| Second Guessing Moore’s Law |
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| Written by Amy Pachla | ||||
| Friday, 12 October 2007 | ||||
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Dongmei Li of Queens, New York is suing Apple Incorporated, claiming that the company violated price discrimination laws when it dropped the price of their iPhone from six hundred to four hundred dollars just two months after the gadget’s release last June. Price discrimination, in short, is when a company offers the same product to different people at different prices in order to prevent competition. Ms. Li is claiming that she can’t sell her iPhone at the same price she bought it at because it’s cheaper for someone to buy it direct from the company now. One wonders just when Ms. Li went into the business of selling iPhones, because that’s what she’s suing Apple for the right to do. We’re all familiar with the fact that consumer technology depreciates rather quickly. In fact, this phenomenon was first documented in 1965 by Intel co-founder Gordon E. Moore. “Moore’s Law”, as it’s called, states that the number of transistors that can be placed on an integrated circuit chip without raising the cost of the chip doubles approximately every two years. This makes the usefulness of consumer electronics at any given price double approximately every two years as well. Everyone going in on an iPhone on day one absolutely knew that their new toy wasn’t going to be worth the six hundred dollars they paid for it within an obscenely short amount of time anyway, but when Apple cut the price of the 8GB version of the phone just two months later, every jaw dropped. Even Woz (Apple cofounder Steve Wozniak) grumbled about it to Slashdot.com, calling the two hundred dollar cut “too soon, too harsh...” You do have to hand it to Apple for knowing what was coming, though. Within a week of the price cut, Apple apologized profusely to the “early adopters”, offering Apple Store credit and other various bits of technorati swag to placate consumers. This, however, was not enough for Dongmei Li, who filed a federal anti-trust suit against the corporation. The particular law Ms. Li is using has nothing to do with changes to price due to market conditions, and says so right on its face. The price discrimination law (Clayton Act of 1914, 15 USC, sec. 12-27, 29 USC sec. 52-53) allows specifically for price changes due to fluctuations in the product or the market. Ms. Li’s attorney, C. Jean Wang points to Apple’s rising stock prices as an indication that market forces did not contribute to the sudden price drop. It would seem, however, that the opposing argument is comically easy to make. Everyone has bought something one day that went on sale the next, but nobody sues over it. That’s not to say the law has no application at all. Venerable utility powerhouse Detroit Edison (now called DTE) had been giving away lightbulbs since its inception. The idea was that if people had things that needed electricity, they would buy electricity, which is really good for you when you’re in the business of selling electricity. In the late fifties, a hardware store owner successfully sued Detroit Edison under price discrimination law because he was in the business of selling lightbulbs. The hitch, interestingly enough, according to lifelong Detroit area resident Karen Pachla, is that Detroit Edison was rumored to have funded the hardware store owner’s suit themselves. The story is that it was the only way the company could think of to get out of having to give away lightbulbs without generating a lot of bad PR for themselves. Whether or not Ms. Li is successful in her lawsuit (the general opinion of which falls somewhere between “totally ridiculous” and “really sad”), Apple kind of walked right into this nightmare. The price drop does seem eerily orchestrated, and one would hope that Apple doesn’t think so little of their customers that they honestly expected to get away with it. We’ll see. The inevitable “next big thing” gadget will come out soon enough. If there are still people camping out in front of the store to buy it a week early, we probably deserved what we got. This article cites as source material:
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