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Ban On Price Floors Abandoned, Internet Prices May Rise
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."
Sheesh, evil *and* a jerk. -- Jade
Oh well, MS and other huge multis, must have paid huge fees to get this one to pass, essentially turning the USA into a fascist corporacy. This may sound alarmist, but that is exactly the way things worked in fascist dicatorships.
Why is this tagged slownewsday? Is this not something that will in theory affect all internet shoppers?
Most of the price-fixed stuff like this is crap you don't need anyway, like movies and music (especially music!)
All they're really going to accomplish is to end up devaluing their merchandise, because it will be harder to get rid of excess stock.
Ultimately you DO have a choice, except when purchasing necessity goods from monopolies - and again, that is typically not the purpose of a price floor. Usually it's for crap goods, which are from monopolies (artificial ones) but which you don't need anyway.
You do have a choice: if it's too expensive, don't buy it! And if you want to see the price come down, send a letter (preferrably a handwritten one, unless your writing is illegible) explaining why you didn't buy it, and why you bought their competitor's product.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
There's always a choice to not buy. No firearms are being directed at heads.
Although it would seem to represent a good portion (probably a majority) of America who does fall into that conservative camp. Welcome to democracy.
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The argument against the ruling is:
If the rest of the world can't compete with the low end seller, they SHOULD get out of the business. Otherwise we leave crappy, foolish business men in charge and surprise surprise, we can't compete with China's low prices. Of course we can't, we let idiots that have no idea how to run a low priced business run our corporations.
Me, I am against the ruling. There is no reason ever to have a price floor. If you can't compete with Walmart, then find another business.
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"....prices that consumers have no choice but to pay...."
No choice but to pay? No way! We also have a choice NOT TO PAY! Unless you can't SURVIVE without a video card, then you do have a choice. And because we have a choice, we can start a massive boycott. But because we lack the organizational skills of ants, WE LOSE.
Although it would seem to represent a good portion (probably a majority) of America who does fall into that conservative camp. Welcome to democracy.
Courts should be apolitical, in my opinion. That includes the supreme court. And I really don't think the majority of Americans are conservatives. I think the majority of *voting* Americans may be conservatives, probably largely due to the constant argument over abortion and gays. The overall majority of Americans are probably centrist people who don't bother to vote...
ZuluPad, the wiki notepad on crack
There's an argument that this is actually PRO-consumer since it makes it possible for businesses to compete on the basis of quality and service instead of being forced to compete on price alone. Price-only competition is surprisingly corrosive since there really is no middle ground on many things -- even if you're willing to pay a 50% markup for quality (and it really is cheaper to pay 50% more if the product lasts twice as long) there's not enough other people to make it economically viable in most cases. Look at t-shirts. You have really cheap junk at Walmart, shirts from other stores that can't charge much more than Walmart so their quality has also suffered, and the $100 designer shirts. No middle ground with good fabric but no handstitching.
I'm not sure I buy this argument, no pun intended, but the race to the bottom has got to stop. I know it's in Walmart's interest that I need to buy a new tv every two years, but it's not in mine.
(Sidenote: I've never entered Walmart/Sam's Club due to this policy and the way they mistreat their employees. Costco, baby, Costco!)
For every complex problem there is an answer that is clear, simple, and wrong. -- H L Mencken
Wal-Mart may well negotiate a deal with a manufacturer that lets Wal-Mart (and only Wal-Mart) undercut the manufacturer's price floor. Wal-Mart is a large enough chunk of the retail segment to do that.
(IANAL)
"[Justice Kennedy] Vertical agreements establishing minimum resale prices can have either pro-competitive or anticompetitive effects, depending upon the circumstances in which they are formed."
Yeah. And take a guess which circumstance companies will do their best to arrange.
My only thought when I saw this was, "Jesus F. Christ, they did it *again* already?"
Let's look at this week (which isn't even over yet).
* Can't sue the government for using your money to fund religious groups, effectively overturning the 1968 precident allowing it -- all under the loophole that it wasn't spending specifically approved by congress, but by the executive branch via funding granted by the congress.
* Corporate ads supporting candidates are free speech, and are protected unless "the ad is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate."
* "Bong Hits For Jesus" isn't free speech, and isn't protected (meaning that schools can now kick people out for saying almost anything that the school doesn't like).
* Efforts to desegregate schools can't look at the race of students. In other words, while a school can't officially be "whites only", it effectively can't be stopped from actually being whites only because the district can't consider race in school assignment and, more critically -- if you go by the majority's wording -- cannot even be monitored to know if they're unofficially skewing a school towards racial segregation. All this despite racial integration proving to be one of the few things in education that significantly improves the average academic scores of an area without a significant increase in funding.
And now, this -- effectively saying, "welcome back, collusion" and gutting the effectiveness of antitrust legislation.
Depressing, depressing.
(I think I missed one of the frustrating early-week ones, too)
"99 dead duelists of Dios on the wall. 99 dead duelists of Dios! Take one's ring, pass it around..."
All humans have opinions, and for any opinion it's possible to find someone who disagrees with it, no matter how wrong they are. Thus, even a perfectly impartial, reasonable, intelligent and just Person serving in office would have thousands (perhaps even millions) of people who thought they were biased, unreasonable, stupid, and unfair. Since neither of us are perfect, we'd also sometimes disagree with a perfect individual (though hopefully we'd agree with them more often than not).
You are reading a copy of my copyrighted post.
Although price floors seem like a way to preserve the profits of inefficient retailers, I'm sure that the better retailers will figure out a way around any sort of binding MSRP. These might include:
1. Good service: extended hours, trained employees, better inventories, free shipping, free installation, etc.
2. Bundled goodies: accessories, logoed T-shirts, media, etc.
3. Extended 3rd party warrantees
And if the manufacturer says "thou shalt not bundle free stuff," then the retailer only needs to charge a nominal charge for the "separate" item -- say $0.50 for free delivery, installation, and 5 years of 24 hr in-home repair service.
Price is not the only dimension of competition and some would argue that the internet's focus on price competition is one reason retail service has come to suck so bad. The same transparency that lets current web users find the lowest price will let them find the best retailer in a fixed-price environment.
Two wrongs don't make a right, but three lefts do.
That's all well and good if there are a lot of products on the market that meet your demands, but if your demands are enough that you already know which product you want, this seriously undercuts your ability to save money.
For example, a few years ago, I decided on a specific LCD HDTV (an extravagant purchase that I still regret to this day). At the time, MSRP for the set was $8999. All retail outlets sold it for that price. However, I was able to go online and buy it for only $5499. Had the price floor been set at MSRP or something else favorable to the big retailers, I could've lost thousands of dollars in the purchase.
As an internet shopper, I am pleased by this decision because this will also mean the end of the stupid bargain/rebate/shoparound/missed discount remorse routine.
Yeah, well to nuts to that, my friend. I'd rather know that I missed out on the best deal possible than to know that I never had the opportunity to avoid getting gouged because of legalized price fixing. Besides, price comparison search engines will let you easily get pretty close to the best possible prices out there if you look right. Froogle exists for a reason.
Also, if you're going to argue that the existence of alternate products makes this irrelevant, then you should consider that having to compare alternate products negates the advantage of not having to look around for the best discount. I seriously can't believe, though, that you'd rather everyone be gouged than you feel the remorse of missing out on a sale.
If it's for-profit but free, you're not the customer -- you're the product (e.g., the Slashdot Beta's "audience").
Why are the conservatives CHANGING things?!?!
Ah, you're confusing conservatives with neo-conservatives. Classical conservatives *do* the things you've mentioned in your post. Neo-conservatives *say* those things, and then go off and do whatever stupid things they want...Some people pay enough attention to notice, but everybody else is more worried about how Paris Hilton is doing in prison (or out of prison, as the case may be)...
ZuluPad, the wiki notepad on crack
Whoa whoa whoa there. There's no "in other words". The interpretation is left to other judges who may or may not be inclined to institute your "bad case scenario". This is a GOOD ruling which finally removes the purely artificial RACIALLY motivated reason for accepting students. I believe in a meritocracy, even if that means that colleges are full of asians.
P.S.
I'm a moderately smartass white guy.
Often wrong but never in doubt.
I am Jack9.
Everyone knows me.
Would you kindly inform me of which law book I should crack open to find this law?
Collusion between supposedly competing suppliers or manufacturers is usually considered illegal due to antitrust issues. However, the ban on manufacturers restricting prices at their distributors was apparently based on shaky legal grounds. The Supreme court has decided that it wasn't valid. If we want to make these types of restrictions, we need to persuade congress to pass a law that bans it and does not violate any constitutional restrictions.
Normally I wouldn't wish harm on another human being, but given the last week, I'm rooting for an early demise for Roberts or Alito shortly after Bush leaves office... either that or some kind of miracle that causes one of them to retire early.
Microsoft may not benefit, but Wal-Mart certainly will.
I don't think you're understanding the decision.
Right now, and for the past 90-odd years, it was illegal for a manufacturer to demand or enforce a price floor on its retail distributors.
The USSC said that now, manufacturers can do this. That's the change.
If anything, this is going to hurt Wal-Mart, because it prevents them from using their distribution network and huge size to drive out competition, at least not on brand-name goods.
Example: right now, Wal-Mart carries Sony cameras. Sony can't enforce a price floor, so they sell the cameras to everyone at the wholesale price -- say $250. Because Wal-Mart is so big, they only need to charge a small markup, or maybe not even any markup at all. So they price the camera at $249 or $255. A smaller camera store somewhere can't exist on those margins, in order to meet overhead it needs to sell the camera at $275. Until now, this would have been how the prices would have fallen. (And it's incidentally why you can go to one store, like Best Buy or Wal-Mart, and find a camera for less than you can find it for at Ritz Camera -- which has much more overhead -- or go to an online store with virtually no overhead and find it cheaper than any B&M store.)
With the ruling, Sony can -- if it chooses -- require its distributors to agree to a price floor on its products. It still sells them cameras at the wholesale price of $250 each, but they're contractually obligated not to sell them to customers for less than $275. Sony doesn't make any more money (at least not directly), but it forces the playing field to be artificially 'level' between distributors. To the consumer, the prices get higher. Wal-Mart suddenly has the same prices as every other store, at least on the same products. (Wal-Mart makes more profit on each unit sold, because its overhead is lower, but this isn't obvious to the consumer.)
If anything this is very bad for big-box stores, because it's harder for them to use big name-brand items as loss leaders to bring in business. The people it's worst for are the deep-discount internet retailers, since they effectively have to compete against a local B&M, while still charging the same prices.
In reality I doubt it'll really affect Wal-Mart that much, because WM is big enough that they can go to almost any manufacturer in the world who might be thinking of demanding a price floor, and tell them to drop dead.
Where I really see this having a lot of effect is in markets where there's still a large independent VAR network, little product placement in big-box stores, and a lot of deep-discount internet retailers. Musical instruments and pro audio equipment comes to mind. Every city has a musical-instrument store or two in it somewhere, and they generally charge a lot more than internet retailers; I can imagine that in the near future, companies like Yamaha and Roland are going to be under a lot of pressure from their VAR networks to institute price floors and force the internet retailers to sell products at the same prices that they go for in the B&M stores.
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Sorry. Doesn't work that way in the real world. Those cheap t-shirts they sell at Wal-Mart are often not the same ones you buy in another store, for one thing. Thus, this ruling has little impact on their products. In addition to often carrying products by different manufacturers, they also quite frequently get special sourcing of custom, cost-reduced versions of products (particularly in electronics). Such products won't be affected in any way.
Even ignoring that, though, the Wal-Mart chains of the world, however, who have huge buying power, will still be able to do what they do now: say "You don't like it, fine. We're not carrying your product." Most manufacturers can't cope with the sudden drop of revenue when this occurs, and basically keel over and die. Thus, Wal-Mart is pretty much insulated from strong-arm tactics by nearly all manufacturers.
The people this will hurt most, contrary to the opinion of five SCOTUS justices, are the mom and pop shops. Now, the manufacturers will be able to tell those stores that they have to meet a minimum price while other manufacturers of similar products are still caving to Wal-Mart's price demands. The result will be that the disparity between Wal-Mart prices and prices at smaller stores will increase, driving those smaller stores even more quickly out of business.
There is simply no way to not see this as a serious blow to consumers.
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You are forgetting, if people don't buy the higher prices the price will drop to market price. Price Floors cause a market surplus. While the company may think it is a good deal because they have higher margins but the truth because of the less quantity in sales will cut on total profit. If you sell 10 goods at $1000.00 vs selling 100 goods at $500.00 $10,000 Gross Profit vs. $50,000 Lets Factor in that the good costs say $100 to product then the Net Profit is $9,000 vs. $40,000. The economics will fix itself out without the need of politicians saying this is bad and must put a stop to it. The only thing that messes up economics is a population of people who think they are a victim that there is nothing to do but pay the price. Be smart if you think it costs to much then don't get it. Don't go crying because you are not keeping up with the Jones (Who are on the average $30,000 in debt anyways), Learn to set your priorities.
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
The word fascist has lost all it's meaning because of people like you.
As one of the Nader voters, I wonder how many recall all the people who said they were going to move to Canada if Bush got elected and are still sitting around here bitching about it 8 years later? Why don't you blame your own party for not being willing to put forward a candidate that can appeal to the apathetic voters who think both the Republicans and Democrats are full of it? Instead you're trying to attack the people who actually dare to challenge the status quo and vote for a 3rd party... who's votes you desperately need!
The world isn't black and white. 3rd party votes say that if you want our vote stop pushing the same old agenda. It's too bad Obama is losing popularity to the old guard candidates... he looked appealing from this 3rd party standpoint.
The sending of this message pretty much inconveniences everyone involved.
Good point. I hate to sound like the eternal optimist here, but I think this is the kind of thing that the market will sort out. Companies who refuse to allow their products to be sold at a reduced price will find that stores and internet retailers are less likely to stock their products, in favor of products that do not have such limitations. Consumers hold little loyalty to brands anymore, so I don't think consumers will really care all that much. And of course, manufacturers of imported goods will see this as an opportunity. And they'll be right.
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So how much are you selling your product to *them* for?
How much they sell it to someone else for is irrelevant.
If they buy 20 of it for whatever you agree to sell it to them for, what difference does it make if they sell them to someone else for twice that, half that, or even give them away for free?
You made your money regardless.
If you are letting them make their own copies for nothing, and not specifying how much you want them to pay *you* per copy, well, then you are a fool. Dont agree to a percent of what they decide to sell it for, agree on a specific amount that they pay you.
... just about EVERYTHING technology related IS a specific item. What will happen now will be that Sony will say to their retailers, "Even though we only charge you $10 for this CD player, you MUST sell it for $45.".
Or more likely it will be someone like Sharp saying, "No one can sell the new 65 inch LCD TV for less then $4500 even though it only costs you $2000." I personally bought my 45" Sharp LCD TV for $2700 ($2400+$300 shipping/handling), which was $1200 less then the "retail" price. Now the companies can say, you can't sell for less then retail price, no matter what. This keeps places like the small installers out of the market because they would allow you to barter with them on pricing especially if you were picking up a decent amount of gear from one place. Many places do this when they see a customer on the ropes as to if they will buy the item or not. Best Buy and the other big box stores can't do this, because their sales staff do not have the power to do anything other then sell you an extra protection plan. Wait until every TV, phone, computer part, refrigerator, air conditioner, stove, oven, game console, CD, DVD, washer, dryer, etc., all have a price floor set. These are all specific items. Unique in many cases, which means you can't just go pick up another competing brand, as there is no competing item (sure there may be things which are "simlar", but you won't see a LCD TV that has 120Hz refresh, 5 phase backlight, 3 HDMI inputs, 1 DVI input, 2 component inputs from another company... at least not right now, Sharp is the only one. Samsung is close, but won't be out for another month or two, where-as I was able to enjoy this year's Super Bowl on mine...)
If someone has a business model which allows them to make enough money buying the product at the set wholesale price and selling it to the public, they should be able to price it anyway they like. If this means offering 80% off to clear the items out of their warehouse because someone ordered too many, and didn't realize they took up 2050 square feet of of warehouse floor space, and not 20.50 square feet that the person making the order thought, well, they should be allowed to discount it. The company that sold them the products already made their money on the bargain, the only one who risks lossing cash is the retailer who sells the item less then the suggested price. Maybe they want to have something to draw customers into the store because they just opened, and so they have a big opening week sale to get people to know they are open for business and have all these great products and better service then the big box stores....
We were all warned a long time ago that MS products sucked, remember the Magic 8 Ball said, "Outlook not so good"
I really want to know! Why are the Republicans on the wrong side of *EVERY* *SINGLE* *ISSUE*? Is there NOTHING that they can do right? Good Lord, a 96 year-upheld-ruling now violated by neoconservatives? Really, they are monsters, predators of the most evil kind. I mean, I can see why "conservative" might mean "not wanting to make abortion legal"(Jesus told me the soul is infused at the point of conception), or "home schooling because I don't want them liberal teachers teaching mah' boy Jonny that Darwinian monkey nonsense" (represent the hillbilly populace) or even "Jon Stossel really knows what he's talking about when he talks about the fraud of Global Warming because its a treehugger conspiracy, see some ice is actuallly growing in some places!" or "Affirmative Action is racism because we already freed the darkies two hundred years ago, thanks to Abe Lincoln, the Republican" Sure, we can swallow all this for a number of reasons, we can live with it, we can tolerate the ignorance... but removing the ban on price floors? Folks, price floors is a EUPHEMISM FOR COLLUSION I hate to quote, but from Wikipedia: In the United States, price fixing can be prosecuted as a criminal felony offence under section 1 of the Sherman Antitrust Act. In Canada, it is an indictable criminal offence under section 45 of the Competition Act." Now the REPUBLICANS in the Supreme Court PROTECT CORPORATIONS FROM VIOLATION OF U.S. LAW? Alito and Roberts must be prosecuted for FEDERAL CONSPIRACY.. I'm sorry they should be put behind bars, or punished w/ a term of life imprisonment. and I would lead the prosecution.
Also, when you're a small shop, and have some merchandise which isn't selling, you can't reduce the price to get rid of it. This places a further burden on those who are too small to negotiate buy back provisions.
It's not wasting time, I'm educating myself.