Apple Class Action Litigation and Why There is No Free Lunch

Rob Enderle

I've likely sounded like a broken record for much of the last decade in trying to remind people that there is a cost to "free" and it may be more than you are willing to pay.


This week, a class action lawsuit was started that primarily focused on Apple application developers who regularly provided, as part of their business model, information to advertisers in order to provide free stuff. I was kind of shocked that Apple was targeted first rather than Google because Google's entire business model is based on similar practices.


Let's explore the cost of "free" as we approach the end of 2010.


Reminder of the 'Free' Risk


The aforementioned lawsuit also serves as a public reminder that providing things for free and getting free stuff have risks because consumers have rights. When those rights are violated, either the government or lawyers will step in and the result in both cases can be very expensive. As consumers, the cost of the free stuff may be more than we are willing to pay (in the form of money or embarrassment), particularly if this personal information is poorly protected and our identities aren't adequately concealed.


Corporate Decision Makers at Risk?


The risk isn't just with our personal lives, either. I've seen corporate decision makers close deals because a vendor offered them something for free not realizing that the price of the rest of the deal was uplifted to more than cover the free addition. I remain particularly worried about stories of decision makers getting free gifts after their decision, as well not realizing that they were putting their jobs and careers at risk in what is still a horrid job market. Evidently, new laws came into play in 2010 that make this practice far more dangerous.


Free practices from vendors can also lead to some questionable behavior by employees. When I was handling commissions for IBM, we found sales reps that were filling their garages with free products and then reselling them when the products should have gone to the buyers. Because the products were free, they weren't tracked to the clients' accounts.


In this litigation- and regulation-heavy environment, it may be wiser to use straight discounting to close deals and avoid free giveaways because, in hind-sight, the giveaways may look like scams, which could, at best, destroy the customer relationship or, at worst, attract the unforgiving interest of litigators or law enforcement officials. In any case, disclosing the cost of "free" is becoming a requirement and it makes sense to move ahead of that curve.


Wrapping Up: Free Isn't Free


There is no such thing as a "free lunch." Look at Google: Its model is to give stuff away for free and then monetize it after. That sounds really smart, except it means that the money is coming from you somehow and even Google may not know where that will eventually be. That's an unknown risk that could come back to haunt you if you don't have some kind of contract. In fact, with regard to every free thing you get professionally or personally, be prepared to pay for any so-called "free" items.


For vendors, it is a reminder that while you may be able to buy trinkets in volumes equivalent to Manhattan Island for the time-being, eventually the land owners, or in this case, the personal information owners, will figure it out and the prices will go up. All in all, we all need to be a little smarter about the decisions we make and look for the hidden costs of "free."

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