The problem is that there is only a certain number of available seats, and you would not want to have to play musical chairs in-flight just to be accomodated in C...;-)

I agree that the airline has to accomodate the passenger downgraded, by either offering him a VDB-package that lets him agree to the downgrade, or kind of IDB him and then pay whatever the applicable law says. This also holds true in my opinion for award-tickets or upgrades.

I once got downgraded on LH on a very short train-sold-as-flight-segment between Frankfurt and Cologne (they had resold my seat as they thought we would not make it in time to the platform), and each of us got a 200€ voucher, redeemable as 100€ cash if requested, out of this. This amount was the then-valid compensation for IDB. We then were given the option to take the next train with seats in C, or get on the one we were booked on in Y.

Greetings - Dirk