[davidtyleryork]

Yeah, sadly this lawsuit is just "cost of doing business" for Best Buy. They earned $140m in the first year, they only had a % chance of paying out for a lawsuit, and the lawsuit was worth less than 20% of the $140m earned. They just profited over $113m (plus the benefit of money now vs. money later) from destroying a startup

Business as usual in America nowadays :/

[tptacek]

No, to both of you. No no no. Best Buy didn't "earn" 140MM; according to this story, they achieved 140MM of revenue. Revenue for Best Buy is the price tag on consumer electronics. Bust Buy doesn't pull those consumer electronics out of its butt; it pays vendors to acquire those goods, marks them up, and sells them to customers. Best Buy is a public company and is required to account for this difference, which is its gross margin. Best Buy's gross margin hovers around 25%.

If it all this suit cost Best Buy were the damages and penalties we already know about, then they are already close to wiped out on the deal (27MM vs. ~35MM, less legal). But that still doesn't capture it, because Best Buy spent money to clone this startup's offering and also to run the company and keep the lights on in the stores, which are expenses not captured in Best Buy's gross margin.

Incidentally, the 22MM figure also didn't get pulled out of some judge's butt. If you read the jury's finding, it's the amount of unjust enrichment Best Buy achieved by misusing Techforward's property.

In the very worst case scenario, virtually every penny of profit from this program was redirected from Best Buy to the winners of the lawsuit. But it's even more likely that Best Buy took a bath even beyond the imputed profits we're talking about.

[gwern]

That's a good point - revenue is not profit - but I'm not sure it is it a conclusive point. First, why would you assume the final estimate of revenue which came out of the sausage system of the legal system, with Best Buy's lawyers presumably heavily incentivized to knock down the estimate at every point in every way possible, is remotely accurate? An economics book on cartels and their prosecution I read (_Global Price Fixing_) noted dryly that the estimates of illicit revenues and hence profits in the cases were nowhere near what an outside would calculate especially in the case of the vitamin cartels.

(A more picayune point is that a small profit or a loss to Best Buy in one case doesn't mean that its practices are not a net expected profit; indeed, if they weren't losing an occasional case, they probably aren't taking enough risks to make the most possible profit.)

[pc86]

I'm willing to bet the $5MM in punitive damages put Best Buy squarely in the red if they weren't there just after the $22MM.

[tripzilch]

Where do you get the numbers for BB's gross margin? Isn't 25% a bit small? (also does it mean they mark up the vendor price by 25% or that 25% of the consumers price tag is profit?)

[qq66]

Your calculation ignores the likely dozens of other companies Best Buy and other BigCorps have screwed over with no consequences whatsover. They rolled snake eyes in this case but this will still be business as usual until damage awards become 100x actual damages, since 99 times out of 100 the BigCorp's lawyers will have their way.