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."
As a retailer, I would simply stop stocking any product that forced me to sell at price higher than the market could bear. This would backfire on manufacturers and have a terrible effect on availability and ultimately amount of goods sold, i.e. recession time... In some cases Internet retailers sell at or below cost as loss leaders, or the volumes are so much higher than a small store could sustain but I don't see how you could apply this equally to all products sold.
Right now, many dealers show "prices too low to list" or "call" to get around distribution rules. You're gonna see creativity like never before if this happens.
Designer merchandise manufacturers will just tell vendors like you "buh-bye."
Ditto vendors who have a lock on their product, such as Microsoft. As it is, it's very difficult to find MS-Windows below MSRP. Under these rules, it would be impossible.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
You'd see a vastly improved rebate industry ramp up, and more importantly, you'd see retailers "bundling" things that they would then instantly take back for a substantial credit/refund. Anyone who's worked retail (especially IT supporting retail!) knows how creative someone can get while competing with someone else two doors down in the strip mall. Where this would get ugly is the little stuff... like, toothbrushes.
Another solution? Retailers who thrive on competitve pricing all become like Costco, and sell things "wholesale" to their member customers. It's sort of like those bars where you have to become a "member of the club" (for $0.01) in order to have a drink poured.
This effort will flop, or there will be a legislative cure anyway. Wal-Mart alone would lobby that one right into the stratosphere.
Don't disappoint your bird dog. Go to the range.
it would drive up consumer prices across the board.
Is the submitter suggesting that the periodic sales by mom & pop storesare responsible for keeping retail prices in check "across the board?"
Anti - price fixing laws are actually becoming quite a real problem or manufacturers and retailers, because they have to juggle the retail channel (which really needs 30%) with the online channel, which can be profitable on only about 6% margin. Preventing online from undercutting retail means giving them less margin, which is fair, but even then they can undercut until their margin is absolutely microscopic and still make money, whereas the retailer can not.
If you're happy with a world where brick and mortar retailers just can't exist, then by all means keep the current system and they will die, and not because of free market forces, but because manufacturers can't control their street prices.
Check out the scuba equipment market. Most stores that stock scuba gear are mom & pop's - the big box stores don't bother with this niche stuff. The mom & pop's sign price floor agreements with the manufacturers in order to sell the gear and get the warranty. Now they're getting slammed by oversea's "grey" marketeers that are shipping stuff over the Internet for half the costs. They aren't under warranty, but the retailers themselves have provided an aftermarket warranty to get around it, as they're making enough cash that its worth it just to replace the item. You just can't have these kinds of agreements anymore with the transparency and information exchange the internet allows. New business model time boys! Oh, wait, I'm sorry, I mean -- call the lawyers!
If this preposterous case turns out with manufacturer set floor prices, would this also end auctions across the USA, including eBay?!
Demonstrant's Open Source Tools
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?
IANAL, but businesses are already allowed to set minimum prices, there is just a presumption that it violates anti-trust laws. However, this presumption can be rebutted. All this case would do is remove the presumption that it violates the anti-trust laws.
The apologists for the Nanny State routinely trot out antitrust as an example of where the free market doesn't work, but in reality it's the industries with the most regulation by government that are the most monopolized. Take telecommunications. For most of the history of telephones, it was illegal to compete for customers. That monopoly was enforced by local governments. But I guess as long as you control the government schools that teach the history of 'Robber Barons', people will believe the propaganda.
[100% ISO 646 Compliant]
SVM, ERGO MONSTRO.
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. While I'm sure you could come up with a few counter-examples, in many markets manufacturers are at the mercy of retailers, and exactly the *opposite* problem occurs -- retailers dictate price to manufacturers. This is one of the thing people whine about when the bash Wal-Mart.
If online retailers can provide the same thing for 24% less then we should have very few brick and mortar retailers.
Grocery stores would still exist, as would convenience stores. Clothing shops might do OK since people like to try things on. There are always impulse/emergency items, in many categories. I can see the need for a handful of electronic/computer retailers in a large city.
Can you give me a good reason we should prop up an obsolete business model besides nostalgia or personal preference?
The way I've shopped in the last 10 years is: Online comparison/research. Online purchase unless shipping is more expensive than local, I want an easy return, I need to touch/smell/hear/taste the item first, or I'm in a big hurry.
I always assumed that eventually everyone would adopt this model of shopping and we'd see a massive collapse of brick-and-mortar retailers. Retailers that are smart will be able to adapt. Lots of opportunities, like partnering with an online retailer, offering amenities that aren't possible online, etc.
Man, you really need that seminar!
I would simply stop stocking any product that forced me to sell at price higher than the market could bear.
This is one of those areas where government regulation protects you. Another area of regulation will make sure you are screwed even worse if this regulation is removed.
Let's imagine they have their way. You can stop selling stuff that's over priced, but you would still be stuck with it. Right now, you can reduce the price to recover part of the money you wasted on something you thought would sell better. This happens all the time. Not being able to recover that money would make more business go bankrupt and then everyone is stuck with the losses.
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.
Finally, the insane state of US patent law means that you may not have a competing product to buy and sell. What can you do then?
Friends don't help friends install M$ junk.
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,
As a retailer of the some of the biggest brands in the snowboard industry, I can say that this already happens to us. We sign agreements to keep our prices at suggested retail through the peak of the season. If you sell "off-price" you jeopardize your account in the next season. Our accounts and credit lines are reviewed yearly. These indirect means of "persuasion" are actually good because it keeps a level playing field for all authorized dealers. Like with most consumer electronics, if you do not buy your product from an authorized dealer, your product warranty is void. -=DG
Nothing is foolproof because fools are so ingenious.
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.
a.)Manufacturer telling retailer "You must sign a contract to sell at this price, and if you sell below that afterwards, we sue you" is illegal.
b.)Manufacturer telling retailer, "You can't advertise at cheaper than this price, or we won't sell to you anymore" is legal. According to the ACSBlog people, the net effect of the case in point would be to make both legal.
Have you been touched by his noodly appendage?
This will give branded stores (Old Navy) a huge advantage over stores that carry other manufacturers merchandise (Sears). The branded stores will have no problem at all clearing out old inventory, and Sears will get stuck with a bunch of unwanted stuff (not that they already are).
Please sign petition to restore sanity to our banking system!!!
http://financialpetition.org/
Announcing the grand opening of www.everythingalwaysonsale.ca
That's right!
Just because your government won't let you shop around for the best deal, doesn't mean that you can't save money.
Stop buying from those overpriced American stores, and get started cross-border shopping!
Our friendly agents are standing by to serve you, eh.
---
"I can't complain, but sometimes still do..." Joe Walsh
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.
"these are exactly the types of questions that capitalism can't solve by itself."
User956, you know of course that you are going straight to hell for that kind of thinking. Blasphemer!
"In a time of universal deceit, telling the truth is a revolutionary act!" -- George Orwell (Eric Arthur Blair)
Apple and Bose maintain tight control over their distribution. As such, they control directly the price the retailer pays for the goods. Other companies use third party distributors which introduce more padding into the pricing, and as such more flexibility. If you violate Apple's pricing policies, well, no more iPods for you to sell, and you can't get them anywhere else for less than the retail price. With other companies, you could simply call up another distributor and continue selling the goods for whatever price you wanted (even if it's below retail).
The practice of selling things too cheap will lessen as more and more companies take control of their distribution, cut out distributors, and enforce their pricing policies.
Is if any manufacturer who set a limit on pricing were also obligated to take back any stock the retailer couldn't sell.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
Apple circumvents it by giving extremely low margin possibilities to their retailers. Mom and pop make at most 8% regularly and maybe seasonally they get a slightly better incentive to stock up on a thousand ipods for a few extra percent margin.
Bose doesn't circumvent it, but instead applies a (perfectly legal) MAP (minimum advertised price) contract to its resellers. This way you still follow the law (retailers can sell for whatever price they want) but they can't advertise any price below MAP. This is why you see stuff like "add to cart to see price" because they are contractually obligated to only show you the discounted price once you have "decided to buy it" per se.
Lots of brands do this, seinnheiser, bose, and lots of AV and other companies have done this type of thing for a long time.
Pair this MAP with extremely low margin opportunity, and you see why nobody sells below MSRP (because the image of bose is that you pay MSRP and nothing less). Most stores make probably 10% max on a bose system if sold at MSRP so there is not any room for them to move any lower.
Now, at the end of the quarter, if you make your sales projections and all sorts of other fancy stuff, you can get a quarterly rebate on your revenue (kindof like car dealerships get) but that is only for higher volume shops. And you can't built that into your price because you don't know for sure your sales will be up.
Hope that explains a little bit for you.
Your ignorance is infinitely greater than you realize.
Are you serious? Capitalism never calls for the producer to dictate the cost that the 3rd party buys the product at... There is NOTHING in there that states that the shop owner cannot sell the goods at a loss (instead of a total loss by not selling at all). In other words, your statement makes NO SENSE.
No, it makes a lot of sense. See, the free marketeers/libertarians are really into contracts. These are basically the manufacturers only selling to people who are willing to enter into a contract where they only sell for what the manufacturer mandates.
How is this anti-free market? If the stores don't want to accept the terms, they're perfectly able to go elsewhere for those types of products.
Well, I've never bought an iPod or a Bose product. I've bought a laptop from Apple, but I think I will stop doing that now. Now I know why prices for Bose and Apple products don't drop like they do for everything else.
In my opinion, instead of making Apple's practices even more legal, it should shift to trying to figure out a way to make them illegal while doing as little as possible to reduce any other freedom Apple has.
I didn't realize that competition among retailers was one of the big reasons you see price drops on consumer electronics stuff. But now that it's been pointed out it makes perfect sense. The product competes with itself to drive its own price down.
Need a Python, C++, Unix, Linux develop
"Not being able to recover that money would make more business go bankrupt and then everyone is stuck with the losses."
Oh boy, this sounds like a big business plan to get more of the pie. I guess the computer simulation is finished running, and has proven that by fixing prices, big bussiness will get more pie. Why else would the courts be thinking this?
I hope the slashdot libertarian crowd is coming out of the woodwork in support of this one. I mean individuals should be able to enter into any sort of contract they want right? And its not the free hands fault when every vendor forces this upon the merchants, thereby driving up costs to all consumers.
Well both small and large retailers do it; and most manufacturers don't care, or have a reason to. Small retailers do it to get rid of stock that isn't selling well; large ones do it to get rid of... the small retailers.
Although most manufacturers do set a minimum advertiseable price. But again, many major retailers refuse to follow such rules, and most small ones aren't really subject to scrutiny.
That same Adam Smith is the same Adam Smith who is the origin of pretty much everything that has historically been considered a free market.
In Smith's day state monopolies were a common means of raising revenue. Smith demonstrated that such restraints on trade have hidden costs that are much greater than were imagined at the time. The cost of the tax is much greater than the amount paid raised in revenue.
In libertopia they do things differently of course, the only evil that can ever exist in libertopia is the result of people consipiring together through the government. The fact that a large corporation has a similar coercive power to government is inconvenient ideologically and is thus ignored.
Nothing is going to happen here. At worst the SCOTUS redefine the interpretation of the anti-trust acts. But that might well be the best outcome long term for consumers since if Congress revisits price maintenance agreements making them explicitly illegal they wil probably act on advertised price maintenance as well.
I don't see an argument being made that prohibiting retail price maintenace is unconstitutional. Even though many members of SCOTUS are notorious partisan hacks I don't see that as being very likely.
Looking for an Information Security student project suggestion?
Try http://dotcrimeManifesto.com/
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
Actually, I would expect Walmart to continue to dictate to the manufacturers just as they do today, even if SCOTUS were to overturn this. Walmart has shown its willingness to cut out manufacturers that don't toe the Walmart line in the past - don't think that just because the manufacturers may gain the legal right to negotiate a price point with their retailers that they will suddenly have power over Walmart.
Let those price-leveling overlords try. Walmart will still crush them.
Of course, then I wonder which side /. will take - the evil manufacturers trying to gouge the end-customer, or the evil Walmart trying to shepherd all consumers into its (very large) walls, crushing all opposition.
Really, manufacturers who deal with Walmart will not bother forcing their other retailers to a fixed point because, as much as they like the volume that Walmart does, they don't particularly want to have a single retail outlet (Walmart) who will then have even more power to dictate to them. It's only premium manufacturers that may care about the outcome of this case.
(And I'm not sure what the laws are like in other countries - so we may see spam advertising for "cheap Canadian iPods!!!!" soon if SCOTUS does overturn it.)
retailers dictate price to manufacturers. This is one of the thing people whine about when the bash Wal-Mart.
Except that there's only one Wal-Mart, and what will happen is that Wal-Mart will dictate that they get a price floor that is 75% less than everyone else's, and they mop up their competition.
Personally, I think that contractual price floors are repugnant, not because of antitrust concerns, but because it's a contract that affects me directly without permitting me to have any negotiation rights or to even agree to it.
"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
After a retailer/distributor buys an item, the manufacturer already has whatever money he wanted in his bank account. At that point, what difference does the retailers price for consumers have on the manufacturer's bank account? If consumers don't want this item anymore, manufacturer would be crazy to continue making it, so it shouldn't even impact new sales. I don't get it. How does pissing off the retailers and the consumers benefit the manufacturer's bank account?
I don't think it's quite as biased against bricks and mortar as you suggest.
If I browse in a bookstore and find something interesting I am very likely to buy it right there and then, because I'm excited by it. I'm not thinking about how I could order it online for less because I want to read it now. I don't want to wait a few days while Amazon packs it and sends it to me, and maybe it's not in stock at Amazon and I'll have to wait a week or more.
If I am going out on the town tonight and I need new shoes I don't have the luxury of waiting while some online store delivers them to me.
Maybe there are people who plan all their purchases days or weeks in advance, but for a large number of people most small to medium purchases are done on impulse or at short notice.
For goods like cars or high-end stereo equipment which require research, trial and considerable investment, I can see more of a problem. If I can't test-drive a car, there's no way I'm going to buy it. I think I would be willing to pay 0.5 - 1% of purchase price to test-drive a car for a couple of hours, or listen to an amplifier and speaker combination to decide that I'm happy with it.
Also, Borders has found a way to make money from browsers, by having Starbucks in their stores, and caffeine-addled shoppers are more likely to spend.
The manufacturers have a big interest in making sure retail outlets survive - because people are more likely to buy something they can touch and test. Maybe manufacturers can subsidise retail stores to make them more competitive.
Finally, the advantage of purchasing online isn't just about price. I have access to a much wider choice of products from the comfort of my keyboard, I can do research on specifications and customer experiences, and I can make my purchase more quickly (and more economically) than if I have to drive to various stores to inspect there offerings. Maybe retailers can do some work here to level the playing field - like providing internet access so I can check if this wireless card works in the latest Ubuntu, or whatever. That last item is one of the biggies for me, I've walked out of stores where I might have a purchase because it's not possible to get all the information about a product from the shop floor, and shop assistants are rarely knowledgeable about their products or my needs.
Yours Sincerely, Michael.
If this happens, then it will be a simple matter of resellers and such moving their product internationally, and then selling it from either Canada or Mexico, both members of NAFTA.
Yeah, it'll really hurt mom and pops, but many companies are now auctioning off their excess on eBay, and this would just encourage a new infrastructure, which will inevitably move more capital out of the U.S.
Linux - because it doesn't leave that Steve Ballmer aftertaste.
It's pretty clear from context that when Smith says "corporation" here, he means what'd we'd call a guild or an industry association. An organization which everyone in the industry was compelled to join and which had the power to regulate the business activities of everyone engaging in the trade. More like the AMA than, say, Microsoft or Google. Smith was not arguing for government antitrust regulation, but rather for governments to avoid mandating or encouraging industry self-regulation.
A legparnasom tele van angolnaval.
I always like to point out that corporations are chartered by the government; discussion of reducing government power to interfere in the marketplace should start with the revokation of most corporate charters (along with government-issued copyrights, patents, and land and resource deeds).
This gets interesting reactions from people who identify as "libertarian capitalists".
Tom Swiss | the infamous tms | my blog
You cannot wash away blood with blood
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the publick, or in some contrivance to raise prices." - Adam Smith (Wealth of Nations, p 145)
It is cowardly, and a betrayal of whatever it means to be a Jew, to act as a white man
-James Baldwin
There are plenty of slashdotters who have had to implement SOX requirements. They impose more costs on new entrants. Who is in the better position to fill out all the forms and satisfy the regulators, AT&T or the ClassMyAss Telephone company?
And once you've empowered your new agency to regulate Big Bad Business, who do you think goes to work there? High-minded reformers, or people who have actual experience in those very businesses? Look at your state agencies that regulate utilities, and find out how many of their staff members used to work for the utilities. The federal agency that was created to regulate the Evil Railroads was heavily dominated by railroad people, until it morphed into the Surface Transportation Board that also regulates trucking. Now it has a lot of people from trucking companies too.
[100% ISO 646 Compliant]
SVM, ERGO MONSTRO.
All in, all I believe that the types of purchases for which a brick & mortar store does not add value ought to, and have been, migrating to online purchases. While the ones where B&M stores can add value are staying at the B&M retail stores.
When information is power, privacy is freedom.
> Price and price alone. If you can get your widget for $0.01 cheaper online from Omni Mega Corp, you will.
No, I won't. I go back to the same retailer even if it is a little bit more expensive. Now if Omni Mega Corp offers it significantly cheaper, that's different. Most people do not buy stuff based on price alone, for if they did noone would buy brandname products - the no-name shop product is quite often contains exactly the same stuff as the brandname, just in cheaper and less flashy packaging (think about washing powder, sugar, everyday stuff). There is a brand loyalty, which is worth a lot. There are also all sorts of other features of products that are important. If the price would be the only factor, you could never sell eggs from free-range chichen at ~AU $4-$5 a dozen when you can get the cage egg for maybe $3.50 from the exact same shelf.
As per child labour, you have no idea if any object you buy had child labour in it or not. You can claim that you guarantee that your shoes are made with no child labour. Fine, I believe you. How about your supplier of the shoelace? Does he guaratee that too? Does he guarantee that the cotton plantation where the cotton was picked from which somewhere they made the string that yet somewhere else has been turned into a shoelace is all ethical wages, proper working conditions, fair wages and all that? No. "Child labour free" is not an ethical statement but an advertising / marketing pitch that makes the product's value higher to a certain segment of the customer base.
Convenience, service and quality are all things that you can express in financial terms.
Covenience is a simple decision: I can buy X in the supermarket for $1 but it takes me 10 minutes to drive there, park, buy the thing, come home. Alternatively, I can walk to the corner store in 2 minutes but I have to pay $1.20. Is it worth it to go to the supermarket? I.e. is $0.20 worth 8 minutes of my time, plus the petrol and tear&wear of my car? Obviously $0.20 is not. On the other hand, $20 is, that's why shopping for the week is done in the supermarket and not in the corner store.
Service is an other thing that you can measure in terms of $-s. Is it worth to me $X to be smiled at and being helped instead of getting a grumpy look and one-sillable answers if I ask something? There is always a value of X for which the answer is yes. You can also put financial value on the personal contact, the fact that the shopkeeper knows you (if you are a regular) and sometimes gives you things cheaper, finds you hard-to-get items and so on.
Quality is yet an other purely financial thing: you take into account the cost of repair, replacement and time wasted with a low quality but cheap product. If I can buy a shoe which last 3 years of constant usage for $150 but can buy the 'made in china' brand one for $30 that last maybe 8 months, then it's $150 versus $30 * 36/8 = $135. If I go with the Chinese, then I have a new (and maybe different looking) shoe in every 8 months and not an old one plus I save $15. On the other hand, with the expensive shoe I'm done with shoe shopping for 3 years, with the chinese I'll have to come quite a few times. These should also be factored in.
So no, people do not go for the cheapest all the time. The ones who only look at the pricetag and nothing else are either poor (when you're scraping the barrel, you can't afford convenience) or they put very little value on these factors, which tells you a lot about their personality (e.g. they don't value courtesy so probably they wouldn't provide any). However, I don't think that most of the people are like that. I don't know about the USA, but I don't think that "price and price alone" would be true for say most of Europe.
Tell that to Dell and other PC makers who have to cave in to Microsoft. (I'm not MS bashing here, it is the first example that came to mind.) If you have a true or effective monopoly you can dictate price, especially if the manufacturer chooses to abuse the monopoly. Even more so if the government/courts choose to ignore and/or abet the abuse. In the case of MS, the republican direction to the justice department was to basically ignore the fact that MS was found guilty of abusing their effective monopoly.
It sounds like if the SCOTUS finds in favour of the manufacturers, they will inadvertently abet monopoly abuse. So cases similar to MS's monopoly abuse might be harder to prosecute since the monopolist will be able to legally dictate conditions to the downstream consumers... retailers and their customers. All they have to do is come up with some excuse as to why they keep raising prices, and no-one can stop them. Or they might insist on lower prices that huge volume retailers can subsist on because of the volume, but modest businesses will die because they need to have a higher markup due to lower volume sales... when it should be the choice of the retail business only.
-- I ignore anonymous replies to my comments and postings.
if the local bookstores days are at an end, so are the local butcher, the local grocer, the local record shop, the local clothing boutique, the local computer shop, local hardware store, etc, etc, etc. pretty soon, all we'll have is walmart, target, barnes and noble, borders, best buy, macy's, jc penny, circuit city, compusa, and home depot.
What's your point?
People vote with their wallets every day, and they've pretty clearly indicated that they don't value these type of establishments, in most cases, enough to pay their premiums. The "value added" in other words, of the local butcher, just isn't enough to most people, to cover the increase in cost versus prepackaged meat from the megamart.
I'm sorry that you don't like the way it's worked out -- and if it helps, I agree with you, and I refuse to shop at Walmart (or Target, or Home Depot) when there's an alternative -- but I think it's fundamentally wrong to try and keep obsolete businesses alive at a direct cost to consumers who have clearly voted with their feet and their wallets and said they're not interested. That's at best regressive, and at worst tyrannical.
"Ladies and gentlemen, my killbot features Lotus Notes and a machine gun. It is the finest available."
I call myself a libertarian, and I think that retailers should most definately be able to set their own price. They bought goods from a manufacturer, and have the LIBERTY to do as the please with them. There's no need to make a stab at libertarianism when the real enemy is a common one (the erosion of property rights).
"Because Science" is one step from "Because old book". Try "Because of my experiment testing my falsifiable assertion".
I'm all for supporting the local retailer, and many times, i'll pay more money to have a knowledgeable staff.
Right now, people can have both. They can go to the boutique to speak to knowledgeable staff, try the product, etc. Then they go home and google the best price. Trouble is, the boutique doesn't get compensated in this transaction, despite having rendered the superior service.
This has always been an issue, as the boutiques already compete with the walmart's, costco's, and the bestbuy's who'll under cut them, hell, who have a policy of undercutting them, but competing with online venders is worse. The online vendors have even lower costs than the bigboxes so the price difference is more pronounced, and you can access the online venders from home so after picking what you want, finding it online is fairly trivial and it gets shipped to your door. You don't have to drive around any more or hope the local BB has it in stock, etc.
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.
The problem with your scenario is that it relys on a market that has a "high barrier to entry", or a market whose barrier to entry is so high that no other players can enter, no matter what. The reality is though, in a true free market this is never the case. No matter how high the barrier to entry, there is always room for another player.
There are two things that can help overcome high barriers to entry. Large companied with lots of capital, and innovation of new technologies. Large companies help because, for example, if every widget company decided to start selling their widgets for double the price that they should, then some other rich company with lots of capital to invest in making widgets is going to come in and start selling widgets for less.
The most important equalizer to high barriers to entry though is innovation. No matter what, new technologies will always be invented, and no monopoly can ever rest on its laurels forever. The market may be unbalanced for a short while, but it will even itself out, quicker and fairer than slow moving anti-trust laws can.
The only way that there can be a market with an infinitely high barrier to entry is when the government is involved, through patents, copyrights, subsidies, and other protectionist laws.
The problem with your scenario is that it relys on a market that has a "high barrier to entry", or a market whose barrier to entry is so high that no other players can enter, no matter what. The reality is though, in a true free market this is never the case.
You don't need to achieve a pure monopoly to dictate to retailers or charge near monopoly rents. Look at the example I cited, ie. the PC OS market Sure you can point to MacOS, and Linux, but these don't seriously dent Microsoft's power, especially in regard to small business computer retailers (maybe someone as big as Dell can get away with shiping PCs without that OS installed ...). Note the barrier to entry here isn't capital expenditure, as it is in chip manufacturing for instance, but primarily network effects.
The most important equalizer to high barriers to entry though is innovation. ... The only way that there can be a market with an infinitely high barrier to entry is when the government is involved, through patents, copyrights, subsidies, and other protectionist laws.
While I'm against the overweening IP regime we are currently subjected to, we should not loose sight of the necessity of IP regulation. IP addresses another market failure, namely the 'free rider effect,' (again demonstrating the necessity of some limited state intervention for a functioning capitalist economy). For innovation to be an effective equaliser to barriers to entry, it requires that very IP protection you decry! Otherwise the innovator will simply have their innovation taken from them by the established players in the market. The innovator bears the research costs, while big guys use their market power to cut that innovator out from the profits of their own innovation. Not a good look.
The market may be unbalanced for a short while, but it will even itself out, quicker and fairer than slow moving anti-trust laws can.
That is a very romantic notion ... unfortunately history demonstrates the exact opposite.
Better to be despised for too anxious apprehensions, than ruined by too confident a security. --Edmund Burke
I would actually have used Apple as a better example here. MS software on sale = not common, but not rare.
I was talking prosepectively, if SCOTUS change the law. An better example of MS's exploitation of its market power would be the refusal to supply to any retailer that sells new boxes which are not bundled with MSWindows. Apple's power in this regard has more to do with branding (why buy another mp3 player when you can get an IPod for 4x the price?) than market power and network effects.
Better to be despised for too anxious apprehensions, than ruined by too confident a security. --Edmund Burke
Would you truly say that you are unhappy with the state of the desktop OS market? I really don't know enough to comment decisively, being a Linux user my views are probably slighly skewed, I feel like I have all the choice in the world. But, I think that most consumers aren't all that unhappy either. The price of Windows has not gone up over the years, and the OS itself has gotten better. Additionally, I would argue that MS's "monopoly" has been gradually slipping year by year. IE is no longer the only legitimate browser (most sites support FF these days, and the numbers are growing), Office now has some serious competitors (Google Apps, and openoffice to a lesser extent). And, although again, my view may be skewed, I think that Linux is only becoming more and more of a threat.
In a free market, monopolies do die on there own. Sadly, there have been very few monopolies in recent history that weren't a result of the government.
As for IP, I didn't actually decry it, I just said that it is one of the only ways for infinitely high barriers to entry to exist. I do think that it could be possible for most IP to be protected through trade secrets and contractual aggreements. However, I agree that in today's society, limited patents and copyrights play an important role, and I am not going to argue against them.
Almost, but nope. The only way the distributors can force the retailers into anything is through agreements - ones the retailers enter into through their own volition. The conversation (and contract) goes something like this:
Big distributor: You soooo want my product. But if I'm going to enter into a deal with you to sell it, you're only allowed to sell if for $99.
Retailer: I wanna sell it for $95. It'll do better in my store that way.
Big distributor: And yet, here I am, requiring $99.
At this point, the retailer gets to chose whether the deal's worthwhile - if the product's a valuable enough product to accept the price requirement.
People will quite accurately point out that for small retailers, this is a pretty one-sided negotiation - and that it's virtually never going to be practical to say "no" - even if saying "yes" all the time is bad for business in the long run. People might also point out that a big retailer (say, Wal-Mart) has a considerable advantage over a distributor that just wants its product sold.
A real libertarian should be for all of this, though - it's all voluntary agreements, by informed parties.
If you get to an accident at a lonely road late some night, and I happen to pass by and agree to call an ambulance if and only if you sign a contract giving me all your property - and if we're going with total contractual freedom, selling yourself to slavery to me too - in exchange for this service, should the contract be enforced ? You did enter it willingly, and does fill all the requirements of a contract (you pay me, I perform a service calling the ambulance on your behalf); your other choice was to bleed to death, but that was no fault of mine.
And if the above contract shouldn't be enforced, should I be forced to pay the bill for food I bought on credit - after all, I can't survive without food, so I only entered that particular contract on pain of death ?
Total contractual freedom sounds good on paper, but has far too much potential for abuse to work in the real world.
Forget magic. Any technology distinguishable from divine power is insufficiently advanced.
Stop imagining conspiracies of collusion between cutthroat competitors.
0 -cd-settlement_x.htmm ed-in-video-tape-price-fixing-scheme/r +price+fixing/2100-1004_3-5894862.htmli ce-fixing.htmlh ronicle/archive/2002/05/10/MN24643.DTL8 -Wed-2002/business/18699104.htmlc t&isbn=0767903277
http://www.usatoday.com/life/music/news/2002-09-3
http://www.engadget.com/2007/03/21/sony-others-na
http://news.com.com/Samsung+to+pay+300+million+fo
http://illinoisissuesblog.blogspot.com/2007/03/pr
http://www.sfgate.com/cgi-bin/article.cgi?file=/c
http://www.reviewjournal.com/lvrj_home/2002/May-0
http://www.powells.com/biblio?PID=28734&cgi=produ
What's more, you don't have to spend long in today's business culture before it becomes *obvious* that there's enough of a critical mass of actors who believe in getting ahead by amassing control over channels and perception (rather than producing/adding value) that the emergence of price-fixing behavior is practically inevitable.
Tweet, tweet.
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.'"
No, the primary reason is a legacy of colonialism and exploitation from the age of European empires.
It is true that colonialism was, on the whole, more harmful than beneficial to those formal colonies which are now independent nations. However, it is also true to say that not everything about colonialism was necessarily a bad thing. The railroads, port facilities, and other colonial improvements made by the British throughout their former empire, notably in India, were reverted to the ownership of the newly independent nations and that windfall of improved infrastructure did partly compensate for the less desirable effects of colonialism in that the new nations began with something of a head start with regard to roads, ports, government buildings, railroads and the like.
However, even when the negative effects are accounted for, and most nations are now 50 years out from their colonial pasts, it does not fully explain why these now independent nations have failed to seize the day and produce for their citizens 50 years of economic growth and progress that was, in theory at least, possible once the colonialism ended.
In fact, modern third-world governments do a fine job of protecting property rights - of multinational corporations. It's actual citizens who lose out.
I would compare this with the dictator offering a good friend or family member, or indeed a foreigner with money to spend, special privileges that fall outside of the laws of that country or not covered by those laws because of the power of the dictator. This is not the same thing as an impartial and independent judiciary enforcing the private property rights of multinational corporations within the framework of the rule of laws. It should not therefore be used as an argument against the efficacy of protecting property rights in per se since it it in fact nothing more than the will of the dictator dressed up in words like "protecting the legitimate property rights", "freedom", and "democracy".
Then property becomes a tool for hoarding the resources of the planet, for concentrating control of capital into the hands of a state-backed owning and ruling class, then we need to realize that ideas that can usefully be applied to guitars, cannot necessarily be usefully applied to large tracts of land, natural resources, or ideas - and certainly not to shares in control of, and profit from, the actions of immortal fictitious citizens created by government fiat.
I suppose that this simply comes down to a basic disagreement on the means to best achieve the same goals. We both of us agree that we would like to own some land with a dwelling and perhaps a car and other personal possessions and amenities of our choosing, but we disagree on the best means to achieve those goals. If you believe that everyone should have an equal share of a smaller total pie then by all means vote for government control of markets and capital and we will all be equal in our misery. On the other hand if you believe in yourself and the rights of yourself in others to invest your capital in business and to work to increase that capital without the government swooping in and confiscating the fruits of your labor at whim then you should not be against the sort of concentration of capital that tends to occur in the later rather than the former system. If private property works for your guitar then why should it not work equally well for say generation of electricity or steel or other more "vital" industries, what Lenin called, the "Commanding Heights" of the economy? The answer is that it does and should not therefore be restricted. In fact, the only industry where the government should maintain complete monopsony control is in the defense industry. The history of the twentieth century proved these assertions conclusively with the collapse of communism and the abandonment by China of any pretense of Marxist economic policies.
Mistaking property
A real libertarian should be for all of this, though - it's all voluntary agreements, by informed parties.
If a mugger points a gun at me and says "your money or your life", and I choose to give him my money instead of my life, that is in some sense a voluntary act. I could have just decided to live (brieflly) with the consequences of doing otherwise; but being robbed seems like a better deal than being killed, so I'd choose that instead. But we still call that coercion, and choices made thus are, in a very important sense, not voluntary. I don't want to choose between losing my money and losing my life.
The economic case is not so extreme, but similar qualitatively similar. It's still a case of someone with disproportionate power over another presenting the other with either a bad deal or a worse deal. In an ideal market, nobody has this sort of disproportionate power - if you don't like the deal you get from one person, you take a better offer from another. But real markets are far from ideal, and monopoly or monopsony status is the economic equivalent of the mugger's gun - you either take the bad deal you're offered, or you take the worse deal that's your only alternative. And such dilemmas can hardly be called free or voluntary choices.
This is why even Adam Smith, the father of capitalism, said that a well-regulated market was necessary. He was talking more particularly about regulations limiting violent coercion, but it seems to me that an extension of that to economic coercion is perfectly logical as well. A free market is great, yes. But a market with monopolists or monopsonists is little more free than a market where the mob makes sure nobody buys pizza except from Fat Tony.
-Forrest Cameranesi, Geek of all Trades
"I am Sam. Sam I am. I do not like trolls, flames, or spam."
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