Slashdot Mirror
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
Why is this tagged slownewsday? Is this not something that will in theory affect all internet shoppers?
How did this get tagged slownewsday *before* there were any comments? Are Slashdot now selling tags to partisan groups? If so I wish to buy a large supply of 'thistagisnotatag' tags. Not for any real reason, I just like to confuse people.
Think of the Children; Sleep with your Sister
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.'"
I thought companies like Apple or Palm already did this - an iPod shuffle is $79 everywhere for example.
Could somebody elaborate?
There's always a choice to not buy. No firearms are being directed at heads.
It doesn't really matter. Retail price maintenance was an issue when manufacturers were big and retailers were little. Today, it's the other way round. Wal-Mart can dictate prices to manufacturers.
Might matter for some luxury goods, like the iPhone, but that's about it.
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
These people are rewriting the law book in front of our eyes.
It was a joke! When you give me that look it was a joke.
That was _the_ eminent domain decision. When that decision was made the Court was weighted to the left. It decided that the gov't can take your land and sell it to the highest bidder in the interest of collecting higher taxes.
Basically, it allowed large developers to lower their land acquisition costs. If you want too much for your little slice of heaven, the guys with guns will come and take it away. An erosion of one of the most basic rights in Western civilization.
consumers have no choice but to pay
Yes you do, you have a choice, you always have a choice. If you feel the price is unfair then DONT BUY THE PRODUCT!!!!! Buy a Used/Refurbished/Experienced Versions of the product, go without find alternative substitutes. Price Floors will only lead to the company selling less units so in order for them to maximize their profit they will need to lower their prices at the market rate. The problem is that consumers are getting very STUPID lately and go crying oh they price fixed the cost of Memory so I am forced to pay extra for memory, Go without society has seemed to function with less then 2 Gigs of ram in the past. If you don't like the price then don't get one. That is why I am not planning on getting an iPhone any time soon, sure it is cool and all, and I would love to get one. But it is to much then what I want to pay for so I won't get one until I could get one at the price I feel is fair. If I don't think the price is fair then I won't get one. But as a Consumer I have a choice. The choice is always don't get it. Except for Food, Shelter, Heat, Water, and Transportation everything else you really have a choice to go without. If to many people go without then the price will go down to the Market point.
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
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..."
It's not overblown.
... or any of the more recent SCOTUS rulings. I was silently cursing the confirmation hearings as they were going on... they should have refused any and all Bush appointees... they did manage to keep one off the bench but they let the others through and now bad things are happening.
I'll grant that much of the stuff that this will affect is fluff that people can generally get along without, but depending on the situation, that may not necessarily be the case. Consider some of the indirect players such as patent licensors. Further, what about the people who actually do sell the necessities of life like electric power service? You know those competitive third parties that encourage a level of competition to keep costs lower? What about those people like DelMonte who actually does the packaging for generic-branded products that compete directly with their own brand names?
This sort of price fixing being allowed can truly raise the general cost of living... and the cost of doing business.
The intent of these demonstrably successful laws has been to keep the invisible hand doing its job and preventing underhanded schemers from controlling the market unfairly.
Nothing good will come from this
So, presumably, how it would work is:
/.'ers.
1. Internet seller sells Item by Manufacturer below MDBP (Manufacturer Demanded Base Price).
2. Manufacturer "bans" this. Since they do not have legal power, they'd ask distributors to stop distributing to that silly sod.
3. Distributors that disobey risk never getting shipments of Item anymore, so they comply.
4. Internet seller doesn't get Item anymore and can't sell them at Low Low Prices (tm).
Hmm... assuming that's how it'd work...
5. Progressive Manufacturer Alpha makes a competing product for Item: Item Alpha. They don't have an MDBP.
6. Distributors carry Item Alpha.
7. Internet seller gets a few lots of Item Alpha.
8. Item Alpha now gets sold at Low Low Prices.
9. Item loses market share to Item Alpha.
If you accept the above as not being very farfetched, then you accept that manufacturers act in their own disinterest by colluding for minimum prices. And that by lifting the ban it doesn't automatically follow that everyone's going to do it.
Even if I'm completely wrong about this, that's still always going to be the grey market from overseas, so, don't get your cheetos in a huddle,
More Twoson than Cupertino
First of all, this only said that there are some cases where vertical price restraints are legal. It did not say that they're all legal. In fact, the opinion listed several situations where they're almost certainly illegal.
For the most part, manufacturers don't want to impose price maintenance -- they BENEFIT when their dealers sell at low prices. Why? Well, here's an example: say Apple sells iPods to dealers for $100, sets a retail price of $200, and 5 people buy it. Apple now has $500. Let's say they don't set a retail price, and (because of competition), the retail price stabilizes at $130, and 7 people buy it at the lower price. Apple now has $700. Which one is better for Apple? Both manufacturers and consumers want dealers to make as little profit as they can.
Here's an example why vertical price restraints should not all be illegal: Suppose that you build sailboats, which are somewhat complicated, not many people know a lot about them, and there are a lot of first-time buyers. Your dealers, then, spend a lot of time and money educating the customers, maintaining showrooms, teaching "what to know before you buy your boat" classes, and so on. These things are very expensive, and consumers benefit by having them. The problem, though, is that if one of your dealers does all the education, and another doesn't, the second one will undercut the first one's prices. As a result, customers will go to the first dealer, look at the boats and take the classes, then go buy the cheap boat from the second dealer. Eventually, the first dealer either goes out of business or just stops offering all those extra services. If the manufacturer can set a minimum retail price, he can stop the second dealer from doing this free-riding. Now, the two dealers are still competing with each other, but they're doing it on something other than price -- they're doing it on service. So, consumers may get longer dealer warranties, or dealers may offer free storage or maintenance.
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").
I've believed ever since Samuel Alito was nominated that the single worst legacy of the Bush administration will be nomination of Judges Roberts and Alito to the Supreme Court, and that those nominations will go down as the worst failures of the Democratic Party to display a spine and stand against Bush's radical ideology.
Roberts is a pretty traditional conservative in most (but not all) ways, which can be bad enough, but Alito is just an out and out fascist who believes strongly in no restraints on executive or corporate power. We're going to be feeling the aftershocks of this administration for decades thanks to the both of them.
If it's for-profit but free, you're not the customer -- you're the product (e.g., the Slashdot Beta's "audience").
We can all read the SCOTUS decision: http://www.supremecourtus.gov/opinions/06pdf/06-48 0.pdf
What it says is not all price flooring is automatically illegal (per se). If the pricing is used to generate services or differentiate the product within a market to be competitive then why not.
What SCOTUS is arguing is that price flooring needs to be decided on it's merits (rule of reason). They say, it is still illegal to have price flooring within a manufacturing cabal. It is also illegal to have price flooring for a monopoly (as if that makes any difference). Generally price flooring is illegal if it is anticompetitive and legal of it is pro-competive.
As to the sale of handbags, anyone can make a handbag and thousands do. In this case the manufacturer had floor pricing to maintain marketing material and consumer cache. This manufacturer wanted a small botique feel to the sale of their products and not a Walmart experience. The retailer in question just wanted to boost sales by under cutting smaller shops and make their margin on volume. The retailer had signed agreements to price floors.
In this case, I too favor the manufacturer. SCOTUS has not thrown out the Sherman act, but merely noted that price flooring in certain circumstances can be OK. I'll still buy handbags at WallyWorld.
Granular decision making: Good
machinator omnis sine licentia
This simply reeks of protectionism for big US manufacturers...
l asticity) will determine what happens as prices rise. In fact artificially high prices may cause additional suppliers to enter the market to compete (an increase in supply) which will cause a surplus of the product which in turn will lead to lower prices as manufactures try to entice consumers to buy. Ultimately unless you impose tariffs or other trade barriers, or all manufacturers collude (and fix prices) the market will solve the problem.
But as any economist will tell you price fixing generally doesn't work well for the economy or consumers as a whole. It may temporarily benefit one industry or sector but is generally undesirable. It is better to let uncompetitive companies face the pressure of competition and either become competitive or go out of business.
If people have a finite amount of money to spend and prices are higher they simply buy less.
They may buy less of different products, for example if the price of gas goes up and people still need to buy the same amount gas, but may not go on vacation or buy a new TV (this is why the price of oil is so important).
Basic concepts of supply and demand (http://en.wikipedia.org/wiki/Supply_and_demand)
drive pricing. Price elasticity (http://en.wikipedia.org/wiki/Supply_and_demand#E
Tariffs and other trade barriers are coming down with globalization, and price fixing involving collusion is highly unlikely between a competitive manufacturer, and an uncompetitive one. The competitive (ie lower cost) manufacture is better off selling at a lower price and taking the business for themselves and putting their competition out of business.
Besides the internet puts global manufacturers within reach of US customers. If prices go up in retail stores in the US because of all US manufacturers setting bottom prices, people will simply buy from outside of the US, and a huge gray import market will open up. At least for high value items, where the difference in price is significant.
If anything this is just one more nail in the coffin of US manufacturing. The legal changes may give them a temporary false sense of security, but realistically companies that fail to please the market (ie consumer) by providing good value simply don't last.
Just think what artificially high CD prices have caused people to do. They've found their music online (legal or otherwise).
Or think region codes and DVDs. Many Europeans buy their DVDs online from the US because they don't want to wait for the European release.
This is no different. Shipping costs are not that high (especially not for large volume gray market imports).
----- "Profanity is the one language that all programmers understand."
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.
Check out my sci-fi/humor trilogy at PatriotsBooks.
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.
This signature has Super Cow Powers