Shaping Competition on the Internet: Who Owns Product and Pricing Information?

By O'Rourke, Maureen A. | Vanderbilt Law Review, November 2000 | Go to article overview

Shaping Competition on the Internet: Who Owns Product and Pricing Information?


O'Rourke, Maureen A., Vanderbilt Law Review


INTRODUCTION

Historically, markets have almost always fallen short of satisfying the conditions for and providing consumers with the benefits of perfect competition. Certain characteristics of electronic markets, however, enhance the possibility that e-commerce1 will be conducted in an environment that comes closer to attaining the perfectly competitive ideal than that of most conventional markets.

Essentially, technology analogous to that which users already employ to search the Internet can also enable this retailing revolution by allowing consumers easily to obtain comparative product and pricing information. However, for a number of reasons, on-line merchants (e-tailers), are asserting a variety of legal claims that, if successful, will hamper consumers' abilities to use the most efficient tools to obtain this information. In particular, if courts adjudicating these claims apply existing property law governing tangible items to Internet activities without considering that medium's unique nature, they may inadvertently, but nevertheless effectively, confer upon web site owners exclusive rights to their product and pricing information tantamount to ownership.

One of the requisites for perfect competition is the costless exchange of information. If e-tailers can control the most efficient means of access to and the accompanying dissemination of their product and pricing information, they may impede movement toward the ideal. Why would they seek this control and how should the law respond? The answers to these questions, particularly the latter, will largely determine the nature of competition on the Internet, including the balance of power between producers and consumers.

Part I of this Article explains the theory of perfect competition, and both why the Internet could facilitate it and why it apparently has not yet done so. Part II considers why and how some sites are seeking to protect their otherwise publicly available product and pricing information from particularly those users obtaining it through automated means. Some of these sites' motivations are anti-competitive while others are not. The law must consider how best to structure competition on the Internet in light of both these conflicting purposes and the interests of consumers in having easy access to such information.

Part III examines the legal landscape, analyzing some of the claims sites are raising. This evaluation.reveals the inadequacies of simply applying existing law to new technology. Part IV proposes a test to address complaints arguing that unwanted visits to a web site should be legally prohibited. It then briefly considers the broader normative question: "What should e-commerce look like?" Part IV concludes by contending that, at this early state of Internet technology, policymakers would do better to err on the side of weaker rather than stranger property rights. This decisional framework may change over time as the market develops, but provides a reasonable starting point.

I. PERFECT COMPETITIoN-THEORY AND THE INTERNET REALITY

The textbook defini ion of perfect competition is "[a] market structure in which all firm in an industry are price takers and in which there is freedom of entry into and exit from the industry."2 A perfectly competitive market is one characterized not only by no barriers to entry or exit, but also homogeneous products and perfectly informed buyers and sellers able to meet with each other without incurring search or other transaction costs.3 In such a market, price equals marginal cost,4 keeping supply and demand in equilibrium.5

Most markets are not perfectly competitive. Real barriers to entry and exit exist, products are differentiated, information asymmetries persist, and transaction costs are non-trivial.6 The relative strength of these factors' variations from the ideal determines where a market fits in the range between perfect competition and the other end of the spectrum-monopoly, where industry output is controlled by a single source that may price above marginal cost, imposing deadweight losses on consumers. …

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