Slashdot Mirror
Battle Over Minimum Pricing Heating Up
The Wall Street Journal is covering developments in the gathering battle between manufacturers and retailers / discounters, especially online ones, over minimum prices. Earlier this year the Supreme Court upheld the right of manufacturers to enforce price floors for their products. Since then, manufacturers have increasingly been employing service companies like NetEnforcers to snitch on discounters who offer goods below "minimum advertised prices" (or MAPs), and to send DMCA takedown notices to the likes of eBay and Craigslist for below-minimum offers. Separately, the Journal reports that a coalition of discounters and retailers is using eBay as a stalking-horse in a campaign to get consumers, and then politicians, fired up enough to pass legislation outlawing MAPs.
From TFA: eBay and discount retailer Costco Wholesale Corp., opponents decided to lobby for a bill now pending in Congress that would make minimum-pricing agreements a violation of antitrust law.
Shouldn't existing law prevent MAPs already? This sounds an awful lot like collusion and price-fixing to me. But since the Supreme Court has already said that manufacturers can enforce price floors, it sounds like new legislation is definitely needed.
How can minimal pricing be legal or logical?
If I sell you an apple from my apple tree then what right should I have to say that you sell that apple at? Or what rights do I have to then your apple at all?
Obviously the original manufacturer has certain rights like copyright, trademark, but I fail to see how these right extend to something like price further down the supply chain.
This whole system just seems abusive and will make it harder for competition to ensue which last I checked was meant to be what a capitalist society was all about.
How exactly could a market be described as "free" if a single market actor is able to force other market actors to not sell the goods at a price they see fit?
Slashdot, fix your code or at least hire someone who is competent at it to do it for you.
So price floors are good, but price ceilings are bad? As we all know, "only commies allow price ceilings", so this sounds a lot like socialism for the rich and capitalism for the poor.
Funny. The "nightmare" situation you describe resulting from a retailer ignoring MAP only becomes a problem because of MAP. 1,2,3 and 4 would not have happened if the regular retailers were "allowed" to lower their prices in response to the current (temporary) situation in the marketplace. Its plain and simple legal manipulation of the retail markets by manufacturers, and hurts everyone else.
"Knowledge is the only instrument of production that is not subject to diminishing returns" -Journal of Political Econom
It's probably bogus but I can't even figure out what the theory is on which manufacturers sue unauthorized distributors. I mean my understanding of trademark law is that it's uncontroversial that using a product's name to correctly identify the item you are selling isn't a violation of the trademark. Moreover, merely listing the item name isn't enough to create a copyright violation.
I mean I see how this might work against retail operations or online stores. After all they usually need to put up a description of the product, pictures of the box and other information to make it attractive to the customer. No doubt the allegation is that the text on the box or the blurb describing the item are copyrighted. But how does this reach ebay sellers?
If you liked this thought maybe you would find my blog nice too:
5) US/European customers get much higher costs of living due to things like MAP
6) US/European customers/workers, laden with the highly anti-competitive legal structure cannot compete with Asian workers buying products at factory price.
Ultimately, after borrowing to fund their living for some decades, the citizens are stuck between a hard place and a rock, and simply cannot afford to pay the inflated prices anymore, the last few resources have been pressed out, and we get widescale deflation and an economic crash.
The reality is that price diffrentiation driven by copyrights, patents, trademarks, MAP, anti-paralell-import and other anti-competetive laws are one of the fundamental aspects undermining sustainable global trade. Western labour isn't 'expensive' in a vacuum; the whole cost structure in western economy is getting geared towards exacting as much resources out of the citizens as possible. Protecting the revenue stream of one player means you're decreasing the competitiveness of everyone else.
So the markup paying your wage is temporary at best; it's more profitable to pay someone living in a country without that markup to do your job, keep the markup in the country where you live and collect the profit on the difference.
and if you can't compete go out of business that's how it is supposed to work. Goods should be as cheap as possible that still keep them selling.
and if you can't compete go out of business that's how it is supposed to work. Goods should be as cheap as possible that still keep them selling.
No, that may work in some businesses but in others it results in higher prices and worse service.
As the GP points out;
These companys want to keep their local dealers open. They want to have a place for you to take your unit back to for support. if they don't have MAP there is no reason for that local dealer to even been selling the product if they can't even be competitive with the pricing.
Once all the small companies go out of business the big guys can raise their prices above where they were when they had competition.
and if you can't compete go out of business that's how it is supposed to work. Goods should be as cheap as possible that still keep them selling.
No, that may work in some businesses but in others it results in higher prices and worse service. As the GP points out; These companys want to keep their local dealers open. They want to have a place for you to take your unit back to for support. if they don't have MAP there is no reason for that local dealer to even been selling the product if they can't even be competitive with the pricing. Once all the small companies go out of business the big guys can raise their prices above where they were when they had competition.
And then small guys come back in to compete - so either the big guys keep prices low to keep out the little guy or they raise prices and open themselves to competition. Conversely, if enough consumers want the extra service they will pay a higher local price - but that should not prevent others from offering a better price. the kicker is many stores now have the click on cart to see price to get around MAP restrictions.
I'm a consultant - I convert gibberish into cash-flow.
You've successfully demonstrated that the problem lies upstream.
If JBL's policies are hurting the customers, then they need to change those policies. If the problem relates to the distribution model, then JBL needs to beef up their distribution accordingly.
The MAP I think is a crutch. Sure, I could save a few bucks online, but at what cost ? If anything, audio guys are aware that gear breaks down (a lot), and a web site isn't going to be of any use when your amp blows up the day before your show - might as well cancel the next 2 months' bookings! A brick and mortar store has customer service (most of the time). They will fix your amp (or ship it back for you), and give you a loaner.
You know what sucks about buying online ? Shipping. The first time you send those cheap speakers out for repair, the shipping will burn whatever you had saved by buying from www.cheapspeakers.cn
Frankly, I think we can do away with MAP. If someone wants to pay a cheaper price for less service, that's their choice. They will probably end up buying another when the first one breaks, so the manufacturer might actually benefit from the crap service.
-Billco, Fnarg.com
The problem with that logic, is that it takes a lot more time and investment to open and close up shop than it does to change prices on a website. If an online retailer (or Walmart for that matter) uses low prices, sometimes so low that they aren't even making a profit but are willing to take it on the chin to clear out the market, and then jacks them back up, there will not be a return of the local small retailers. It's not like they just throw all their stuff in storage and wait for the day when they can come back and be competitive, if you're run out of business you're not popping back next week when the market is more favorable.
OK, so I grow one special breed of apple from the apple tree that is delicious, but bruises easily.
I contract with and certify authorized fruit distributors who certify me that in advance of doing business with me, they must staff up and provide gentle handling and quickly respond to consumer complaints. In return for their investing in this staffing up, I set a minimum retail price they will charge and maximum wholesale price so the distributors of all sizes will have some assurance of gross profit.
My distributors make the investment, build my reputation among buyers, and my buyers and distributors are happy and make me wealthy.
I also offer volume discounts. (I didn't say that all distributors would have the SAME profit margin, just an agreed-to MINIMUM profit margin.)
A rogue distributor starts buying in larger lots than he can handle to get the larger discounts. He takes the units he can't sell and sells them to an unauthorized "gray market" distributor. The gray market distributor can sell them because they cut corners on staffing customer service and support.
Consumers have no idea why, but word-of-mouth is that service and support at the (gray/unauthorized) retail level is degrading. Small problems are repeated over and over as they are not addressed. Eventually, the market-wide brand perception is damaged and my business is eventually on the brink of being ruined.
I cut off shipments to the rogue distributor. He takes me to court. The court agrees that I am operating legally and I am in the right to cutoff any distributor who violates our contractual terms.
Some people on web discussion boards present me as a monster intent on excessive and unfair profiteering.
Business should be a series of voluntary transactions between all parties. If a product is priced too high or service is too low, then the product deserves to suffer. Monopoly laws apply only to products deemed by the authorities as essential to the economy and where alternatives do not exist.
That is why monopoly laws apply to the vendor of the world's largest operating system (i.e. the US vs. Microsoft and the E.U. vs. Microsoft) and not to minority OS players (i.e. US court ruled Apple could put out of business the Apple clone maker).
Just another day among the chattering lunatics. (Yes, I appear to be one too.)
Live Long and Prosper - Thanks Leonard. You are missed.
Therefore How do I sell a speaker to a customer if I am not an authorized dealer? If I sell it to them they will not have a warranty? Sure I can get it through a distrubutor but thats being shady to the customer, and downright bad business.
It would have the same manufacturer's warranty it does now. It would just mean that you were no longer on the hook for warranty work they would have to contact the manufacturer. Just like I would if I bought a PS3 or Xbox at Target I don't expect Target to do warranty work I contact Sony or Microsoft.