• April 3, 2012

These days, the great majority of consumers are aware of the complex world of “price discrimination,” also known as “price differentiation,” in which sellers charge different consumers different prices for more or less identical goods or services.

“Early adopters” of high-technology bric-a-brac pay a premium for the latest/greatest gadget when it first comes on the market.  The rest of us wait 3 months and buy the same device for 10-25% less (or the next superior version at the same price).  Business travelers (traveling on someone else’s dime) may pay substantially more for one seat on an airplane than the leisure flier in the next seat.

It is generally ok to discriminate or differentiate between such groups (that is, early adopters/restivus, leisure fliers/business travelers).  But it is obviously NOT ok to discriminate based on gender, religion, or race.

What about discrimination based on stupidity or laziness?  Is it ok for sellers to discriminate or differentiate based on stupidity or laziness — “a stupidity tax”?

This is somewhat more complicated.

Retailers exploit lazy consumers all the time.  For example, supermarkets sometimes place higher priced canned goods at the supermarket at eye-level and cheaper identical alternatives on higher or lower shelves.  For completely fungible products (black beans, say), one might consider this a form of “legal” “price discrimination” between the “vigilant” shoppers and the “too rich or too stupid to care or notice” shoppers.

But a business that charges money in return for nothing — say separately offering a “insurance” for a product where the product, without paying for the extra “insurance,” already comes with the same protection — arguably a price discrimination “stupidity” tax — may get less than it bargained for.

And so it may be for Symantec and Digital River, sued in a consumer fraud class action in U.S. District Court for the District of Minnesota, for selling “download insurance” for on-line purchases, which, allegedly, offered nothing more than the buyers would get without the “insurance.”

Adding to the affront, Symantec allegedly had consumers’ default setting to purchase the “download insurance” when they purchased software on-line.  (It is as if Target or Walmart did not just have candy at the checkout counter but threw something into your cart, which you would then need to affirmatively remove.)

On March 12, 2012, U.S. District Court Judge John R. Tunheim (D. Minn.) denied defendants’ motions to dismiss plaintiffs’ consumer fraud claims.   Based on plaintiffs’ allegations (yet to be proven, of course), clearly the Court seems inclined toward the view that this kind of price discrimination will not fly.

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