Slashdot Log In
Battle Over Minimum Pricing Heating Up
Posted by
kdawson
on Sun Dec 07, 2008 09:19 AM
from the can't-charge-that dept.
from the can't-charge-that dept.
The Wall Street Journal is covering developments in the gathering battle between manufacturers and retailers / discounters, especially online ones, over minimum prices. Earlier this year the Supreme Court upheld the right of manufacturers to enforce price floors for their products. Since then, manufacturers have increasingly been employing service companies like NetEnforcers to snitch on discounters who offer goods below "minimum advertised prices" (or MAPs), and to send DMCA takedown notices to the likes of eBay and Craigslist for below-minimum offers. Separately, the Journal reports that a coalition of discounters and retailers is using eBay as a stalking-horse in a campaign to get consumers, and then politicians, fired up enough to pass legislation outlawing MAPs.
Related Stories
[+]
Your Rights Online: Ban On Price Floors Abandoned, Internet Prices May Rise 544 comments
paro12 and i_like_spam informed us of a 5-4 decision by the US Supreme Court which abandons a 96-year-old ban on manufacturers and retailers setting price floors for products. The Slashdot community discussed the issue when the case was argued back in March. The ruling means that anti-competitive complaints based on price-fixing will have to be argued case-by-case and will be harder to prove. Discounts and discounters in all venues may be under pressure, with internet sales possibly the hardest hit. "Importantly, this case points a dagger at the heart of the most consumer-friendly aspects of the Internet. The Internet has shifted power to the consumer in two ways. First, it allows consumers to search for and gather information in a cost-effective, efficient manner. Second, it provides a low-cost means of retailing, making it easy for discounters to offer products to the public. This combination squeezes excess profits and inefficiencies out of product prices. Retail price maintenance seeks to short circuit this extremely consumer friendly process. By setting minimum prices, manufacturers can build in excess margins for themselves and for their favored retailers -- prices that consumers have no choice but to pay."
This discussion has been archived.
No new comments can be posted.
The Fine Print: The following comments are owned by whoever posted them. We are not responsible for them in any way.
Full
Abbreviated
Hidden
Loading... please wait.
Shouldn't need a new law, but... (Score:5, Insightful)
Shouldn't existing law prevent MAPs already? This sounds an awful lot like collusion and price-fixing to me. But since the Supreme Court has already said that manufacturers can enforce price floors, it sounds like new legislation is definitely needed.
Minimal Pricing = Legal Monopoly? (Score:5, Insightful)
How can minimal pricing be legal or logical?
If I sell you an apple from my apple tree then what right should I have to say that you sell that apple at? Or what rights do I have to then your apple at all?
Obviously the original manufacturer has certain rights like copyright, trademark, but I fail to see how these right extend to something like price further down the supply chain.
This whole system just seems abusive and will make it harder for competition to ensue which last I checked was meant to be what a capitalist society was all about.
Re:Minimal Pricing = Legal Monopoly? (Score:5, Interesting)
Precisely, and here's a quote from that article:
NetEnforcers alerts its clients including Sony Corp..... they can allege that the discounter's use of the product's name or image constitutes trademark or copyright infringement, in an effort to force the seller to stop listing the discount....
So if I have a brand-new, never-used Sony PS3 and for whatever reason I decide to duimp it for cash, I might list it for $200 on amazon oe Ebay. BUT then along come the "netenforcers" claiming I violated the MAP, or I violated copyright, or some such bs, and yank my listing straight off Amazon/Ebay.
They shouldn't be able to block my sale of my product! I can set any damn price I feel like setting, even as low as a penny, because *I* own it.
Parent
Re:Minimal Pricing = Legal Monopoly? (Score:4, Interesting)
NetEnforcers says that this year through Oct. 13, it helped shut down 1.2 million seller pages on eBay
Frak. That's a lot of takedowns and I bet most of them were completely harmless and legal. I had one of my auctions yanked last year, not by these people but by some lawfirm in California because they BELIEVED my copy of Star Trek TNG season 1 was an illegal copy. I called this lawfuck...er, firm and tried to reason with the man in charge but he refused to listen. He just kept repeating that if I list TNG-1 a second time, he'll prosecute and yelled loud enough for my secretary to overhear the threats.
I ignored him and relisted it anyway... fortunately the threat turned out to be the babbling of a power-tripping, windbag lawyer... it sold and my customer was happy. I hate corporations, I hate lawyers, and I hate politicians that serve corporate masters.
Parent
Re:Minimal Pricing = Legal Monopoly? (Score:4, Insightful)
No. You don't own it. That was the end result of the supreme court decision. You no longer own the goods you buy. You only have a "licence" for them. Just like in the software industry.
Manufacturers took their cue from software developers. They wanted the ability to sell a product, yet maintain ownership. They got it. When the day comes and you cannot sell or paint or add and extension to your "Hometech" built house because the company still holds rights over it, then the gravity of the court decision will truly hit home. You can't own anything anymore without a company charter and a team of high priced lawyers.
Parent
not for second sale (Score:5, Interesting)
Parent
they don't seem to be distinguishing (Score:5, Informative)
You're correct legally, but NetEnforcers et al seem to be demanding that eBay take down all sales of new products below the minimum price, assuming that these must be prohibited first-sales.
Parent
Re:Minimal Pricing = Legal Monopoly? (Score:4, Interesting)
Parent
Re:Minimal Pricing = Legal Monopoly? (Score:5, Insightful)
If I sell you an apple from my apple tree then what right should I have to say that you sell that apple at? Or what rights do I have to then your apple at all?
Simple. Before selling that apple, you make a contract that says what the buyer can do with it. If he does something else with it, it's a breach of that contract.
So if we want to prevent for example these MAPs, or any other similar thing, we need a law specifically saying that such contracts aren't valid.
It's always a trade-off, because here we have two private parties (seller and buyer), and then we make legislation about what kind of contracts they may make between them. Ie. it limits freedom of people and freedom of trade. Then again, it may help prevent monopolies or other bad stuff that would in effect limit freedoms even more.
As far as I can see, it's a slippery slope both ways, and right now it's earthquake season too... We need to try to stay at the top, but it requires constant vigilance.
Parent
but you DIDN'T buy that apple (Score:4, Interesting)
Retailers are only consignment dealers, they don't buy anything up front. The manuftcr stocks their stuff on the floor, and the BestBuy remits as each item goes past the register. It's a form of floor planning like car dealers. If the item disappears from stock without going past the register (stock shrinkage aka employee theft) Apple eats it.
Since the mfr assumes the risk, then the mfr sets the terms and prices. This is how WalMart "Keeps Prices Low."
If the stores actually bought this stuff from the mfr as it came into the store, then it would be their property to dispose of as they see fit. But we don't.
Parent
All these Apple analogies (Score:5, Informative)
I find humorous. No one has mentioned Macintosh computers. Apple has a very interesting way to get around this problem. They have a MAP but they don't really need one.
Reason is, they sell them to you (the retailer) at VERY near their online store's price. When you, as an Apple Authorized Reseller sell a mac, you send proof of your purchase to them, and at the end of the month you get a check from them. Depending on a wide variety of factors, basically "how much you've behaved like Apple WANTS you to behave as their representative", that determines the amount of cash they give you back per machine. They call it "metrics". We call it "kickbacks".
AARs don't make ANY money on selling a mac. Many of them even LOSE money. But those BDU checks are what make their profit.
This has several interesting effects. First off, when a customer calls us asking about prices for all the systems, we can just direct them to the online Apple store, because all our prices will be the same as theirs, and will be the same as all our competition's. Second, Apple still holds us to MAP, so we can't sell at a loss to make more with the BDU checks. Third, we don't have to worry about direct competition in our market because no one else can sell below MAP, because everyone that's getting the computers from Apple directly has to sell at that price so they're not available anywhere below MAP to be bought "wholesale" and then retailed elsewhere.
The only two problems this causes us is #1 we have no way to compete with the deals Apple offers, such as discounts on ipod with computer purchase, or especially the student discount. #2 some of the places like Mac Warehouse get around this by throwing in free stuff like printer or memory upgrade and that's hard for us to compete with.
This whole thing wouldn't normally work because if Apple makes a price drop when a new model comes out, everyone would be stuck with merchandise they paid more for than they can sell for, so Apple also cuts us checks for any unsold inventory to make up the difference when they drop a price. (they call it "price protection")
The BDU checks and the price protection both are at Apple's discretion, so it gives them a lot of leverage to tell us what we can and cannot do. So even though we're independently owned/operated, we have to basically do whatever they say, or they'll cancel our AAR status and we lose the BDU checks and price protection and that puts us out of business. Really annoying when Apple does something like prohibit us from selling iPhones, and then turns around and lets places like Best Buy and Wal Mart sell them. Sort of a swift kick in the balls and we have no real recourse but to bend over and take it. For example, if Apple catches us selling an iPhone we'd get delisted instantly. If we were caught so much as displaying a pre-release of any Apple software, such as Snow Leopard or the new Aperture, same thing. So in this respect, the manufacturers can have a lot of control over their retailers - it goes far beyond just MAP.
I don't know for sure, but it seems like their preventing us from selling iPhones is something that should be illegal? Apple is notorious for taking steps to eliminate competition within their market, specifically from their partners. "competes with an Apple product" is the #1 reason for iPhone apps to be rejected by Apple from being sold on the Apple Store.
Parent
Is this free market? (Score:4, Insightful)
How exactly could a market be described as "free" if a single market actor is able to force other market actors to not sell the goods at a price they see fit?
Price limits (Score:5, Insightful)
Re:Price limits (Score:4, Informative)
False. Here is my source:
http://www.cbo.gov/ftpdocs/88xx/doc8885/EffectiveTaxRates.shtml#1011537 [cbo.gov]
Do you have a source for your claim?
I suppose we could quibble over households vs individuals, but note on that page, there is no instance where moving up into a higher income group results in a cut in overall taxes.
And maybe the wealthy should be paying even higher taxes, I don't know, but the idea that they are paying lower taxes is simply false.
Parent
Re:Price limits (Score:4, Informative)
You are only looking at income tax rates. Rich people derive a big portion of their income from capital gains, which is taxed at a much lower rate. The best known example is Warren Buffet, who is taxed a lower rate than his personal secretary (he uses this to support higher taxes on himself).
Parent
Makes for an awkward situation (Score:5, Interesting)
Enforcing MAPs is often more about maintaining supply chain and sales stability than explicitly trying to be profiteering.
Recently in the model-aircraft world, we had one large online, offshore (Asia) store acquire a large lump of stock from a supplier via proxy (because the supplier explicitly didn't want this online retailer selling their stock), the store promptly dumped the stock into the market at a price within 10~15% of the supplier cost price which was about 30% below MAP (on a $400~$600 item).
This had a couple of immediate effects;
1) Everyone bought stock from the one online store
2) Other major US/Europe stores couldn't match due to legal issues with going below the MAP
3) Said US/European stores stopped purchasing from the factory
4) Existing customers became enraged at the "huge profiteering" (many electronics goods are retailed at roughly 400% of their factory cost or higher)
Ultimately, the factory goes into a situation where they're between a hard place and a rock.
Certainly quite an effective way to crush some competitors in your market space.
We don't like to think that people are carving out huge profits on the items we buy, however the reality is that a lot of what we pay for items -is- profit that pays the wages of people like us who need to buy things to keep on living.
Re:Makes for an awkward situation (Score:5, Insightful)
Funny. The "nightmare" situation you describe resulting from a retailer ignoring MAP only becomes a problem because of MAP. 1,2,3 and 4 would not have happened if the regular retailers were "allowed" to lower their prices in response to the current (temporary) situation in the marketplace. Its plain and simple legal manipulation of the retail markets by manufacturers, and hurts everyone else.
Parent
Re:Makes for an awkward situation (Score:4, Interesting)
The difference to notice though is that there's a higher cost involved in maintaining a support infrastructure for the product, as apposed to dumping the product and running with the (slimmer) profits.
Essentially the "ultra low cost seller" takes a higher effective profit because they pay no contribution towards maintaining the support network (advertising, support, repairs etc).
You can remove the MAP's, yes, what you'll see then is a lot of retailers refusing to take on the products at the risk of margins going too low to warrant carrying the stock and the after-sale responsibilities.
The problem is in the form of the rogue trader who sells today and is gone 14 days later and yes, customers will and do go and find one of the other resellers to scream and yell when it doesn't work, whom -will- then get shafted if they don't support the item in terms of bad-mouthing (by the customer) or financially (by taking on the problem above and beyond their responsibility - simply to keep the good name). If stores don't like the MAP enforcement then they shouldn't buy the stock to sell. If no one buys the stock then your market has sorted itself out.
MAPs are a minor assurance, from the factory, that when you hand over your money to buy their stock you're not going to end up with something worthless in your hands two weeks later because of some fly by night jerk who submarines the market to make a quick buck and leaves the existing sellers to clean up the mess (as if there aren't already enough market forces pushing against you).
Parent
What Is The Trademark/Copyright Violation (Score:3, Insightful)
It's probably bogus but I can't even figure out what the theory is on which manufacturers sue unauthorized distributors. I mean my understanding of trademark law is that it's uncontroversial that using a product's name to correctly identify the item you are selling isn't a violation of the trademark. Moreover, merely listing the item name isn't enough to create a copyright violation.
I mean I see how this might work against retail operations or online stores. After all they usually need to put up a description of the product, pictures of the box and other information to make it attractive to the customer. No doubt the allegation is that the text on the box or the blurb describing the item are copyrighted. But how does this reach ebay sellers?
Re:MAP vs Price Fixing (Score:4, Informative)
Parent
Re:MAP vs Price Fixing (Score:5, Informative)
Exactly. Protecting the Dealers from other dealers is the reason for MAP Pricing.
I worked in pro audio for 5 years. MAP is very prevailent in that market. I live in North Dakota. Its not like I sell 1000 dollar speakers every day like Musician's Friend does. So if I'm a dealer and the 1000 dollar speaker costs me 800 dollars. plus 70 dollar shipping. I'm making 130 dollars per speaker.
If there is no MAP. then The online retailer is able to then sell the speaker for say 850 dollars and and then sell more, getting better pricing so that the speaker may only costs them 700 dollars. well now they're able to sell it for less than what the smaller local dealer can and still make a profit. and make up the extra amount in gross sales. Isn't this reminding you of Wal-Mart?
These companys want to keep their local dealers open. They want to have a place for you to take your unit back to for support. if they don't have MAP there is no reason for that local dealer to even been selling the product if they can't even be competitive with the pricing.
Make sense?
Parent
Re:MAP vs Price Fixing (Score:5, Interesting)
I sell "dual core intel computer with 2gb" for $1000 (or even more). Now, the customer *could* go to tigerdirect.ca and buy the "same" system for a few hundred dollars. I make my client VERY aware of that option. Really, I don't want any buyers remorse or anxiety over purchasing a system from me.
But... on-site setup, customized media software, lifetime labor, quality parts, little to no noise, and a nice pvr case.
Let's see tigerdirect.ca compete with that.
If *all* you are doing is selling the speakers -- I don't have much sympathy. Take your $50 dollar profit, if that's all you can get. Buy more speakers, and go "internet" as well.
MAP *does* gouge the consumer; if only to keep your business model afloat.
Personally, I think that MAP is designed to protect "reputation". Without the need for anyone to apply any extra elbow grease.
Parent
Re:MAP vs Price Fixing (Score:5, Insightful)
You've successfully demonstrated that the problem lies upstream.
If JBL's policies are hurting the customers, then they need to change those policies. If the problem relates to the distribution model, then JBL needs to beef up their distribution accordingly.
The MAP I think is a crutch. Sure, I could save a few bucks online, but at what cost ? If anything, audio guys are aware that gear breaks down (a lot), and a web site isn't going to be of any use when your amp blows up the day before your show - might as well cancel the next 2 months' bookings! A brick and mortar store has customer service (most of the time). They will fix your amp (or ship it back for you), and give you a loaner.
You know what sucks about buying online ? Shipping. The first time you send those cheap speakers out for repair, the shipping will burn whatever you had saved by buying from www.cheapspeakers.cn
Frankly, I think we can do away with MAP. If someone wants to pay a cheaper price for less service, that's their choice. They will probably end up buying another when the first one breaks, so the manufacturer might actually benefit from the crap service.
Parent
Re:MAP vs Price Fixing (Score:5, Interesting)
Exactly. Protecting the Dealers from other dealers is the reason for MAP Pricing.
Except the consumer gets screwed by this - essentially it's a way to make price comparison more difficult. As a result, some places don't advertise price but require a call or email to get a quote.
I worked in pro audio for 5 years. MAP is very prevailent in that market. I live in North Dakota. Its not like I sell 1000 dollar speakers every day like Musician's Friend does. So if I'm a dealer and the 1000 dollar speaker costs me 800 dollars. plus 70 dollar shipping. I'm making 130 dollars per speaker.
If there is no MAP. then The online retailer is able to then sell the speaker for say 850 dollars and and then sell more, getting better pricing so that the speaker may only costs them 700 dollars. well now they're able to sell it for less than what the smaller local dealer can and still make a profit. and make up the extra amount in gross sales. Isn't this reminding you of Wal-Mart?
If it means consumers pay less then it is a good deal - the manufacturers don't want to piss off they big buyers by not offering steep discounts but don't want to offer the same pricing to the little guy. They could offer the same price to the little guy but they don't want to take the revenue hit so they use MAP to "protect" them while hurting the consumer.
These companys want to keep their local dealers open. They want to have a place for you to take your unit back to for support. if they don't have MAP there is no reason for that local dealer to even been selling the product if they can't even be competitive with the pricing.
If they really want then don't give the big sellers a sizable discount - stay a specialty product selling through dealers only. Some companies, such as Stihl and Snapper, do this. Of course, their prices are not that much more than for a similar product at Home Depot; they simply chose not to get into the price death spiral and instead sell on quality. As the CEO of Snapper said - "My tombstone will say 'He turned down WalMart.' - whether or not that was smart remains to be seen"
Make sense?
It depends on the business model - I don't think one that gives better pricing to Big Box / large online stores and tries to keep a dealer network in place via MAP is a viable long term strategy. The big guys will find ways to sell for less (MAP only controls advertised, not selling price); squeezing the dealers.
Parent
Re:MAP vs Price Fixing (Score:5, Insightful)
Parent