When does a competitive advantage become unethical?

A brief but violent storm blew through portions of the IT world in early May, but was downgraded to huffing and puffing, when one of the parties to the dispute shrugged and the other blinked. Most of the animus in the brouhaha came from observers in the apparently tight-knit world of PDA aficionados.

Despite the short-lived nature of the controversy, it did leave ethical questions dangling. To wit, when does seizing competitive advantage cross the line into unethical business practices? The answer, as you might suspect, isn’t as clear-cut as it first seems.

The situation in a nutshell, for those who haven’t been following, involves two companies that make similar calendar applications for the Palm operating system. Pimlico Software was just about to launch its DateBk5 application when rival iambic registered the domain names DateBk4 and DateBk5.

Initially, attempting to go to either datebk4.com or datebk5.com would take viewers to the iambic Web site. When the news hit a Palm-related message board, the readers there reacted negatively and iambic backed down, pointing the addresses to blank pages. This still didn’t satisfy complainers, and eventually iambic surrendered the two domains and apologized for registering them in the first place.

Ordinarily, iambic’s action in surrendering the domains would render the controversy moot, but the whole mess has left open the question of whether the actions were unethical, as some people on the message board have claimed. Clouding the issue for many people was the fact that the proceeds from Pimlico products go to support a gorilla refuge charity.

First, we should dismiss the gorilla charity connection, which is a red herring as far as the ethical considerations are concerned. iambic is a business trying to make a profit. As such it is allowed to use whatever ethical business practices will give it a competitive advantage — regardless of how its competitors choose to use their earnings. The question is whether the practices are ethical, not how the competitor was spending its money.

To get to the bottom of the core ethical questions, it’s always best to start someplace where we feel we’re on solid ground. Had iambic tried to cybersquat on Pimlico’s business name, which it didn’t, it would have been easier to say the action was unethical and was liable to run into difficulty in the courts. In fact, clicking on pimlico.com takes you to a race track. You need to go to pimlicosoftware.com to reach the calendar company.

Had iambic tried to disguise its Web site to make buyers think they were dealing with Pimlico, which again it didn’t, the ethical decision would be much easier and much quicker. The verdict here would be that the whole process was misleading, and that the company was operating under false pretenses. It wasn’t.

What iambic did was register domain names that were clearly available, despite the fact that Pimlico had plenty of time to register them. By directing those sites to the company site, iambic was, I imagine, hoping to attract customers interested in a date book application and offer them an alternative.

Let’s consider an analogy. Suppose I develop a small sports car that I can produce cheaply and feel is a good alternative to the Ford Mustang. I go to a domain registry and find that Ford has neglected, after all these years, to register mustang.com. So I register the name and direct potential customers to my site, where I tell them, “Hey, if you like the Mustang, you’ll love my car. Why not consider it?”

If I did that, my argument would be that Ford had a chance to register the name and didn’t. Furthermore, it’s not my fault that customers mistakenly typed in “mustang.com” instead of “ford.com.” I could argue that this meant the potential customers weren’t so much interested in the manufacturer as the type of car. I’d argue that my tactic left me a competitive advantage to try to offer them a Mustang-like alternative.

In the iambic-Pimlico case, people who went to a search engine and typed in “Datebk4” or “Datebk5” would get results sending them to the Pimlico site. It was only those who tried blindly typing in “datebk5.com” in the address box who went to the iambic site.

Having said all this, the whole notion of the domain redirect leaves a bad taste in my mouth, but then I find that many things people do to maintain a competitive advantage leave a similar taste. So I hesitate, as usual, to use my likes and dislikes as a measuring stick. We need some rationale for why this is unethical — if it is.

Iambic’s first response was to defend its actions, but after the controversy began to grow legs, the company backed off and directed the domains to blank pages. This still infuriated the denizens of the message boards. But the action took us into even murkier ethical territory.

When in doubt, reach for another analogy. Suppose you and I live in a small tourist town and we both run very similar and highly competitive souvenir shops. Mine is close to the main entrance of town, and consequently most people stop there because it is the first one they see — even though you advertise very heavily in tourist magazines. Because of my location, I don’t have to advertise at all.

But you soon realize that there is a small vacant lot next to my store — actually between my store and the town line. I never bought it because it’s not big enough to build anything on. You realize that it is just big enough for a billboard and will meet town zoning regulations. So you buy the land and build the biggest billboard the zoning laws allow.

Because of the size of the billboard, cars coming into town can’t see my store until they are past it, should they care to turn around and look. They dutifully follow the directions on the billboard and make their way to your store. You prosper; I don’t. Have you done anything unethical? I think it would be hard to say you have.

Like so many things in the online world, the iambic-Pimlico controversy takes us into uncharted waters, and it might take awhile to sort it all out. I’m not sure there’s a quick and easy answer to the questions this has raised, but I’m always suspicious of quick and easy answers anyway, as they usually fail to capture all the nuances of the situation. As I said previously, my initial feeling was that the original tactic in redirecting the pages was questionable, but I don’t have a well-developed theory for why it would be. Pointing the domains to blank pages seems to be less questionable.

iambic has apologized and Pimlico, which acted with restraint and aplomb during the whole mess, has accepted the apology. Buy I think the ethical questions remain and are worthy of some discussion, although that should be done in the abstract — apart from the parties involved.

Meanwhile, the fallout continues. Although the two companies have apparently resolved their differences, some of the partisans on the sidelines, however, have thrown restraint to the wind. Among these was the vigilante who posted a message saying he or she operated DNS servers for a regional ISP and had set all servers under his/her command to redirect page requests for iambic.com to Pimlico Software. That’s not even close to murky. If it’s not illegal, it’s clearly unethical — and more than a bit over the top.

What do you think? Is this type of action a case of taking advantage of an opening left by a competitor? Or is it dirty pool? Weigh in at our Ethics Matters forum at

www.infoworld.com/forums/ethics

or write to me at ethics_matters@infoworld.com.