run, and in every industry outside of software is seen as a bad thing. In the software business that seems to be the standard VC-backed-company model.

View on HN

> Preditory pricing is bad for consumers in the long run, and in every industry outside of software is seen as a bad thing.

Not so fast. "Agency model", which is what the publishers want to mandate, is "retailers have to sell at MSRP". There may be nothing stopping them from refusing to sell through Amazon unless Amazon agrees to MSRP.

That said, lots of industries do work on "retailers pick the pricing", which is the deal that Amazon likes. (Either way, the publishers get to decide how much they charge distributors.)

The "predation" here is that Amazon is willing to take a smaller cut than Apple. That's not predatory. If anything, that's a competitive response to Apple's favored status on a dominant hardware platform.

A competitive response? Amazon was selling books below marginal cost before Apple even entered the ebook market. Unless Amazon is equipped with a time machine, I'm pretty sure this wasn't a response to Apple, just a strategy intended to produce a monopsony.

I've actually wondered about this for a long time: why is it legal for software companies to offer products and services at below marginal cost? Clearly zero is below whatever the actual marginal cost is, and Eric Schmidt summed up the industry's view of charging zero: "Consumers like the price of free."

I would love to learn from a knowledgeable lawyer why the practice of giving software away for free -- even when it potentially harms new entrants by eliminating entirely their potential for revenue generation -- is legal.

I'm not a layer but cases have been won against this very practice:

http://www.computerworlduk.com/news/it-business/3334934/goog...

I suppose you could argue the services aren't really free, it's just that advertisers pay for them and not the users directly. So Google isn't really providing a service below marginal cost as long as the marginal revenue of advertising is enough to cover it.

Note, that was in France, where different legal rules apply.

I am not a lawyer, but it seems to me that you're suggesting that you think that it should be illegal to contribute to open source software that is naturally available for free. As someone who has contributed to open source software, I had plenty of legitimate reasons for doing so other than anti-competitive behavior. One of them is advertising - if I'm in an interview and am asked for a code sample I can just point to CPAN.

Similar considerations happen in a proprietary context. For instance this website is funded and built by programmers whose time is incredibly valuable, yet it is available for free. My belief is that pg sees this discussion forum as an advertising cost for ycombinator. Why shouldn't it be legal for pg to spend his advertising budget giving away a discussion forum when there are competitors that are trying to do similar things as a paid product?

Sorry, I wasn't clear. Obviously the only reason it would be illegal would be if it were done to restrain competition or trade, and done by an entity with a monopoly.

Giving things away for below marginal cost can also run afoul of WTO anti-dumping laws. I am also curious why there are never any dumping complaints made against software companies whereas they are quite common in adjacent markets like RAM chips.

Well, what is the marginal cost of software distribution?

Just bandwidth cost. Literally a fraction of a cent.

There are a lot of costs to software distribution, but the vast majority are sunk costs, not marginal. By contrast manufacturing has significant marginal costs.

This economic fact may be relevant to any decent analysis.

Reply on news.ycombinator.com