Slashdot Mirror
SCOTUS Case May End Sale Prices
An anonymous reader writes "If you own a mom & pop store and can't get rid of some of your inventory, you can always clear out some shelf space by holding a sale. If the Supreme Court sides with business interests in a case they heard today, however, such sales may no longer be possible. Since 1911 it has been illegal for manufacturers to force retailers into setting a price floor for products — individual retailers get to decide how much they sell products for. But today the Supreme Court heard oral arguments in a case seeking to overturn this longstanding rule. Should the Court do so, it would drive up consumer prices across the board. This case is particularly salient in the era of Internet shopping: consumers are now easily able to shop around to multiple retailers to find the best price. The Court could wipe out this advantage." From the article: "Should the Court abandon the... rule against minimum resale price maintenance... it would send a signal that the Roberts Court will continue to narrow the application of the antitrust laws and that the Court may disregard settled precedent and Congressional will in other areas of the law as well."
I'm confused: I was under the impression that Apple pretty much dictates the sale price for the iPod and other consumer gear to the dealers? It sounds like such contracts would be massively illegal currently?
So my friend owns and operates his own lighting and audio equipment online retailer. I remember a discussion we had where he was telling me about the minimum price he's allowed to sell his products for, or the manufacturer and others in league with that manufacturer won't sell him anything more. Something like he buys a given product from them for ~$40 but he's not allowed to sell it for less than $80. The manufacturers require all businesses looking at selling their audio and lighting equipment to agree to do the same. This is why you can't find anything cheaper than $80 for a given product, even though the seller could go much lower.
I don't know if this is illegal or not, but is this not what the article is discussing?
That's where the "membership stores" like Costco really got going: they could, through a legal fiction, sell at below the set price. When the law changed, they lost (at least some of) their advantages, and quite a few (anyone remember FedCo?) went Tango Uniform. Costco (or, as it was here, Price Club) was one of the survivors.
Well, if the Court votes price fixing back in then I guess a lot of Wally Worlds will turn into Sam's Clubs.
Won't Get Fooled Again
There's nothing in the streets
...
Looks any different to me
And the slogans are replaced, by-the-bye
Meet the new boss
Same as the old boss
Lacking <sarcasm> tags,
Under MAP, the price is allowed to be anything, as long as it is not advertised (MAP stands for Minimum Advertised Price). MAP appears to be legal, if the penalty is "you can no longer carry our products." If the penalty is "we won't pay you co-op advertising dollars" (see second link), it might be illegal.
0 1_qtj.html
Jan 2004 commentary on legal uncertainty of MAP:
http://www.fredlaw.com/articles/marketing/mark_04
May 2000 FTC "analysis to aid public comment" on MAP policies of "the five largest distributors of prerecorded music," Sony, Universal, BMG, WEA, and EMI:
http://www.ftc.gov/os/2000/05/mapanalysis.htm
In many states it is already illegal to sell gasoline below cost.
TFA is not a news article, it is a guest editorial by a friend ("amicus") of the defendants. So, it is very slanted as to why minimum resale price agreements should continue to be in violation of antitrust laws. Knowing there is always two sides to a story, I sought out that other side and found this from the Ayn Rand Institute:
Legalize "Price-Fixing"
Please note that by posting this, I am not saying I support the Ayn Rand Institute's side; I mearly think it is important to hear both sides of the debate. In this case, I think the Institute does a poor job of convincing the public that their position in in our best interest.
Really though, this is about what you do with what you own and we should not undo a century of sensible policy. Once you buy something you own it and can do what you want, right down to giving it away. Why give up that right? So McSoft can make more money? No one but monopoly providers will benefit from this.
Large online clearinghouses benefit from this.
Local bookstores for example are starting to massively suffer from online competition. Customers walk in, browse, leave and order the book from amazon.com for 10-20% less. How do you combat this? Retail cannot lower their prices to the same level online companies can -- they have prime real-estate leases vs a warehouse in some grungy commercial district. They deal in hundreds of books per week in stead of per hour, etc, etc.
The proposed legislation prevents amazon.com from lowering the price of the books to less than the retailers can survive.
I don't know if that is a good idea, but I do think *something* needs to be done to protect retail. Retail is not an obsolete business model - online sales would suffer too if we couldn't kick the tires at retail. The issue here isn't that retail is 'obsolete', its that retail has to figure out how to make money from customrs who just come in to browse and try things on.
Would you pay 'cover' to get into a retail store? Would you pay a sales person even if you didn't buy something. ie... the bookstore or shoestore could lower their prices and compete with amazon if you paid $20 dollars at the door just to get into the store. There'd be no incentive to buy online as the price in the store would be the same. You could still avoid going into the store, and just buy online directly, and save money, but you lose out on the chance to browse etc.
Essentially, retail and online provide the same final product. retail costs more because of the extra service of bringing the inventory close to you, and having staff available to work with you with it. Retail needs to figure out how to get paid for that component because whats going on right now is that people use the retail outlet to decide what to buy, and then buy it online.
Or put another way online retailers are basically letting retail to all work, and bear all the costs, of making the sale, while swiping the actual transaction because their prices are cheaper. Right now retail bundles the cost of making the sale into the product, and are losing out to online competition who don't have that cost.
Retail needs to unbundle that cost, so they can offer the same product for the same price as online, while somehow charging directly for the service of letting you play with it, try it on, decide what to buy, etc.
Its sort of a bizarre model, but I can't see a better solution. regulated minimum pricing doesn't strike me as a solution.
As online shopping grows other markets will be hit by this, like sports equipment (runners (Nike/Addidas/Reebok), weights, skis, etc), electronics, designer clothing, etc. In fact pretty much anything where you can look at the product (at retail) to gauge its fit/quality/comfort/whatever and then order online and expect to receive an identical product.
So McSoft can make more money? No one but monopoly providers will benefit from this.
You couldn't be more wrong. The little guys would benefit from this. Right now, the stupid masses (Slashdotters included) tend to shop only based on price. Price and price alone. If you can get your widget for $0.01 cheaper online from Omni Mega Corp, you will. You wouldn't care if they were cheaper because they used children for labor. If this thing went through (it won't), people wouldn't be able to pay so much attention to price, and would shop based on convenience, service, and quality. I think it would make the country a much, much, much better place, but it'll never happen.
Why would Microsoft care? All of their stuff is already priced the same everywhere, anyway. Can you prove you're not a rabid anti-MS troll?
I don't respond to AC's.
And the free-market answer to that is that no manufacturer will be able to sell the price-fixed product because no retailers will do business with them.
As a player in the market I play not just for profit, but for market share. My aim is to put all competitors out of business, and since I'm in a market with very high barriers to entry I can keep them out of business. Now that I have achieved a monopoly (and monopoly rents), the retailers have no choice but to do business with me and I will certainly dictate the exact conditions under which my products can be sold. If I'm unable to achive a monopoly, I will instead collude with the other surviving players to our mutual advantage, and again to the disadvantage of retailers and consumers.
This scenario is historically why Anti-trust law was necessary in the first place.
Are you seriously suggesting that retailers are refusing to stock Microsoft products because these products come with strings attached? Reality check: Should their sales agreements specify minium resale prices, the mum & dad computer shops will be in no position to refuse MS. And they won't.
This is but one of the reasons that the intervention of the state is necessary to a healthily functioning capitalist economy.
Better to be despised for too anxious apprehensions, than ruined by too confident a security. --Edmund Burke
"Local bookstores for example are starting to massively suffer from online competition. Customers walk in, browse, leave and order the book from amazon.com for 10-20% less. How do you combat this?"
Offer better services ranging from knowledgeable clerks to coffee bars to author signings to small concerts certain nights of the week.
Or maybe the local bookstore's days are at an end. It hardly seems worthy of laws or court actions. Times change. We all adapt or end.
You were mistaken. Which is odd, since memory shouldn't be a problem for you
"Why does Apple get to dictate the price of the iPod?"
Apple has a MAP program. You can sell iPods for less; you just can't advertise them for less if you expect to get any support (cash or otherwise) from Apple.
Fry's gets around this. They'll run newspaper ads in which they state that the price of the iPod is $X and that you'll get a $Y rebate, but they stop short of the usual step of pointing out that your final price is $X - $Y.
By the way, Universal Music tried doing a similar MAP program with Tower Records a few years back, and Best Buy and Wal-Mart put a stop to that real fast. We all got settlement checks from Universal, and Tower eventually went out of business. Great news for anybody who doesn't like record companies, subscribes to "what's good for Wal-Mart is good for the country," and doesn't particularly mind the slow death of the indie music retailer at the hands of outfits like Best Buy and Wal-Mart which can afford to use CDs as loss leaders.
Sitting in my day care, the art is decopainted.
I have a counterproposal.
All corporations shall be disbanded and remade as co-ops.
Each co-op shall be divided into a number of shares of equal size which shall be equal to the number of employees. Any employee hired to such a corporation shall have the opportunity to spend any percentage of their wage on their share. They are entitled to profit sharing (if any) based on a percentage of their share. Upon leaving they may trade their share to another employee for any consideration with which they are comfortable, with the exception that no employee may own more than one share.
All co-ops shall be democratic entities with each employee being entitled to vote their share or any owned fraction thereof. Shares (and fractional shares) are tallied to determine the outcome.
We have a constitution that [ostensibly] guarantees us certain protections and standards, and then we give these protections and standards up and effectively become a serf when we go to work. Why should this be the case?
With apologies to Kim Stanley Robinson, and those from whom he derived his ideas.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
Having actual lived (and suffered) under this rule as a smaller manufacturer operating on a national level for decades. It has a real and, in some cases, severe financial impact on my life.
This rule caused us lots of harm and prevented the growth of our small, self-funded entreprenuerial business. As a manufacturer, having local resellers is a less expensive alternative to hiring our own sales force. The distribution channel is essentially a way to outsource sales, which if you are a small start-up is often a key enabler to getting your business off the ground. Resellers are crucial to us because they call on customers, demonstrate our products, answer questions, do local support and even run local ads. That's why they are worth the ~30% margin I build in to our business model to pay them. Dealers also assume credit cost/risk and aggregate a bunch of onesy/twosy orders into volume purchases that our small company can handle. To me that 30% is a necessary cost of making and selling my product just as much as parts and assembly. If the dealer didn't make that investment on my behalf, then I would have to raise that much more money and pay to do that work myself. That's the beauty of a distribution channel. I don't have to fund that pre-sales and distribution expense upfront out of my pocket. My reseller partners essentially go into business with me, do the work and get paid for their work by adding that cost downstream of me. It's a wonderful enabling option for me as an entreprenuer - except it doesn't work because of this law. It makes it so that I can't ensure that my reseller will actually be repaid for their investment and work to build our mutual business.
The problem is that as soon as my product starts to get any momentum, an internet or mail-order 'box house' buys a little inventory from a distributor and marks the product up only 15%. Prospects still learn about the product from the local sales calls, ads or shows our 'real' dealers invest their money to do, and prospects still phone the 'real' dealers for pre-sales questions and demos but then many of the prospects buy from the box house because it's cheaper. But it's only cheaper because those box houses 'cheat' by not doing the market development and support work that we need them to do (and built into the margin to pay for). In that case I'd rather lower my product's selling price and split the difference directly with the consumer. The problem is that then I don't have anyone doing local demos, sales, support etc. Some products need those things to succeed and those products (like mine) are harmed by this law.
When I design, cost-estimate and raise capital to build a product, I always have a projected ASP (Average Selling Price). This is what we think a typical consumer will typically pay for the product. We use this to figure out if the product will be a good competitive alternative in the market and if enough customers will actually buy the product. We balance the bill of materials, advertising, cost of sales and customer acquisition costs. In our ASP there is an average expected reseller margin which is there to pay the resellers to do the work we need them to do to make the product successful. Those box houses are essentially 'leeching' the value of the pre-sales work and investment I asked my 'real' reseller partners to make. It sucks that I make this product by my own hand and the "sweat of my brow" so to speak, but then this law limits how I bring my product to the marketplace, how I implement my distribution partnerships, and how I grow my business.
In my view the law is a government intrusion into my right to enter into certain kinds of mutually agreed contracts with my distribution partners. It also quite literally limits what products I can consider creating and offering to consumers. I have to stay away from products that I feel need a lot of face-to-face explanation, demonstration and support to succeed. There's no way I can justify raising the capital from my investors to fund local sales offices and this law make