30 November 2005

Netflix class action lawsuit redux

I just got a phone call from one of the lawyers involved in the Netflix class action lawsuit I wrote about a while back. Apparently my letter had caught his attention, and he wanted to discuss my objections to the proposed settlement in more detail. It turned out to be quite an interesting conversation.

I explained that the first issue was that I felt the proposed settlement gave far too much benefit to the legal firm, rather than the allegedly wronged customers of Netflix. I said that I understood that law firms took class action cases on a speculative basis, and that fines had to be large enough to hurt the companies sued, but that it seemed excessive for the wronged customers to get 1 month of better service that they would then have to cancel to avoid paying more, while the law firm got over $2 million cash.

He said that the settlement was the product of compromise, and that having to opt out of the increased service after a month was the way Netflix wanted it. I said that I didn’t doubt that, but that in the past Netflix had sent me a bonus DVD one month, as a reward or compensation for something I forget. So clearly there were other ways to compensate customers.

He said that yes, Netflix had done that, but that it had resulted in so many customer service queries from people not reading the accompanying explanation, and presumably worried that they had been silently upgraded, that Netflix had vowed never to do anything that way again. I conceded that it seemed entirely plausible to me that I was just atypical of the average Netflix consumer, in that I’m not easily confused by a bonus disc and I hate opt-out arrangements.

He mentioned that he’s had the same objections from many people writing to opt out. I’m guessing they’ve been surprised by the level of response. Maybe they’re calling partly to check up that the people opting out really do understand what they’re opting out of, and haven’t been suckered by a chain e-mail or something.

We also talked about the fundamental issue of why the lawsuit had been brought in the first place. I explained that I felt it was fairly frivolous to start with: in the real world, reasonable people understand that when something is advertised as ‘unlimited’, there are in fact usually some limits. The example I picked was an ‘all you can eat’ restaurant—when you pay for ‘all you can eat’, and the restaurant closes while you’re still eating, that’s not a reason to sue. “All you can eat” is not necessarily meant in a pedantic literal sense, and neither is “Unlimited DVD rentals”.

The counter-argument put to me was that the real issue wasn’t the lack of unlimitedness, but the alleged unfairness. It wasn’t that Netflix couldn’t actually deliver unlimited DVDs, it was that after a certain point, customers who had had fewer rentals that month got sent to the front of the queue—and the heavy customers had the sending of their next discs delayed as a result.

The lawyer said that to use my analogy, it was like the restaurant allowing the people who had had two slices of pizza to cut in line in front of me when I was going to get my seventh or eighth slice.

The thing is, I don’t think that would be particularly unfair. I might not be happy about it if someone grabbed the last slice of vegetarian pizza and I had to wait for a fresh one to be cooked, but I wouldn’t sue them over it. Growing up, at mealtimes the kid who had only had one serving was always given precedence of choice over the one who was on his third helpings.

I mentioned having heard about Netflix giving preferential treatment to low-volume customers ages ago. Again, from my point of view—which admittedly, may be biased by my being a low-volume customer—it seems to make good sense. If John is only getting 1 DVD this month, it’s pretty damn important to make sure he gets the one he wants, quickly. More important, I think, than making sure that Mike’s 8th DVD arrives just as quickly as his 1st.

I also mentioned the allegations a while back about Amazon offering worse prices to people who were regular customers, and similar cases of shops offering preferential treatment to customers who they believe are the most profitable for them. The lawyer talked about how those cases were different; he seemed to be trying to draw a clear distinction but I couldn’t quite grasp his reasoning. Maybe it was some subtle legal point, or maybe he was bluffing.

Anyway, it was all very amiable. I said I would be interested to see the outcome of the lawsuit, and that if it succeeded it would be interesting to see if companies would have to start putting disclaimers up saying something along the lines of “Your price may be worse than the price we’re offering other people, because we don’t think you make us enough money as a customer.”

(Oh, I don’t remember the guy’s name I’m afraid. I’m terrible with names, he said it once at the start and I completely forgot what it was by the end of the discussion.)

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