Many hub-captive business execs in FRA, MUC, and ZRH must fly LH group. Their time is to valuable to have constant layovers in LHR, MAD, AMS, or CDG. No need to incentivize those guys, they're buying expensive LH group tickets either way.
Instead, you want to incentivize those people to stick to LH group which have the option to go elsewhere. That is, those guys for who might as well elect to fly OW, ST, or *A carriers not fully integrated into M&M.
So your first point is, that there is no real competition for fully integrated M&M carriers on First and long haul Business, but that there is a lot of competition on i.e. FRA-TXL in Eco light?
And your second point is, that F and C guests try to avoid adding 3 hours to a 10h flights at all costs, but Eco light guests don't mind flying 4 hours instead of 1 and paying much more money for that?
Well, that is not common business sense, but that doesn't have to mean for sure, that it is wrong.