Predatory Packaging

Are expensive bundles of next-gen consoles, games and assorted add-ons just one big con?

by James Brightman

Many GameStop/EB customers may have been alerted this week to an upcoming bundle package for the Nintendo Wii. Rather than offering a standalone console for purchase online, it would seem that GameStop/EB are "forcing" consumers to commit to expensive packages. Beginning November 9, you'll have the "opportunity" to pre-order a Wii bundle for yourself. "You'll get the best games, accessories and more in one convenient package delivered right to your door - all for under $699 plus tax and handling!" reads the e-mail. Moreover, GameStop explains, "The bundle will be removed from the site as soon as we have reached our expected quota."

Unfortunately it's become all too common in recent years for retailers, particularly specialty stores like GameStop/EB, to pull a fast one on consumers who are all too eager to get the newest consoles at launch—remember last year's $1,000+ Xbox 360 bundles? While it's true that pre-order campaigns for brick-and-mortar locations allowed customers to pre-order nothing but the console, why should online consumers get the shaft? And is this even legal?

The legal perspective

According to Bob Freitas, a technology and antitrust litigator and partner in Orrick's Silicon Valley office, it's possible that these bundles could violate certain anti-trust laws, but it's not highly likely he explained. "The most common way that something like this would be looked at would be a problem with so called tying arrangements, where someone will condition the purchase of one product on the purchase of another... and this comes up in anti-trust law in a variety of ways," Freitas told GameDaily BIZ. "You can have a standard tying of unrelated products, you can have what's called full-line forcing where they make you take the whole line and they won't sell you one little part of it, or sometimes bundling problems can get analyzed in this way."

He continued, "But, there have been a lot of changes in the law over a fairly large number of years that have resulted in the anti-trust law prohibitions against tying arrangements just not being as strong as they used to be. Whereas in the old days, if certain requirements were met a tying arrangement would be considered illegal, nowadays the circumstances under which a tying arrangement is automatically illegal has been really substantially reduced."

Another problem in tying arrangements, Freitas explained, is distinguishing if there are really two products involved. "There are all kinds of cases that address whether there are two products involved—cases involving, for example, a car and air conditioning for the car. Is that part of the car or is that a separate product? So when you sell a car with an air conditioner, are you tying the purchase of the air conditioner to the purchase of the car? So the two product analysis in a given situation is going to get in the way. For example, let's take a situation where you're selling the console only as opposed to the console and let's say two controllers. The idea that the console and the controllers are in separate markets, that's a lot more difficult to defend than an argument for let's say a console and a carrying case or something like that. So if you're talking about games and controllers, you're going to have to overcome the idea that there's only a single product there and there in fact is no tie... so it's pretty tough to mount an anti-trust based attack on most forms of product bundling."

He added, "Maybe somebody could come up with a theory about why it's unfair to have certain kinds of product bundled and try to build a consumer protection case on it, but I'd be skeptical about the extent to which that would succeed."

Manufacturers in on the scheme?

So unfortunately, it looks like this "predatory packaging" is legal, but why the heck are consumers getting these console bundles shoved down their throats? Well, let's take a look at the manufacturers' point of view for a minute. For most console makers, hardware is sold at a loss. The old razor and blades model still applies today.