Prices are information goods, and information wants to be expensive, because it’s so valuable

Michael Giberson

I know the internet mantra “information wants to be free,” the bane of many copyright holders.

Macy’s, among many others, is one retail Goliath fighting against the free flow of information online. The Chilling Effects Clearinghouse posted online a copy of Macy’s letter to, the “David” in this David and Goliath story, requesting the site remove information carried online related to Macy’s day-after-Thanksgiving sales promotion:

Like many retailers, Macy’s generally conducts a significant shopping promotion centering around the days following Thanksgiving (commonly known as a “Black Friday sale.”) The elements of this promotion, including sale dates and times, as well as sale merchandise selection and pricing, are the product of substantial time and effort on the part of Macy’s, and constitute proprietary information.

We have become aware that the web site (the “Site”) is currently displaying this information, including specifics relating to “early bird” specials, a detailed list of items to be on sale (with sale pricing), … none of which has been released to the public … The Macy’s Black Friday Materials are protected by copyright, trade secret, and other federal and state laws….

Accordingly, we hereby demand that you immediately remove any and all … [blah blah blah] … We further demand that you disclose the source ….

In the New York Times, Randall Stross reports on the battle between retail giants and online davids. Apparently the retailers’ attorneys talk a big game, but are reluctant to actually take such websites into court:

For the last several years, Wal-Mart Stores and other large chains have threatened legal action to intimidate Web sites that get hold of advertising circulars early and publish prices online ahead of company-set release dates. The retailers’ threats rest upon some dubious legal arguments, however, which may be the reason they haven’t shown a keen interest in actually going to court over the issue.

The article calls the legal claims “dubious” in part because “the claim of copyright protection for facts themselves, like sales prices, that exist separately from their original expression was rejected by the courts long ago.” The article then makes reference to a 1991 Supreme Court case in which the court ruled that “names and phone numbers in a telephone directory could not be copyrighted and thus could be freely copied.”

While the article makes much of the fact that the retailers haven’t tested the issue in courts, it may be because the retailers have concluded that the harm is relatively small while court cases are expensive. In addition, huge retailers suing little website operators doesn’t generate much consumer goodwill.

Still, I wish the retailers would sue. I would want them to win. Prices are property.

The phone book case mentioned in the Times article seems inappropriate. In the case, Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., Inc., the court said, “facts do not owe their origin to an act of authorship. The distinction is one between creation and discovery: The first person to find and report a particular fact has not created the fact; he or she has merely discovered its existence.” A little later the court said, “[A]ll facts – scientific, historical biographical, and news of the day . . . may not be copyrighted and are part of the public domain available to every person.”

When a retailer, by application of managerial expertise, selects prices and products to promote, the prices chosen are not facts being discovered. The terms of trade that will prevail in the market – the P* that results when economists draw supply and demand on the chalkboard – may be a kind of discoverable fact. The prices at issue here are pieces of the retailer’s business strategy, they are creative utterances.

I grant that the prices here make for a funny kind of property. Retailers will eventually spend millions of dollars to inform the public of the prices, but prior to the retailers’ release of the prices, they will spend to prevent the public from becoming informed. The intent to widely distribute the prices cannot undermine the property claim anymore than a publishers’ intent to sell many copies of a book will undermine a copyright claim.

Prices are information goods, so once they are distributed anywhere it is nearly costless these days to distribute them everywhere. Low cost of distribution doesn’t constitute economic grounds for depriving an owner of property. Books, again, or music seem the obvious examples.

Prices are property” is the title to a 1991 article in the Journal of Law & Economics by Jarold Mulherin, Jeffry Netter, and James Overdahl. Much of the article focuses on a sixty-year period from the mid-1860s to the 1920s over which the New York Stock Exchange, Chicago Board of Trade and other financial exchanges fought to maintain control over access and use of prices produced on the exchange. The authors make a convincing case, at least to me, that the exchanges were more than just an efficient place to trade shares. Exchanges were and are firms that produce a valuable information good. While the information may become widely distributed, such distribution did not undermine the exchanges’ ownership claims. The authors suggest that the exchanges needed control over price information in order to succeed as organizations.

The authors conclude that, as of 1991, the law governing the output of financial exchanges had become somewhat muddled, and economists were not much help. Economists were generally too ready to believe that prices are the product of abstract, social processes rather than individual choice – too ready to believe that prices are made “in the market” and simply discovered by entrepreneurs. A recent court case involving copyright and prices, NYMEX, Inc. v. IntercontinentalExchange, Inc. – decided on somewhat other issues – suggests that these laws remain muddled.

Sure, information wants to be free. As Wikipedia says, the expression was first made by Stewart Brand in 1984. Brand said:

On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.

I’d be about the last person to believe that the contents of a retailer’s holiday sales catalog is the kind of information that “just changes you life.” But the contents of those catalogs, including the prices chosen by the retailers, are the property of the retailer.

Coming up with a good price can be hard work. Just because the resulting product can be expressed as a simple number, easily copied and cheaply redistributed is no reason to deprive the retailer of its property. Just because the retailer will itself distribute the prices widely is no reason to deprive the retailer of its property. Maybe the law currently protects the retailers’ property claims, and maybe not. I think that there is an economic case to be made in favor of the conclusion that the law should protect the retailers’ valuable information property.