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US Supreme Court allows minimum price requirements
Perhaps One of the Most Important Judgements Ever Affecting e-Commerce

 10:06 am on Aug 8, 2007 (gmt 0)

The U.S. Supreme Court ruled that manufacturers can set minimum prices for sale of their products by retailers.
And, of course, manufacturers can now sue resellers who violate those minimum price requirements.




 3:35 am on Aug 11, 2007 (gmt 0)

Firstly as a consumer I hate the thought that I will not be able to get a deal or find something on sale. There goes the economy!

As an internet retailer we do not subscribe to MAP pricing UNLESS we are buying DIRECTLY from the manufacturer.

And even then they should not be able to keep retailers from offering incentives like "buy this and get this free" or get free shipping or offering a mail in rebate.

And what about areas of the country where cost of living is higher or lower. People in say a tiny farming town is not going to have the funds available to them where as people in New York with much higher incomes in general will reap the rewards of this.

I dont think that the battle is over. We have been collecting data for the last two years from a couple of the manufacturers that have been attempting to enforce map pricing and breaking ALL the rules, one even went so far as to call our ISP to try and have a site shut down.

We finally just shut those items off from purchase in our system and let them run ads for those that do. Funny thing is.. we're making more money from the ads than we ever did selling their product.

-- in addition
I will tell you that in our market you can walk into someones store and they will sell at what ever they want regardless of the sale sticker. So are the manufacturers going to send out secret shoppers to police this? no.

I also do not like that just because you have a website that gets spidered by a search engine means you are advertising it. If we aren't paying for ads we AREN'T advertising! Just no different that word of mouth on the streets.

One thing I see on the horizon with this is that some websites will have "membership" areas to sell cheaper.

[edited by: Bewenched at 3:40 am (utc) on Aug. 11, 2007]


 4:17 am on Aug 11, 2007 (gmt 0)

It's another nail in the coffin of property rights. If someone owns a 1000 cases of widgets, they can't sell them for what ever price they want. Instead, they become the contractually licensed distributor of the goods that they own, but which the manufacturer controls.

I guess its essential in the global economy. If the movie studios and record companies want to sell something for $2 in China, $12 in the US, and $20 in Europe, they need a law to prevent someone from buying the CDs in Asia and selling them elsewhere. Because, of course, the consumer doesn't own the music. They own the plastic disk and a license to listen to it.

That model is being pushed from pure intellectual property to shippable goods with an intellectual property component, to plain old shippable goods. Yes, it will mean fewer bargains. Bow down to the big corporations.


 4:25 am on Aug 11, 2007 (gmt 0)

Here's another take on the case


<quote>Kay's Kloset only lowered their prices on the Brighton bags after Brighton (Leegin Creative Leather Products) itself did so in its company stores in the same city!

-- David Blanchard
IndustryWeek editor-in-chief</quote>


 4:36 am on Aug 11, 2007 (gmt 0)

Don't know all the Ps & Q's of the ruling but there are many ways to get around
minimum retail pricing.

Volume discounts, advertising allowance, reduced or free shipping, co-op advertising, private labels, products exclusive to certain retailers. Products
made to similar but different specs. The ingenuity of the American manufacture
and retailer is endless.

The more things change the more they stay the same!..KF


 4:56 am on Aug 11, 2007 (gmt 0)

So is there a retailer organization that is going to help Kay's fight this, is there a way to donate to their legal efforts?


 5:01 am on Aug 11, 2007 (gmt 0)

In some sectors the internet distributors sell more cheaply but not because they're truly more efficient. Their only saving is that they've managed to offload the cost of customer service onto the backs of their brick and mortar competitors for no recompense. Some internet discounters make no bones about telling users to try out the products at a local store then come back and order from them.

That situation is not sustainable, and this ruling will make it easier for manufacturers to protect the stores who have paid for samples and do the REAL work of selling their products.


 2:08 pm on Aug 13, 2007 (gmt 0)

I agree buck. Manufacturers need a sales force other than themselves for many different reasons like regional services, personal selling and demonstrations, and cultural differences. If a manufacturer cant stop someone from selling their product at a price that drives out the rest of its reseller force then they will untimately lose business because while the cheap reseller can make other resellers unprofitable, the cheap guys cant sell 100% of what the rest of the resellers were selling because these needs I mentioned above.


 2:38 pm on Aug 13, 2007 (gmt 0)

It's a fact that some companies can run an extremely lean and efficient operation and sell at prices that are ruinous to less efficient companies.

That isn't how I've seen it play out, nor do I think this is the purpose of this law. My experience has been where a small player in the market decides that they are going carve out some market share by selling at or below cost on a high-volume item. The problem is, this is not sustainable as a business model (if it was, the big guys would already be doing it).

If a manufacturer allows this to happen too often, large retailers will move to other vendors. If all the large, well-known retailers in your indsutry stopped carrying a brand, how would that affect your opinion of the brand?

Manufacturers have been concerned about this for a long time, and MAP (Minimum Advertised Price) programs have been around for decades. These worked well before the Internet, if you couldn't advertise a price below MAP, it became much more difficult for a small player to undercut the market in a big way.

The Internet changed that. The advertising and selling processes are now much closer together and the line between them is much grayer. How often do you see a site advertising 'Prices so low, you have to place this item in your cart to see it.' That is someone breaking MAP, and manufacturers hate it (some of them, anyway).

This is really giving some teeth back to a pricing model that has been around for a long time. If a manufacturer wants their brand priced a certain way, so be it.


 4:06 pm on Aug 13, 2007 (gmt 0)

This is really giving some teeth back to a pricing model that has been around for a long time. If a manufacturer wants their brand priced a certain way, so be it.

I firmly believe that Manufacturer's should stay out of the pricing game.

MAP, collusion and other forms of price fixing, only hurts the free market system, regardless of the spin you put on it.

It all comes down to (from the manufactuer perspective), the cheaper your product sells for in the retail market, then the more product you are going to have orders for, and your factory is going to be kept at 100% capacity.

If some idiot sells product below cost, goes under, and the stuff show up in a flea market, who cares, as long as the manufacturer got their money up front (which they should if the credit deparmtment is on the ball).

The free market takes care of itself. As soon as you start introducing artificial constrants such as MAP, you are biasing the market.

MBA schools need to drill into their students the evils of price fixing, even more than they do now, so MAP and other forms of price fixing are eventually weeded out of senior managements blood.


 4:33 pm on Aug 13, 2007 (gmt 0)

Lgn1, what's your answer for coping with the problem of parasitic marketing that I described above?

If a manufacturer cant stop someone from selling their product at a price that drives out the rest of its reseller force then they will untimately lose business

The effects of this will vary in different sectors, but it's a major problem in one industry that I monitor and its effect is to reduce consumer choices, not improve them.


 9:34 pm on Aug 13, 2007 (gmt 0)

In our industry, 97-98% of customers are going to buy retail, regardless of what the price on the internet is.

A lot of people are just impulse buyers, and others are just unwilling to wait for delivery, they just got to have it now.

The parasitic marketing example of seeing it in the store, and then buy it online, should not be a problem for the above reasons. Most people I know are ethical and would not stoop to this type of behavior, especially if the store gave good customer service.

The funny thing is, despite having several web businesses, I buy everything in retails stores (except downloadable software), because I want it now.

My guess is that books have the highest internet penetration as far as percentage sales between internet and retail. Anybody has some firm numbers, to see if parasitic marketing might be an issue?

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