CP 5-1
Netbooks Inc. provides accounting applications for business customers on the internet for a
monthly subscription. Netbooks customers run their accounting system on the Internet;
thus, the business data and accounting so”ware reside on the servers of netbooks Inc. The
senior management of Netbooks believes that once a customer begins to use Netbooks, it
would be very difficult to cancel the service. That is, customers are “locked in” because it
would be difficult to move the business data from Netbooks to another accounting
application, even though the customers own their own data. Therefore, Netbooks has
decided to entice customers with an initial low monthly price that is half of the normal
monthly rate for the first year of services. A”er a year, the price will be increased to the
regular monthly rate. Netbooks management believes that customers will have to accept the
full price because customers will be “locked in” a”er one year of use.
Answer:
a. In order to make the best determination whether or not Netbook Inc.’s ‘half price’
offer is an ethical business practice, we have to investigate whether all necessary
information prior to purchase was disclosed. That is, the consumer was aware of the
initial low price prior to signing up for the entire package and the eventual price
increase therea”er. If Netbook’s Inc. could provide that their consumers were aware
of the introductory price, and continues to sign the contract or go through with the
package, then it is the consumer’s choice. Therefore, Netbook Inc.’s practice of luring
