News

Apple Sued Over iPhone Price Cut

Tuesday, October 2nd, 2007 at 8:30 AM - by

Apple is facing yet another law suit over the iPhone, but this time it's over the surprise price cut the company sprang on customers in early September. Dongmei Li, a New York woman that's hopping mad about the US$200 price reduction, filed a suit against Apple and AT&T on September 24 alleging price discrimination, according to Forbes.

In addition to claiming Apple violated New York price discrimination laws, the suit also alleged that early buyers were given less favorable purchase terms, and that the price reduction injured early purchasers because now they can't resell their iPhones for the same profit. Ms. Li bought her 4GB iPhone when Apple originally released the combination iPod and smart phone at the end of June.

When Apple first released the iPhone, it was available as a 4GB model for $499, and an 8GB model for $599. After about two months, Apple dropped the 4GB model and reduced the price of the 8GB version to $399.

Apple CEO Steve Jobs apologized in an open letter to angry early buyers and offered a $100 credit at the Apple Store.

Apple and AT&T declined to comment on the case.

12 comments from the community.

You can post your own below.

+ show options

Your current settings, click to change: Sort Oldest First, Show Guest Posts, Hide Community Stats

macinnerd said:

member since 15 Jun 2005 with 1708 posts, unranked, send him a message or view his profile

Tue Oct 02, 2007 9:51 am

HAHAHAHAHAHAH!!

Seriously, that's ridiculous...

Quote this post ↓

geoduck said:

member since 30 Dec 2003 with 1797 posts, unranked, send him a message or view his profile

Tue Oct 02, 2007 10:48 am

I've read in other reports that she is claiming price discrimination because there was no price cut or rebate on her 4G model. Hello, the model was discontinued. The claim is vacuous.

Quote:
the price reduction injured early purchasers because now they can't resell their iPhones for the same profit.

Apple is not responsible for her bad business decision.

Personally I would like to see Apple start counter suing these slimebags for defimation. At the very least I hope the judge makes her pay Apple's legal costs.

Quote this post ↓

A guest said: (hide)

Tue Oct 02, 2007 12:01 pm

According to THG, she's suing for $1 million. WTF?

She's not angry, she's trying to make a pile of money at Apple's expense.

Quote this post ↓

Tiger said:

member since 17 Jun 2003 with 970 posts, unranked, send him a message or view his profile

Tue Oct 02, 2007 12:11 pm

Judge to plaintiff: Miss, what makes you think this claim is worth $1 million?

Plaintiff: I can't resell my iPhone for what I paid for it, therefore I'm injured.

Judge: (LOL) I rule summary judgement for the defendant and order the plaintiff incarcerated for five days for being stupid. Oh, and I further order she pay the defendant's legal fees for filing a frivolous lawsuit. Oh, and one more thing...your name is now plastered all over the Internet for this action. Good luck being taken seriously by ANYBODY!!!!!

Quote this post ↓

A guest said: (hide)

Tue Oct 02, 2007 1:36 pm

Apple did cut the price to $299 for the 4G model. I also thought Apple offered the $100 rebate to people who bought the 4G as well.

As for people "injured" since they won't be able to resell it, these are the idiots on eBay who bought a bunch of them, opened the bos to unlock the phone and are now stuck with a dozen that they won't make their money back on.

geoduck wrote:
I've read in other reports that she is claiming price discrimination because there was no price cut or rebate on her 4G model. Hello, the model was discontinued. The claim is vacuous.

Quote:
the price reduction injured early purchasers because now they can't resell their iPhones for the same profit.

Apple is not responsible for her bad business decision.

Personally I would like to see Apple start counter suing these slimebags for defimation. At the very least I hope the judge makes her pay Apple's legal costs.

Quote this post ↓

A guest said: (hide)

Tue Oct 02, 2007 5:34 pm

Two problems with this lawsuit: 1. This is not price discrimination. 2. Price discrimination is not illegal.

Quote this post ↓

A guest said: (hide)

Tue Oct 02, 2007 6:07 pm

What kind of judge wil allow a vendor to be punished for dropping the price of its product? Hopefully, no kind of judge at all. It would set a dangerous precedent.

Quote this post ↓

Bosco said:

member since 03 Jun 2002 with 999 posts, unranked, send him a message or view his profile

Wed Oct 03, 2007 12:01 am

Your firetrucking kidding me. Price discrimination happens all over the place and benefits all of us tremendously. These people are smoking crack if they think they have any chance with such a lawsuit. Someone who hasn't yet purchased an iPhone should sue their sorry asses for trying to keep the price high. Idiots.

Quote this post ↓

gslusher said:

member since 13 Nov 2002 with 2063 posts, unranked, send him a message or view his profile

Wed Oct 03, 2007 5:58 am

Anonymous wrote:
Two problems with this lawsuit: 1. This is not price discrimination. 2. Price discrimination is not illegal.

Disclaimer: I am not an attorney. I don't even play one on TV and I did not stay at a Holiday Inn last night.

1. Probably correct--see below.

2. Price discrimination is illegal, according to the Robinson-Patman Act. Various state laws may also apply.

You can read the law (or at the DOJ site) and a speech by the then Secretary of the FTC for more information, albeit not necessarily more clarity.

From the Wikipedia article, to be illegal, the sales must involve:

* discrimination in price;

* on at least 2 consummated sales;

* from the same seller;

* to 2 different purchasers;

* sales must cross state lines;

* sales must be contemporaneous;

* of "commodities" of like grade and quality;

* sold for "use, consumption, or resale" within the United States; and

* the effect may be "substantially to lessen competition or tend to create a monopoly in any line of commerce."

Note the sixth criterion: sales must be contemporaneous. To this non-attorney, that would seem to not apply to price changes over time, as long as the same price is charged for all sales at a given time. Sellers change prices up and down all the time. Ms Li, it seems, would contend that no store can have a "sale," since they charge a lower price for some item(s) than prior to the sale. (Indeed, there are laws about sales that force sellers to compare the "sale price" to the previous actual price of the same item, not some "list price.")

I couldn't get real clarity on this, but it also seems that the Act applies primarily to sales to resellers. (Sales to OEMs are specifically exempt.) One defense can be that the sales to one party cost more than those to another (e.g., because of volume or packaging). The Act was apparently originally aimed at chain stores to keep them from getting price breaks compared to local stores. (I did read of one case involving magazines.) However, that probably happens today. One defense can be, if I read correctly, that the actual costs of the sales are different, but the difference in price has to precisely reflect those differences in costs. That might be how chains can still get lower prices--they buy in large lots that are delivered to their warehouses, cutting down the wholesaler's distribution costs. It's also possible that chains deal with a higher level in the distribution system--e.g., directly with manufacturers, rather than through wholesalers. For example, the local postal center where I have a mailbox buys the paper for their copiers at Office Depot or another local business, rather than directly from a manufacturer. (Chains can also have lower retail prices than independent stores because they have lower overhead.)

Apple, like many companies, does charge different prices to different customers--e.g., education discounts and corporate discounts. That is not "price discrimination" under the Act, I would think, as it does not have the effect "to lessen competition."

Quote this post ↓

Bosco said:

member since 03 Jun 2002 with 999 posts, unranked, send him a message or view his profile

Wed Oct 03, 2007 2:21 pm

Actually gslusher, note the last criteria. Price discrimination has to lessen competition to fall under this. Otherwise, all of the criteria are not met and it's not a legal problem. This is anti-trust law.

Price discrimination happens all the time. Think grocery store club cards, coupons, price haggling, etc. It happens because while a single price conveys information about product value, the clearing price for each individual purchaser in the market is different. Many such clearing prices may be above reseller cost of goods, and the reseller would be leaving money on the table by not finding such discount prices for price sensitive customers.

Monopoly and trusts are a murky legal issue. I think we can all agree that Apple does not have a monopoly on cell phones. Nor does AT&T enjoy such a thing on cell phone service. You've got to have a monopoly before you have an illegal one.

In short, this lawsuit is horse defication and the plaintiffs out to be tazered with cow prods. Morons.

Quote this post ↓

A guest said: (hide)

Sat Oct 06, 2007 4:26 pm

for number 6, does a sale on one day at $600 and a sale the next day for $400 not constitute contemporaneous sales? I don't know how much closer you can get other than counting hours.

Quote this post ↓

gslusher said:

member since 13 Nov 2002 with 2063 posts, unranked, send him a message or view his profile

Sat Oct 06, 2007 5:55 pm

Anonymous wrote:
for number 6, does a sale on one day at $600 and a sale the next day for $400 not constitute contemporaneous sales? I don't know how much closer you can get other than counting hours.

By that logic, no seller could ever change a price, as any price change has to start sometime--at one moment, the price is X, the next, it is Y. Thus, any reduced (or increased) price would be "contemporaneous" to the previous price.

Here is an example that may seem absurd, but, in truth is no different. You buy a package of Twinkies at a convenience store for $0.49. The next day, you discover that they are now selling Twinkies for $0.32. Would you sue for price discrimination? If not, why not? That is the same percent cut as for the iPhone and the same timing. You should sue the convenience store for at least $818, using the ratio of price-to-suit value as the $1,000,000 suit against Apple.

Please read up a bit more on the Robinson-Patman Act and the suit. You should find that the Act was intended to address activities that lessen competition. It was primarily aimed at suppliers (manufacturers and wholesalers, for example) selling the same commodity at different prices to different resellers in the same area at essentially the same time. That would give the reseller who got the lower price a competitive advantage in the same market.

Based on several rather dull, boring articles I read:

1. Supplier sells an item at $1.00 to reseller A today. Tomorrow, the supplier sells to reseller B at $0.90. The next day, the supplier sells to reseller C at $1.00. A, B, and C are all in the same general area and the price difference cannot be ascribed to cost differences (e.g., shipping, volume). That might be a violation of the Robinson-Patman Act, if the effect was to lessen competition. If resellers A, B, and C are in quite different locations and don't compete with each other, the last criterion could say that this isn't illegal price discrimination.

2. Supplier sells an item today at $1.00 to reseller A and anyone else who buys it today. Tomorrow, the reseller sells the item for $0.90 to reseller B and anyone else who buys it tomorrow. That's just changing the price, which happens every day, and unlikely to be a violation of the Robinson-Patman Act.

The next time you buy something "on sale," please insist upon paying the previous price. Otherwise, you would be morally guilty of participating in price discrimination. You surely cannot negotiate the price of a new car, appliance, etc. (Houses would be different, as they are not "commodities." Cars and appliances are.)

Quote this post ↓

Post Your Comments

  Remember Me

Not a member? Register now. You can post comments without logging in, but they'll show up as a "guest" post.


Please enter the word exactly as you see it in the image above. Registered users aren't prompted for this. Having trouble reading the image get a new one.