The legality of bundles
by Justin Murray 
{ Nov 10th 2006 at 5:25PM }
When we say $699 for a game console, a PS3 (plus game and tax) is likely the first option that pops into a respondent's mind. That may be true (given varying tax rates) but we're thinking of something completely different -- the GameStop Wii bundle. Most gamers find the bundle amusing, especially since the Wii is going to be available in droves on launch day. However, some people actually think the idea of bundling games and accessories with a console is (scary music theme) illegal.
In a discussion with GameDaily, an antitrust litigator by the name of Bob Freitas says that gaming bundles could fall under antitrust law. While he admits the grounding is weak, he points to a concept called "line forcing" -- forcing extras that are not needed to utilize the product before the product will be sold -- which is a key indicator of an antitrust violation. That method of thinking is all well and good, but we find that to be a bit of a stretch.
Bundling games and accessories with the Nintendo Wii may be unethical, but we can't find much ground for it to be illegal. For starters, GameStop is not the only place we can buy our Wii; we could always send our business to Wal-Mart or Best Buy or Third Street Gaming Emporum and Pet Store. A Wii is not a necessity to life like food, medicine, or even a car in many American cities (except to maybe Eric Cartman). Maintaining a healthy economy requires a balance between consumer and business rights and calling a game bundle illegal tilts the balance of power too much toward the consumer side. We should keep our legal system out of the bundle decision, they have better things to think about. Just vote with your wallet and then sit back and watch GameStop Online try to explain to R. Richard Fontaine, CEO of GameStop, why they have a warehouse full of $699 Wii bundles when everyone else is sold out.
Reader Comments (Page 1 of 1)
Ben @ Nov 10th 2006 5:35PM
Didn't BestBuy get into hot water for forcing bundles on 360 buyers? I think bundles are fine as long as you have the choice not to buy the bundle...
otakucode @ Nov 10th 2006 5:36PM
Forego instant gratification for the reason of financial responsibility or principle alone? HA! This is America, 2006! Wake up and smell the Madden sales!
icelandman @ Nov 10th 2006 5:38PM
The Sherman anti-trust laws, and anti-monopolistic and consumer protection mandates make no mention of not being allowed to sell combinations of products for a profit, especially when the original product will be in good supply, and there are other retailers offering variations and even more of the original product. Its not illegal, its not even unethical, especially if can so easily find what you are looking for elsewhere... The only thing retailers are guilty of is being legitimate businesses, and having a great number of clerks w/ inadequate salesmanship skills.
Call it what it is: Shrewd but legal business.
~PEACE
-Icelandman
Danners @ Nov 10th 2006 5:46PM
Stores can no longer sell pre-built bundles here in Canada (since the Xbox 360 launch actually). Glad for it too. You should never be forced to buy a crappy 3rd party controller that you know will break in a couple weeks, or a game that you don't even want.
n2 @ Nov 10th 2006 5:46PM
I disagree. Voting with your wallets is not enough. Companies need to know they cannot force unwanted options onto consumers. Voting with you wallet and going elsewhere is basically turning a blind eye to the practice. Someone else will inevitable come along and purchase the item anyway. Does the retailer then care that you didn't buy from them, but someone else did?
When I went to purchase a PSP from Circuit City, they forced you to also buy a game if you purchased it from them. On launch week, Circuit City was the only location in my area that had PSPs in stock (probably because of the stupid bundle). I bought it because I really wanted the PSP, but I resented having to purchase a game right away.
Rabish12 @ Nov 10th 2006 5:49PM
"Maintaining a healthy economy requires a balance between consumer and business rights and calling a game bundle illegal tilts the balance of power too much toward the consumer side."
Hardly. Allowing them to offer these bundles is legal and all, but letting a retailer force customers into paying $700 for a $250 product tilts that balance WAY further towards the business side. Just selling the bundles might be fine, but when they're completely cutting off customers who aren't willing to spend more than double what the product is worth they've crossed a line. Again, that may not be a legal line, but it's still not right.
Ryoga Vee @ Nov 10th 2006 5:51PM
the same can be said for an extra value meal. I dont need fries and soda to enjoy the burger. But they give them to me anyway and i save a buck.
Chris @ Nov 10th 2006 5:56PM
Icelandman is dead wrong. It is unethical, and packaging popular goods that have a limited supply with unpopular goods IS illegal in some instances, such as with movies. For example, it is a violation of federal law for a film distributor to sell films in packages to movie theaters, i.e. suffer through purchasing one crappy movie in order to get one blockbuster film.
I can only hope this becomes illegal one day, as it is illegal in several similar instances.
phan @ Nov 10th 2006 6:00PM
When this website becomes a legal blog, consisting of lawyers and other active members ot the judiciary, whether you can or "can't find much ground for [anything] to be illegal" might mean something. Until then, please realize that 1) you can make a case out of virtually any set of facts, and 2) all you need to do to prevail is persuade a jury you're more right than the other guy and a judge that your case isn't completely bonkers.
Done.
Rabish12 @ Nov 10th 2006 6:08PM
#7: McDonald's doesn't force you to buy the fries and soda to get the burger. For a while, Gamestop was doing just that: limiting sales of console pre-orders to those willing to pay for a bundle. It's not the same.
icelandman @ Nov 10th 2006 6:26PM
#9 speaks truth, also to #8: even if you believe its unethical, that is irrelevant so long as it isn't illegal, its not a nice thing, just the truth. Retailers and distributors never have a direct relation to the consumer and customer, so to them, bundles are logical, they sell, and there have been no sales impact... the idea that voting w/ your wallets will work is nice, but what you don't buy, someone else will.
~PEACE
-Johann
copa @ Nov 10th 2006 6:23PM
Wow, that was terrible. I actually got stupider reading that article. Let's make an incredible leap, and assume that console bundles are actually product tying (and this is a huge leap).
Product tying, and all other antitrust violations, are not illegal unless the company that is engaging in the violation is a monopoly.
Even the most hardcore Wii fanboy is not going to argue that Nintendo has a monopoly on the videogame market.
Derek Daniels @ Nov 10th 2006 7:23PM
Should be illegal.
DakidOG @ Nov 10th 2006 6:59PM
Walmart is great because they let you pick the games you WANT! I think bundles would be the greatest if we were allowed to build them ourselves.
velocitystrike @ Nov 10th 2006 7:02PM
Hah...GameStop are just doing what any other *business* (key word there) would do...try to make money...
Chris @ Nov 11th 2006 12:55PM
First time i have ever posted so hi...(feels like a support group lol) But i thought i would interject as i used to work for best buy and we tried to do something simular with computers... Where we would package a computer monitor printer all the cables inks and accessories and service in one package... We would use the same comptuer and get a cheaper monitor and printer and package them all together for the same price.... Well we too had to stop this for something real simular... im not sure if this helps the debate but maybe it holds a little water
mykie @ Nov 10th 2006 7:32PM
What IS illegal in many states, however, is forcing a "warranty" or replacement plan on you.
Dansk @ Nov 10th 2006 8:25PM
Here in Brazil bundle sales are illegal. (as in, only offering bundle sales without offering the items solo)
Skipjimroo @ Nov 10th 2006 8:50PM
The public motion: Shrewd and legal, but shitty.
Couldn't agree more, as someone who used to work in electronic retail. I used to feel so dirty whenever someone wanted to buy a console from me and I had to tell them they had no option but to additionally pay for the shitty outdated titles they would probably never play.
The sad thing is more often than not the consoles are bundled with inferior titles with high mark ups or ones that the retailers have in over abundant stock.
Anything but mark them down in price and sell them for what they're actually worth I guess. I'm so glad I work in the *much* more wholesome field of finance now.
Mike @ Nov 12th 2006 7:22PM
I loathe GameStop and go out of my way to buy games elsewhere. They are one of the least customer friendly stores ever and the management is so smug and proud of it. During an interview I had with them the regional manager was there and he was bragging about their profits and how much of a killing they make on preowned and whatnot.... and it just bothers me cause they pay the least out of any store for preowned games and then sell them for $2 less than a new game. I always take games into FYE. They generally will give you twice as much as GameStop will. Plus their "preorder or you won't get one!" sales pressure is such a hassle and is the opposite of the "convenience" it offers their customers.
I'd rather shop where you can go pick something up on day 1 without a hassle.
Kcen @ Nov 11th 2006 12:36AM
What im pretty sure is illegal is not taking returns on the unwanted parts of the product.
If I was really determined to get the Wii, I would just return the games that I didnt want. They have to take them back.
At least in NY.
Brian Sexton @ Nov 11th 2006 1:35AM
"copa" wrote:
"Even the most hardcore Wii fanboy is not going to argue that Nintendo has a monopoly on the videogame market."
No, and nobody who is both paying attention and thinking should even think of that possibility in this context since Nintendo's monopoly or lack of a monopoly over the video game market has *NOTHING* to do with the issue under discussion, which is that some *RETAILERS* refuse to sell newly released consoles except in *RETAILER*-contrived bundles while supplies are low, which is definitely exploitative profiteering, but may or may not be unfair and illegal.
X GATECRASHER X @ Nov 11th 2006 2:11AM
I disagree with the article. The bundle-only pre-order situation that we're in now tilts the balance of power too far in the middle-man's favor -- in this case, the retailer. If the console is to be sold as a stand-alone product, the option to buy the stand-alone product should be available to order right beside the bundles.
Yashar @ Nov 11th 2006 9:07AM
I will not pay more than $100 for a Wii, let alone $699. Wii= GC + $30 sensores.
Abilor @ Nov 25th 2006 2:27AM
Recently, after being forced at the local Toys 'R' Us to buy a Wii bundle (which I refused), I inquired into the mandatory Toys 'R' us warranty. Failure to sell me the Nintendo Wii without the purchase of the optional warranty may constitute a violation of the Sherman Act, the Clayton Act, the Federal Trade Commission Act, and US Supreme Court Decision JEFFERSON PARISH HOSPITAL DIST. NO. 2 v. HYDE, 466 U.S. 2 (1984), and a general violation of federal antitrust and consumer protection laws.
By requiring the purchase of a Toys 'R' Us warranty and games off an approved list to purchase the Nintendo Wii console right in front of me, Toys 'R' Us made a "tying" arrangement. The New York Antitrust enforcement agency summarizes tying-in as, "An illegal tie-in occurs when a seller with market power over one product (the 'tying product') will only sell it to buyers who agree to buy another product (the 'tied product')." (http://www.oag.state.ny.us/business/antitrust.html). The University of Pennsylvania Health System Office of Legal Affairs (http://www.uphs.upenn.edu/legal/antitrust.html) summarizes the Sherman Act:
"The Sherman Act prohibits contracts, combinations and conspiracies between two or more persons or companies that unreasonably restrain trade. Although unilateral activities, such as activities between a parent and subsidiary corporations or between subsidiary corporations, to achieve competitive advantage or market dominance are normally permitted, a company acting unilaterally or with others is prohibited from monopolizing or attempting to monopolize by exclusionary or predatory practices." This language may not apply to my case, depending on the actual company offering the warranty, but may still constitute a violation.
It also summarizes the Clayton Act as:
"The Clayton Act prohibits exclusive dealing arrangements where the seller conditions the sale or lease of goods upon the buyers refusal to deal with a competing seller or upon entering into a tying arrangement, where the seller conditions the sale or lease of a desired product upon the buyer purchasing or leasing another product, where competition is likely to be lessened substantially. Other sections of this law prohibit mergers or acquisitions, joint ventures or vertical arrangements which substantially lessen competition."
The Jefferson Parish decision's language claims:
"[T]he essential characteristic of an invalid tying arrangement lies in the seller's exploitation of its control over the tying product to force the buyer into the purchase of a tied product that the buyer either did not want at all, or might have preferred to purchase elsewhere on different terms." (http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=466&invol=2)
It should be noted that the recent Independent Ink vs. Illinois Tool Works Supreme Court decision has changed a lot of the applicability of the Jefferson Parish decision, though much of it may still apply here.
The bottom line is not only was I treated disrespectfully by Toys 'R' Us, but what they did also seems to me upon initial examination to be overtly illegal, possibly grounds for class-action civil litigation.