The Tethered Economy

92 Pages Posted: 31 Jan 2019 Last revised: 3 Oct 2019

See all articles by Chris Jay Hoofnagle

Chris Jay Hoofnagle

University of California, Berkeley - School of Law; University of California, Berkeley - School of Information

Aniket Kesari

University of California, Berkeley - D-Lab (Data-Intensive Social Science Lab); Yale Law School

Aaron Perzanowski

Case Western Reserve University School of Law

Date Written: January 19, 2019

Abstract

Imagine a future in which every purchase decision is as complex as choosing a mobile phone. What will ongoing service cost? Is it compatible with other devices you use? Can you move data and applications across devices? Can you switch providers? These are just some of the questions one must consider when a product is “tethered” or persistently linked to the seller. The Internet of Things, but more broadly, consumer products with embedded software, are already tethered.

While tethered products bring the benefits of connection, they also carry its pathologies. As sellers blend hardware and software—as well as product and service—tethers yoke the consumer to a continuous post-transaction relationship with the seller. The consequences of that dynamic will be felt both at the level of individual consumer harms and on the scale of broader, economy-wide effects These consumer and market-level harms, while distinct, reinforce and amplify one another in troubling ways.

Seller contracts have long sought to shape consumers’ legal rights. But in a tethered environment, these rights may become non-existent as legal processes are replaced with automated technological enforcement. In such an environment, the consumer-seller relationship becomes extractive, more akin to consumers captive in an amusement park than to a competitive marketplace in which many sellers strive to offer the best product for the lowest price.

At the highest level, consumer protection law is concerned with promoting functioning free markets and insulating consumers from harms stemming from information asymmetries. We conclude by exploring legal options to reduce the pathologies of the tethered economy.

Keywords: tethering, internet of things, drm, consumer protection, competition

Suggested Citation

Hoofnagle, Chris Jay and Kesari, Aniket and Perzanowski, Aaron, The Tethered Economy (January 19, 2019). 87(4) George Washington Law Review ___ (2019 Forthcoming), Case Legal Studies Research Paper No. 2019-10 , Available at SSRN: https://ssrn.com/abstract=3318712

Chris Jay Hoofnagle

University of California, Berkeley - School of Law ( email )

341 Berkeley Law Building
Berkeley, CA 94720-7200
United States
‭(510) 666-3783‬ (Phone)

HOME PAGE: http://hoofnagle.berkeley.edu

University of California, Berkeley - School of Information ( email )

212 South Hall
Berkeley, CA 94720-4600
United States
510-643-0213 (Phone)

HOME PAGE: http://hoofnagle.berkeley.edu

Aniket Kesari

University of California, Berkeley - D-Lab (Data-Intensive Social Science Lab) ( email )

350 Barrows Hall
Berkeley, CA 94704
United States

Yale Law School ( email )

127 Wall Street
New Haven, CT 06510
United States

Aaron Perzanowski (Contact Author)

Case Western Reserve University School of Law ( email )

11075 East Boulevard
Cleveland, OH 44106-7148
United States

HOME PAGE: http://www.theendofownership.com

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