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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.
He developed software to track the company's authorized dealers and prices. From there, he devised companion software to identify online sales that were discounted. This put the stereo discounting to an end, Mr. Loomis says. In 2003, he launched NetEnforcers using similar software.
Mr. Loomis may be in violation of any NDAs and non-compete agreements he may have signed with his employer for whom he designed this very lucrative software for.
Just saying.
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.
What's an MAP all about? In the world I thought I lived in, retailers buy their merchandise from wholesalers. Those retailers are then free to handle said merchandise as they see fit, including not selling them at all.
The only argument I see for MAPs is when retailers do not buy merchandise, but act as a middle-men with the wholesaler receiving a percentage cut of the retailers' revenue. And in that case, I agree with the USSC, but then the issue boils down to ordinary contract law. So I don't think this is the case.
So, wholesalers: if you're not happy about how retailers handle your wares: sell it yourself. Otherwise, stop complaining about a market that you chose not to compete in.
Enforcing MAPs is often more about maintaining supply chain and sales stability than explicitly trying to be profiteering.
Recently in the model-aircraft world, we had one large online, offshore (Asia) store acquire a large lump of stock from a supplier via proxy (because the supplier explicitly didn't want this online retailer selling their stock), the store promptly dumped the stock into the market at a price within 10~15% of the supplier cost price which was about 30% below MAP (on a $400~$600 item).
This had a couple of immediate effects;
1) Everyone bought stock from the one online store
2) Other major US/Europe stores couldn't match due to legal issues with going below the MAP
3) Said US/European stores stopped purchasing from the factory
4) Existing customers became enraged at the "huge profiteering" (many electronics goods are retailed at roughly 400% of their factory cost or higher)
Ultimately, the factory goes into a situation where they're between a hard place and a rock.
Certainly quite an effective way to crush some competitors in your market space.
We don't like to think that people are carving out huge profits on the items we buy, however the reality is that a lot of what we pay for items -is- profit that pays the wages of people like us who need to buy things to keep on living.
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:
First of all, if the manufacturer sold the product any retailer or online retailer or individual, in a free market, wouldn't it be their right (the second party's right) to try to sell it for what they could or wanted to? Secondly, I wonder if they are going to try anything with the secondary (used) market? Think about it. Congress and the manufacturers saying "We're going to establish minimum and maximum pricing for the second hand market (people that sell used things after they no longer want them). This will potentially affect everything from garage sales to eBay/Craig's List. Just how do they plan to enforce this?
If you don't allow a manufacturer to strike a voluntary agreement with the dealers they choose to use, then they'll eventually just move to a "company store" model. The whole point of a dealer agreement is to support the manufacturer's choices about who they will have supporting, and representing their products to their end users. You are NOT obligated to support MAP prices... as long as you're also not interested in being able to tell your customers that you're an authorized dealer that supports warranties, etc. You can purchase a nice shiny Nikon D700 DSLR from a US dealer, or you can get a cheaper one that's gray-market... and you'll never get Nikon USA to service it, period. They manufacturer doesn't want to have to take up the slack for the work that legit dealers are supposed to be doing. Legit dealers usually make most of their money off of accessories anyway (HDMI cables, for example), and like having a big name-brand item as an anchor/draw in order to do that accessory business. Companies like Sony don't want to have to wear a bunch of customer service complaints about a retail outlet that "can't afford" to take a lot of time taking care of a customer's problem because they gave away all of the margin on the sale.
Don't disappoint your bird dog. Go to the range.
The difference is that price fixing involves multiple (competing) sources agreeing on a minimum price. This minimum pricing scheme just concerns one manufacturer's product. You're free to buy from a competitor. Now, even if these contract terms are voided by law, a manufacturer can still easily charge a minimum price - their own price charged to retailers. Minimum pricing is more about protecting certain retail outlets than about gauging the consumer.
Fleur de Sel
They can set their prices, and then you can choose to resell it at a loss, once you've paid for it. Or has First Sale gone out the window as well?
I want to delete my account but Slashdot doesn't allow it.
Exactly. Protecting the Dealers from other dealers is the reason for MAP Pricing.
I worked in pro audio for 5 years. MAP is very prevailent in that market. I live in North Dakota. Its not like I sell 1000 dollar speakers every day like Musician's Friend does. So if I'm a dealer and the 1000 dollar speaker costs me 800 dollars. plus 70 dollar shipping. I'm making 130 dollars per speaker.
If there is no MAP. then The online retailer is able to then sell the speaker for say 850 dollars and and then sell more, getting better pricing so that the speaker may only costs them 700 dollars. well now they're able to sell it for less than what the smaller local dealer can and still make a profit. and make up the extra amount in gross sales. Isn't this reminding you of Wal-Mart?
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.
Make sense?
There is no minimum rpice for second sale. The MAP they are trying to enforce is for distributor and first sale. Please note that I disagree with the MAP, I jsut wanted to point out that as a second sale they would have no right to enforce a MAP. YMMV by country, but usually second sale right is that you can put whatever price you wish. Even 1 cent if you want. Not so for retailer and distributor.
C. Sagan : A demon haunted world:
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visit randi.org
Retailers are only consignment dealers, they don't buy anything up front. The manuftcr stocks their stuff on the floor, and the BestBuy remits as each item goes past the register. It's a form of floor planning like car dealers. If the item disappears from stock without going past the register (stock shrinkage aka employee theft) Apple eats it.
Since the mfr assumes the risk, then the mfr sets the terms and prices. This is how WalMart "Keeps Prices Low."
If the stores actually bought this stuff from the mfr as it came into the store, then it would be their property to dispose of as they see fit. But we don't.
This minimum pricing scheme just concerns one manufacturer's product. You're free to buy from a competitor.
Unless the product has no close substitutes, and the state enforces this lack of close substitutes.
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.
I sell "dual core intel computer with 2gb" for $1000 (or even more). Now, the customer *could* go to tigerdirect.ca and buy the "same" system for a few hundred dollars. I make my client VERY aware of that option. Really, I don't want any buyers remorse or anxiety over purchasing a system from me.
But... on-site setup, customized media software, lifetime labor, quality parts, little to no noise, and a nice pvr case.
Let's see tigerdirect.ca compete with that.
If *all* you are doing is selling the speakers -- I don't have much sympathy. Take your $50 dollar profit, if that's all you can get. Buy more speakers, and go "internet" as well.
MAP *does* gouge the consumer; if only to keep your business model afloat.
Personally, I think that MAP is designed to protect "reputation". Without the need for anyone to apply any extra elbow grease.
Just another "Cubible(sic) Joe" 2 17 3061
I find humorous. No one has mentioned Macintosh computers. Apple has a very interesting way to get around this problem. They have a MAP but they don't really need one.
Reason is, they sell them to you (the retailer) at VERY near their online store's price. When you, as an Apple Authorized Reseller sell a mac, you send proof of your purchase to them, and at the end of the month you get a check from them. Depending on a wide variety of factors, basically "how much you've behaved like Apple WANTS you to behave as their representative", that determines the amount of cash they give you back per machine. They call it "metrics". We call it "kickbacks".
AARs don't make ANY money on selling a mac. Many of them even LOSE money. But those BDU checks are what make their profit.
This has several interesting effects. First off, when a customer calls us asking about prices for all the systems, we can just direct them to the online Apple store, because all our prices will be the same as theirs, and will be the same as all our competition's. Second, Apple still holds us to MAP, so we can't sell at a loss to make more with the BDU checks. Third, we don't have to worry about direct competition in our market because no one else can sell below MAP, because everyone that's getting the computers from Apple directly has to sell at that price so they're not available anywhere below MAP to be bought "wholesale" and then retailed elsewhere.
The only two problems this causes us is #1 we have no way to compete with the deals Apple offers, such as discounts on ipod with computer purchase, or especially the student discount. #2 some of the places like Mac Warehouse get around this by throwing in free stuff like printer or memory upgrade and that's hard for us to compete with.
This whole thing wouldn't normally work because if Apple makes a price drop when a new model comes out, everyone would be stuck with merchandise they paid more for than they can sell for, so Apple also cuts us checks for any unsold inventory to make up the difference when they drop a price. (they call it "price protection")
The BDU checks and the price protection both are at Apple's discretion, so it gives them a lot of leverage to tell us what we can and cannot do. So even though we're independently owned/operated, we have to basically do whatever they say, or they'll cancel our AAR status and we lose the BDU checks and price protection and that puts us out of business. Really annoying when Apple does something like prohibit us from selling iPhones, and then turns around and lets places like Best Buy and Wal Mart sell them. Sort of a swift kick in the balls and we have no real recourse but to bend over and take it. For example, if Apple catches us selling an iPhone we'd get delisted instantly. If we were caught so much as displaying a pre-release of any Apple software, such as Snow Leopard or the new Aperture, same thing. So in this respect, the manufacturers can have a lot of control over their retailers - it goes far beyond just MAP.
I don't know for sure, but it seems like their preventing us from selling iPhones is something that should be illegal? Apple is notorious for taking steps to eliminate competition within their market, specifically from their partners. "competes with an Apple product" is the #1 reason for iPhone apps to be rejected by Apple from being sold on the Apple Store.
I work for the Department of Redundancy Department.
Just a quick question.
Are you an authorized dealer with Intel, the case manufacturer, and the Ram Manufacturer? If you are I'm sorry as this won't apply.
But with speakers There are dealer minimum sales to stay a dealer. So for JBL lets say I need to sell 15,000 in speakers a year.
If I can not sell that many speakers, I can not stay a dealer, therefor I can not become an authorized parts dealer, and I am not authorized to handle warranty work for speaker issues. Therfore A speaker I sell to a customer that has a warranty issue I can not handle.
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.
You're correct legally, but NetEnforcers et al seem to be demanding that eBay take down all sales of new products below the minimum price, assuming that these must be prohibited first-sales.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
Property taxes tend to be regressive when look at on income terms, because someone making $1m doesn't on average own a 10x as expensive house as someone making $100k.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
The case that went to the Supreme Court actually didn't involve a suit against unauthorized distributors at all: the manufacturer simply cut off the retailer from further shipments after they started offering discounts, and the retailer sued the manufacturer over that, alleging an antitrust violation.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
It's not just because of the discount. Lets go back to the 800 dollar cost. Internet store company sells 20 of the 1000 dollar speakers a month. Well now it can put all 20 of those on a pallet and stock them because it knows it can sell them.
20 speakers will give you free freight because of the order size (Just like at many other stores you may order stuff from)So now the speaker costs 70 dollars less per speaker. Now that store may feel like selling alot of speakers for less than the normal amount to make the same amount of money with more volume since they bought 20 speakers and they want to make sure they sell them all that month so they don't have any carry over to the next month when they order another 20. They now again have an upper hand on the smaller dealer.
Raw numbers will let a dealer outperform another dealer.
The Supreme Court overturned the former ban on retail price ceilings a decade before they overturned the one on retail price floors. See State Oil v. Khan (1997), which held that a gasoline distributor could put a cap on the retail price the gasoline stations could resell it for.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
No Walmart is so big that no one will dare send a DMCA notice (what does copyright protection mechanisms have to do with price advertising?) for violating mininium prices. THey are for it as they want to remain the lowest piced for all goods and do not like a bit of competition when it comes to price.
THis is in place to protect Walmart and other retailers so they can have the lowest prices and as a consumer you no longer get the benefits of capitalism as Walmart and Bestbuy decide what everyone pays (isn't that illegal?).
Infact I view MAP as a way to prohibit the sale of used items so we are all forced to buy it new. Walmart wants to have the lowest possible prices and banning the sale of used products means they are now the lowest again.
http://saveie6.com/
The Software Developers at NetEnforcers rule!
Except items with biggest retail profit will be preferred by retailers. MAP allows this model to work. Consumers buy from retailers unless they know of a better alternative. Majority of alternatives will be found from consumer product guides - magazines, websites. These resources operate on advertising profit and endorse products from manufacturers throwing money around.
So consumers choose between cheap products with high retail mark-up, or cheap products with high manufacturer mark-up. We need an avenue for manufacturers that spend more to produce, but don't spend much to advertise, allowing competitive pricing for alternative, higher quality products.
Open-source product review/comparisons, or equivalent. And ditch the MAP, why allow another method of retailer product biasing? We want diverse markets.
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.
Exactly. Protecting the Dealers from other dealers is the reason for MAP Pricing.
Except the consumer gets screwed by this - essentially it's a way to make price comparison more difficult. As a result, some places don't advertise price but require a call or email to get a quote.
I worked in pro audio for 5 years. MAP is very prevailent in that market. I live in North Dakota. Its not like I sell 1000 dollar speakers every day like Musician's Friend does. So if I'm a dealer and the 1000 dollar speaker costs me 800 dollars. plus 70 dollar shipping. I'm making 130 dollars per speaker.
If there is no MAP. then The online retailer is able to then sell the speaker for say 850 dollars and and then sell more, getting better pricing so that the speaker may only costs them 700 dollars. well now they're able to sell it for less than what the smaller local dealer can and still make a profit. and make up the extra amount in gross sales. Isn't this reminding you of Wal-Mart?
If it means consumers pay less then it is a good deal - the manufacturers don't want to piss off they big buyers by not offering steep discounts but don't want to offer the same pricing to the little guy. They could offer the same price to the little guy but they don't want to take the revenue hit so they use MAP to "protect" them while hurting the consumer.
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.
If they really want then don't give the big sellers a sizable discount - stay a specialty product selling through dealers only. Some companies, such as Stihl and Snapper, do this. Of course, their prices are not that much more than for a similar product at Home Depot; they simply chose not to get into the price death spiral and instead sell on quality. As the CEO of Snapper said - "My tombstone will say 'He turned down WalMart.' - whether or not that was smart remains to be seen"
Make sense?
It depends on the business model - I don't think one that gives better pricing to Big Box / large online stores and tries to keep a dealer network in place via MAP is a viable long term strategy. The big guys will find ways to sell for less (MAP only controls advertised, not selling price); squeezing the dealers.
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.
I think you'd see it differently if you were actually competing with Tigerdirect, which by the sound of your post, you're not.
When they open up a service center and start selling the same hardware you do for $200, because they could even if it's not profitable for as long as it takes to run you out of business, call me and see if you think MAP is just a marketing tool. You've even got the benefit of working in an business where you could basically run it out of your living room if you wanted to, so you don't even have to worry about issues of stock and and overhead like someone who runs a straight retail business.
"They want to have a place for you to take your unit back to for support."
This is an old argument; I remember back in the early days of computers, this came up over and over. The argument was something like this:
"If you buy from the mail-order guy, then you don't get the kind of great support you get from your local dealer"
Okay. So you'd go in and ask about a particular piece of software, that you'd need support with. The local merchant's answer?
"How can you expect us to be an expert in each of these packages! They're quite difficult, and I'd have to devote a lot of staff to it!"
So. I still don't get it.
Let's take your store. I've bought high-end audio. It's usually sold with no return. If you complain about it, they'll fix it, but since you probably don't have repairmen on premises, you send it back to the manufacturer.
Let me ask you this. When I buy any TV or audio equipment from your store, can I return it for any reason within 90 days? That $2500 high-end receiver, can I try it for a week and bring it back? Because that's Costco's policy.
It's been my experience that small merchants have the worst return policies because they'll tell you they can't afford to take returns. Or if they take it, it's a big hassle. They argue, they'll point to a policy on the wall which says if you open the box it cannot be refunded. They'll only take returns if it's broken.
Rarely do small merchants offer great return policies. At best, they'll offer you good advice before you buy.
Recently, I went looking for a high-end keyboard, every place on the internet and locally sells it for $2,500. I figured the local store (very large) would tell me all about it. The manager said "These keyboards, it's hard to keep them all straight. It's hard to really go through it. XXXXXXX company rep will be in here Wednesday, maybe he can show it to you". Would they discount it? "Sorry sir, we only sell a few of these a year and the markup isn't great". So I did a little digging and I found 2 large stores that indeed sell below MAP ($2000, free shipping). And they were more helpful, they offered all kinds of great advice. Now they didn't offer returns, but it turns out nobody does on high-end stuff like this.
So tell me again what value the local guy is bringing me? If he went out of business tomorrow, how would that harm the consumer?
You were mistaken. Which is odd, since memory shouldn't be a problem for you
Halo 3 not on your system of choice? Tons of other FPSes available.
Not when Konami is using patents to sue its competitors out of existence. See Konami v. Roxor and Konami v. Viacom.
The real reason that this was put into law was because with every manufacturer making their pieces of plastic and software offshore in China and similar places, all form the same few factories in some cases. Take computer cases. Most are made in a handful of factories and re-badged as required.
"Protecting their image" is actually better translated as keeping the public in the dark as to what their products really cost. If the supplier in China or Malaysia or wherever decides to undercut Apple, well, they are unable to do anything about it as there IS no place cheaper to have it made.
I used to avoid gray market items and offshore no-name electronics. But that was back when they were really just cheap clones. Now, I can get that IPod Mini sans the name from the same factory in China for $40.
Don't pass a bunch or oppressive laws to try to fix it.
Manufacturers should be able to chose who they are going to sell their product to wholesale. If they want to fix their prices by refusing to sell to people who advertise below they price they've outlined, that's their business and the government should stay out of it.
The only alternative is writing laws to determine who I can sell goods to, and under what circumstances. That's a huge blow to freedom, and yet another step to building a large oppressive government.
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.
"These companys want to keep their local dealers open."
This may be so.
"Make sense?"
No. They have another option. Sell to the small local dealer for less than they sell to be non-local ones. Or at least on par. Naturally they don't want to do it this way, but they could.
all the best,
drew
FreeMusicPush If you want to see more Free Music made, listen to Free
"and to send DMCA takedown notices to the likes of eBay and Craigslist for below-minimum offers"
How (I'm afraid to ask) can DMCA be used to enforce MAP violations?
KeS
But... on-site setup, customized media software, lifetime labor, quality parts, little to no noise, and a nice pvr case. Let's see tigerdirect.ca compete with that.
*opens yellow pages, finds reputable computer repair shop*
"Hello, I'm purchasing a new computer, how much would it cost for you to install my software, set it up in my office, and provide free labor for the lifespan of the computer?"
It's not going to be ~$700, the implied difference in price you've quoted. You're banking on your reputation, and that's great, more power to you. But if you're telling your customers that they *can't* get the same service and support if they buy from an online volume dealer, you are in fact misleading them.
For most consumer products, especially computers, people can pay for whatever they want from whomever they want, which is what has the manufacturers trying to protect the smaller shops they believe are important to their target market.
I'm not saying MAP is a good idea, I just disagree with the relevance of the parent post.
War as we knew it was obsolete
Nothing could beat complete denial
- Emily Haines
You just hit the essence of a good idea to enforce of Minimum Advertised Price (MAP), that is to sell to dealers at a price very close to MAP while making the dealers' Cost Of Goods Sold (COGS) unpredictable, especially before a period of time completed. The problems are in implementation.
I know many companies willing to pay a very generous amount if you can come out with an MAP enforcement implementation in some products. :-)
If you delay pleasure infinitely, the pleasure will be infinite. (YM)
I think a key issue is being overlooked. Manufacturers have contracts with distributors, in which they can and do specify wholesale pricing however they see fit. No volume dealer can sell for less than the MAP unless they are cutting a deal with the distributor. If the manufacturer expects volume dealers to abide by MAP restrictions, clearly those terms must be laid out in the contract between the manufacturer and the distributor, and enforced with civil action if necessary. MAP legislation is completely unnecessary if manufacturers deal with their distributors responsibly.
War as we knew it was obsolete
Nothing could beat complete denial
- Emily Haines
No you don't make any sense.
For one thing, if you're providing any kind of good service, that is why people will come to your store and buy stuff with a warranty. While surely not a small store, I get excellent service from my local Staples. As a result, for any major computer purchase, I shop there. Even if it costs me a bit extra. I don't even shop on Staples online. I would suggest most of the people I know follow this same sort of service oriented approach.
Service is still the major game in town. No, small stores don't always provide better service either. I ended my relationship with my local small computer store after they refused to take back a crappy usb wireless controller that kept overheating. This was on a 800 dollar purchase. So, bye bye.
On the other hand, I've had more than excellent service with Logitech. This was all over email and telephone support. As a result, I now only buy Logitech accessories.
MAP is ridiculous and should be illegal. Service always wins. If you're relying on MAP, you're not providing good enough service.
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.
It's the long term behavior that counts - if retailers make a habit of dropping prices to end competition then jack them up other sellers will stay in the market because they know that the. price will rise. OTOH, if the low price stick then they won't enter because they can't compete. What we've seen is low prices tend to be sticky; favoring economies of scale over small local shops.
I'm a consultant - I convert gibberish into cash-flow.
It is still collusion in my book.
Wallyworld and CostMe are agreeing to sell a product for a minimum price, their just going though a middleman to make the arrangement (the product manufacturer).
Troll, Troll, go away and flame again some other day
See, i don't want your store protected from other competing dealers. It creates higher costs for me.
If someone requires 'pro audio' gear, and cares not to listen to it fist, and just buys it online, then perhaps their not really interested in pro-audio, but just wants high-end audio. And if your little store is unable to survive in this climate, perhaps a Pro-Audio store in North Dakota is too niche for the population size of the area.
Make sense?
Troll, Troll, go away and flame again some other day
More retailers will sell their item if they can make a better profit off of it.
With more retailers pushing their item aggressively, there are more profits to be made in volume.
I may be wrong but I believe that selling at a loss to clear out the market and then raising the costs is in some way related to monopolistic/anticompetitive business practice. If this happens then you can get a nice little suit together with all the other little guys.
"Educate the mind but never at the expense of the soul."~Blessed Basil Moreau
WalMart
If manufacturers want to negotiate price floors for their products, let them negotiate with WalMart. Good luck in these depressed economic times. Odds are that any manufacturers who don't get shelf space at discounters won't be in business much longer.
Have gnu, will travel.
The eBay/craigslist crackdown thing caught my eye. I can't say I know alot about MAPS and selling stuff but assuming you aren't a dealer who sells multiples of an inventory, bulk items, etc you should be able to sell for whatever price you want on eBay right? If I, as an individual, choose to sell a brand new Apple Macbook Air that I no longer want on ebay for half of what it costs in an Apple Store or online, I should be legally able to do this right?
Aw Frell this
Acutally I have seen some stores offer a huge inventory, and then turn around and buy them online for the customer, adding a percent markup for their store. If a store can get within 20% of an online retailer, they're doing good. I might pay +20% on a video card if I could exchange it at the store if it broke, but I'm damn sure not paying +100% for the store to tell me its not their problem and to contact the manufacturer. Ultimately, its a business model thing. Brick and mortar stores are still in shock from the whole internet buying thing. A lot of them don't know how to react. Some are doing what I described above, and are finding a slow-down in sales, but not quite drastic enough to put them out of business. Most computer stores, however, go with the +100% method and won't be around too much longer. Afterall, why would I pay $190 for the el cheapo brand of RAM when I can pay $80 for it from the manufacturer? Why pay $150 for a hard drive when Walmart has the same model for $89.99?
Job? I don't have time to get a job! Who will sit around and bitch about being broke and unemployed then?
The fact that this is on slashdot shows #1 obviously the internet including slashdot is totally commerce driven #2 DIY retail is now the way the economy works. You need to know how retail works & how to run a business.
Right, I don't know if they still do this. But a few years ago I bought something from Amazon, but they wouldn't display the price until it was in my shopping cart. I didn't quite get it at the time, but it makes more sense in light of reading about this.
I've been a consumer of ameteur music & sound equipment for a while, in Australia. I've been appalled at the way such things are priced here. US web prices are less than half the local "discount" and online prices, let alone in-store small-retailer prices. Even paying international air freight on individual items, it's a huge difference.
I spoke with a retailer about it, and it comes down to there being only one distributor who fixes the minimum prices locally, with the threat of shutting off access to ALL brands if a retailer attempts parallel imports or breaches the specified price. I can empathise with a low-turnover retailer, but not with a sole importer holding a captive market.
Australian law explicitly allows parallel or grey imports, but cannot force a distributor to deal with a retailer. Further, international web sellers are often prevented from selling internationally by their own supplier contracts.
I'm most appreciative of Behringer's policy on international pricing, which stops me being ripped off by a monopoly importer.
-- All your bass are below two Hz
In case you haven't been reading the news, free market economics was just given a shit-kicking by its cheerleaders. I'm curious what will be nationalized next....
Take your $50 dollar profit, if that's all you can get. Buy more speakers, and go "internet" as well.
Many manufacturers, including most of the ones that I deal with, will not allow you to sell on the internet because the only authorize you to sell in your "territory". And that is not fair to other local businesses, supposedly. Unfortunately, since they let other businesses sell their products on the internet, what they are really doing is ensuring that ALL local businesses are not allowed to compete fairly with their internet competition.
If you are not allowed to question your government then the government has answered your question.
Some of the problems are attempting to be equitable. If life was fair, Walmart would not be the cut-throat retailer it is . Walmart ignores MAP and can do it because of volume purchases. If you can police WalMart to insure they are MAP observant, then other retailers will be able to compete. I am waiting for January DUMPING sales. True Dell stated that Black Tuesday has already occurred, but I am waiting for the real discounts. MAP and discounts -- thats a laugh
Leslie Satenstein Montreal Quebec Canada
Except the consumer gets screwed by this - essentially it's a way to make price comparison more difficult
Ah yes, but an alternate syndrome is where a big chain store busts into town, sells at cut-throat margins and drives the local stores out, then jack prices back up after all the competition has failed or fled.
That's not good for the consumer either, but it's been known to happen fairly often.
What the hell ? If i have a company and i make my own price what does DMCA have to do with this ?? I don't get it.
On the other hand my wife had an Internet gift business reselling popular collectibles, and we went out of business because an Internet competitor that was down the street from the manufacturer had a back-door deal and undercut us terribly. Their retail was lower than our wholesale, and we were approved vendors meeting the quantity requirements.
Between the economy and these kinds of problems, I don't know how anyone makes a living in retail sales these days, except the well funded big box/internet stores reselling high volume low margin imported junk, and of course paying the salespeople almost nothing.
"Ultimately, the manufacturer always sets a de facto minimum price: its wholesale price. "
Here is a term for you to look up "LOSS LEADER"
I resell coke products
Wanna know what my purchase cost of 2L's pre-priced with the 99c stickers on them is?
1.19 each- delivered....
every day http://en.wikipedia.org/wiki/Special:Random
It's the long term behavior that counts - if retailers make a habit of dropping prices to end competition then jack them up other sellers will stay in the market because they know that the. price will rise.
That is simply not true. It is hard now to believe that even you seriously think that is true.
LARGE COMPANIES HAVE MORE MONEY. I normally dont like to yell, but that basic fact is one that you are completely overlooking. Small companies generally have very low cash reserves. They can only operate in the red for relatively short periods of time compared to large companies. The reason that large companies can continue to lower prices to push out small business is because they can outlast them. Smaller retailers already know the prices will eventually go up, but they simply cannot wait the big guys out.
Not only do big companies have larger cash reserves, they have more stores. If the larger corporation has 50 other stores, they can use the profit of those stores to cover the losses in the store that is currently in a price war. A small business cannot do that. It is so simple that it really shouldnt have to be explained.
-- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
No they won't - they sleep under a bridge and won't get the loan needed to furnish and open another shop.
And they won't be a new guy either - any newcomer will see the guy under the bridge and think: No I don't want to end like him.
Here's a term for you to look up: de facto. Promotions and loss leaders are the exact reasone that wholesale prices are de facto minimums and not explicit minimums. Come on now. In trying to be smart, you sail right past the point.
Loss leaders are exactly that: losses. You can't permanently sell a product at a loss unless you're making it up somewhere else. Furthermore, products with MAP guidelines are not loss leaders. They tend to be some combination of high-end, specialty, or boutique products.
It's the long term behavior that counts - if retailers make a habit of dropping prices to end competition then jack them up other sellers will stay in the market because they know that the. price will rise.
That is simply not true. It is hard now to believe that even you seriously think that is true.
LARGE COMPANIES HAVE MORE MONEY. I normally dont like to yell, but that basic fact is one that you are completely overlooking. Small companies generally have very low cash reserves. They can only operate in the red for relatively short periods of time compared to large companies. The reason that large companies can continue to lower prices to push out small business is because they can outlast them. Smaller retailers already know the prices will eventually go up, but they simply cannot wait the big guys out.
Not only do big companies have larger cash reserves, they have more stores. If the larger corporation has 50 other stores, they can use the profit of those stores to cover the losses in the store that is currently in a price war. A small business cannot do that. It is so simple that it really shouldnt have to be explained.
Then how do you explain the overall lower cost of many items? If your scenario was accurate, we should see significant price increases as companies raise prices to make up for all the losses they incurred driving the small guy out. The reason we haven't is competition - from other big stores as well as smaller retailers, online and B&M. In the end the consumer benefits because prices remain lower than if there were only small retailers. Some retailers can't compete because their costs make them two expensive, but that is not true across the board. If you look at WalMart, the big bad guy, their strategy is not to lower prices to the absolute lowest so they can stifle competition. They price at what their major competitors do, and are happy to make a bit more profit since they are very efficient. It really is simple - competition benefits the consumer by lowering prices.
I'm a consultant - I convert gibberish into cash-flow.
You're ignoring the fact that it may not be the SAME small guy that comes into the market. If I'm an entrepeneur with some family money or some other funding source and I see an obviously inflated market that I can go after on cost, guess what business I'm going into? (this is probably responding to the wrong parent, but I already typed it, so :p)
My Babylon
MAP is a joke. Wisconsin has minimum markup on goods by law to "protect the small guy." (Yes, I understand that MAP and minimum markup are not the same, but the effect on the consumer is almost the same.) MAP and minimum marks ups do nothing to protect the small guy. I see all of the same big box stores dominating in Wisconsin as I see everywhere else in the country. In the end any minimum price fixing to "protect the small guy" does nothing but hurt the consumer.
When it comes to lowering prices, supplier competition is king. Guess what, as a consumer retail outlets are the supplier, not the manufacturer.
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.
That particular shop may not return, but if there's a profit to be made then someone else will take their place.
If low prices are the only reason people do business with a shop then that shop is probably doomed anyway. We shouldn't romanticize local stores, because the world is littered with small, local retailers that really suck. They have mediocre selection, poor customer service, little expertise, limited hours, bad environment, and high prices. Many have ridden on the backs of their communities for years and invested nothing in improving these faults, and they've gotten away with it because they have had no real competition. Now, suddenly, they do. And they discover that they have no customer loyalty, no value-added, and no special dispensation to survive.
When I buy something, I don't want to pay to protect some certain retail outlet who happens to be a powerful enough customer of the manufacurer to warrant protecting eg, WAL*MART. If Mom and Pop can beat WAL*MART, then that's who I want to buy from. ( And I like WAL*MART ) but if enough crap like MAPs is allowed to accumulate in the gears of the market, then WAL*MART will turn into just another K-Mart with not-so-low prices all the time.
IMHO, MAPs and other such power plays have no socially redeeming value. Being power plays, they are merely ways for those with the power to reach into everyone's pockets and get more power/money.
...
Isn't it funny that where monopolies and price fixing aren't done by the manufacturers, whole companies crop up to do it for them.
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Lifetime labor? I personally avoid warantees and maintenance contracts like the plague as they are almost invariably filled with terms and conditions that make using them next to impossible. ( the first barrier to getting anything for the money you paid for the warrantee/maintenance contract is: do you have your recipt/copy-of-said-warrantee-or-contract )? If the thing breaks past 30 days, odds are I don't have it. )
Even if there is 'no extra charge' for a warrantee, that's a red flag that I am likely to find the same product for cheaper somewhere that does charge extra for the warantee, or bundle the surcharge into the price of the good so it can be sold for 'no-extra-charge'. I can probably just buy the product, and not the warantee, which amounts to an overly expensive insurance policy. ( And insurance is always a bad deal game theory wise, because the insurance company couldn't make a profit otherwise. I am financially strong enough to be self insured with respect to the possibility of having a broken TV. Worse comes to worse, I will just not watch TV for a while. )
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You're ignoring the fact that it may not be the SAME small guy that comes into the market. If I'm an entrepeneur with some family money or some other funding source and I see an obviously inflated market that I can go after on cost, guess what business I'm going into? (this is probably responding to the wrong parent, but I already typed it, so :p)
And if you start that business, another price war will likely begin and that price war will definetly favor the larger company. They can simply lower their prices again until you go away. It takes quite a bit of time and money to open up a brick and mortar store. And because the newer store is already at a disadvantage as far as name recognition goes, it can be fairly easy for a larger company to win such a price war.
Starting price wars with larger companies is often a bad idea. It is usually a better idea to offer something better than to simply offer lower prices.
-- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
It seems like the more comments I read, the more people who don't understand MAP. MAP does not enforce a selling price - in fact, you can't do that - it's called price fixing and it's illegal. MAP simply states that you may not advertise something below a certain amount.
So, if MAP on a product is $100, you can sell them at $75 all day long, you just can't say so on your site. This is why a lot of retailers make you add something to your cart before you can see the price. They are dealing with a supplier who enforces MAP, and they're getting around it.
Also, MAP is an agreement between the supplier and the retailer. There is no law or way that a supplier can tell Joe Blow on eBay that he can't sell his crap for whatever he decides. Unless you made an agreement with the supplier, MAP does not apply to you. It's not a law - it's a policy (the legal ruling didn't make it a law either, it just stated that the policy was legal).
MAP can actually be a good thing. It allows smaller startups to compete with the big boys by not letting the big guys get price advantages. The big guys will get higher margins on their stuff, but the startups can still make a reasonable profit.
So long as it is not excessive, I think MAP is fine even for enforcing the idea of brand quality. A lot of brand rely on price as part of their overall experience. You pay a premium for a premium product - and as soon as you product starts showing up in discount bins you lose that. I think MAP is a reasonable way to keep your image up.
Unfortunately, a lot of suppliers misunderstand MAP. I've had suppliers contact me really pissed because they found out I was selling quantity products under MAP to a customer. Nowhere had I advertised that I was selling below MAP, I had just come to an agreement with one particular customer who needed to buy a lot of the product. The supplier has nothing to do with it and has no legal right to tell me what I can SELL something for, only what I can ADVERTISE something for.
Suppliers will still cut you off, though, and a lot of times you need to fall in line with their illegal policies because they're the only guys who will supply you with whizbangamatrons and you don't want to piss them off by telling them they're doing something illegal.
or else!
The manufacturer is the source of the problem and the source of the solution ... If you really do want to keep the small scale business in operation, then stop selling mass quanitities to mass marketers at a discount that is unavailable to the small scale retailer.
End of problem.
End of story.
Good judgement comes from experience, and experience comes from bad judgement.
- W. Wriston, former Citibank CEO
So many people bashing the concept of MAP seems weird to me, since I'm familiar with the subject (part of my job). MAP agreements generally don't stop any owner/consumer of a product from doing anything. It's purely applied to retailers, not consumers that want to sell their used stuff.
Ummm, also, if you never signed a retailer contract with Sony (or whoever else), you're not bound by MAP & can sell your old PS3 for $1 if you want - any lawyer that threatens you (an individual, not a business) about it is full of s**t. (Disclaimer, IMNAL).
In fact, MAP is good for the underdog, the Mom n Pop shops. Think about it - that's why W-Mort & Coozco want to kill it, because it slows them down in their quest to crush their competition & take over the world. It's intended to create a level playing field, but does allow price to fluctuate under certain conditions (easy to do).
To those comments that say - "if I have my own store I should be able to sell at any price I want! How dare any manufacturer tell me what to do!" -- Well, if you really had a store, you'd be begging all manufacturers to implement MAP, just to help you out.
The big-box stores buy in huge volume so they get lower prices. But, small shops can't do this, thus their cost of goods is higher & they must sell for a higher price to stay alive. The intent is to help the small guys by keeping the price at a level they can survive on & stopping the big guys from undercutting, or worse yet, from intentionally selling at a loss just to kill your little shop (& some big stores like it too, because they don't like price wars either).
Applying MAP to eBay seems absurd, UNLESS it's for a big eBay merchant that sells new products.
The "A" in MAP is the key. Standard MAP agreements allow anyone to sell for any price, as long as they say something like "price too low to print" in ads.
Also, any item that's not new (as in perfect), e.g. demo, scratch'n'dent, b-stock, returns, unboxed, open-box, or any type of used - can be any price (you must state it's condition)...So, as long as it's not NIB, (& especially if you never signed a contract that contained MAP provisions) eBay stuff should be exempt.
- Well, that's all based on my actual experience & what our legal dept has explained in the past. If anyone can point out specifics (especially example contracts) that differ from what I've stated, please reply to this comment since I'd really like to know more - especially if there are other things going on, like with MAP somehow being incorporated into DMCA (which would be odd).
Well, the thing that I left out of my post is that I that I shop wherever I get the best the deal with the least amount of hassle, which frequently involves chain stores or an occasional trip far out of my way for that special independent store. I don't shed any tears for the death of the mom and pops, I was just making the point that it's silly to think that if mom and pop got ran out of business that if the chains jacked up their prices they'd be right back in the game. Running a brick and mortal business takes a lot of work up front, and it's not like anyone reasonable can afford the time or money to pop in and out of the market solely in response to gouging by other retailers. That said, I trust Target a lot more to try to keep Walmart in line than I do Uncle Jim's Local Hardwarium.