Some Interesting Questions

Over the past few years, a lot has been said and done in the name of “protecting” industries, companies, and consumers. The individualist in me looks with interest at these words that should sound reassuring, but then the intellectual butts in and goes, “wait a minute!”

Words are nothing if not accompanied with the right context, and the context within which these words and phrases have been used lately give the budding intellectual in me pause. For example, look at the ongoing lawsuit of a student entrepreneur Supap Kirtsaeng, who brought cheap versions of books — by purchasing them legally  — from Thailand to the US and sold them on eBay to support his studies and make some money on the side.

Now John Wiley & Sons — the publishing company suing  Kirtsaeng — is making an argument that market segmentation is key to the ability of these companies to make profit and thrive in a global environment. People like Kirtsaeng are a threat to that ability, so they should be punished. In simple words, they want to sell stuff at different prices in different countries, and they don’t want people to take advantage of these differences to undermine the publishers’ interests — by buying items at low prices in one area and reselling them as used items in another area!

The courts so far have ruled in favor of Wiley in the name of protecting the industry. Here’s where lies my dilemma. Allow me to explain:

Companies look at the scarcity power they possess and price their items based on what they think the consumer would be willing to pay. Of course, with the advent of the Internet, this strategy isn’t as easy to implement as it once used to be. Consumers now have the ability to move across borders more easily, and knowledge can be transferred from one location to another even more quickly. In such a situation, it is quite obvious that largely different prices in different markets may not be very easy to accomplish for some items.

Looking at this situation, I can’t help but ask, “so what?” Things change, technology changes, and those who want to succeed in a changing environment have to adapt. Is it really OK to refuse to do that and use the power of litigation instead to maintain the status quo?

After all, Wiley does maintain nearly constant prices for a book within a city or a state in America, doesn’t it? That’s because they know that if the prices of their books differ a lot, people will simply shop at the place where the price is cheaper. So why is it any different when it comes to different countries?

Sure, Wiley has the right to deal with only those Thai retailers who agree to not sell cheap versions meant for Thailand in any other country. But does that rule apply to a student who wants to sell these books he has purchased legally in Thailand as used goods in the US? It shouldn’t, should it?

That’s one side of the story, and so far, it sounds good. But things get a bit muddy when I consider the situation where goods are bought in large quantities for the express purpose of reselling them. For example, someone buys all the tickets for a show at a theater, and then sells them for double the price. In India, this activity is called selling tickets in “black” and is illegal. Should it be? I don’t know!

In case of tickets in “black”, you could argue that while the buyer wants to sell them at a price that gets him a profit, he also wants to sell them at a price people would be willing to pay. If the price is too high, people might choose to watch the movie at another theater or watch it later when it isn’t is as much in demand. So the free market would eventually take care of the problem. But what happens when this is done in another area: say someone buys all the supplies of a rare blood group in a given city and charges exorbitant amount of money for it to those who desperately need blood transfusion?

Would it be OK in this situation to allow the person to do this? I know it’s probably not legal in most countries at the moment anyway. But my interest in this subject is to understand how it could be dealt with in a real free market.

Leave a Reply

Your email address will not be published. Required fields are marked *