Wow! But what if company goes bust and has to sell all remaining stock at any price?
That has been one of the problems with sellers on the internet.
There are to many companies out there that can't calculate their P&L and our setting the prices so low, that in the end when they do go out of business they drive the prices down so far that the only way to compete is to have some cheap copy of it made in China and close our factories down in the United States.
In my opinion, I think it's a good move for the US Surpreme Court to slow down the loss of jobs.
Except the manufacturing has been/is being/will be outsourced on the "quality" product anyway to grow margins.
> Wow! But what if company goes bust and has to sell all remaining stock at any price?
And what if a ABC sells for less until sued - closes and reopens as XYZ?
Might slow down the process, but not end the problem.
Of course that would be illegal when exporting to Europe. Get the price and shipping right and there is a nice little niche here to resell direct to US consumers.
|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.
Not as simple as it sounds at first. A gut reaction might be to think this is not in the consumers interest, however experience has shown that large corporations use loss-leaders (selling at bwlow cost price) as a technique for closing down the competition, and then can charge what they like.
I think this is a good idea, though I am amazed the US court should side with such a left-wing concept!
|The United States Supreme Court has just cracked 100 years of antitrust jurisprudence in a decision that may profoundly affect the way consumer goods are priced in the future. This decision holds great promise -- but not without danger -- for manufacturers of virtually any type of consumer product. |
On June 7, 2007, in Leegin Creative Leather Products, a sharply divided Supreme Court ruled that pricing behavior which, in the past, had been considered so pernicious that it was always per se illegal -- i.e., under no circumstances would it be permitted -- might now, under the right circumstances, be OK. The subject is minimum resale price maintenance, and the potential commercial impact is vast.
Manufacturers Must Follow "Rule of Reason" In Setting Floor Prices
I think this is a direct blow to Internet sales. The brick and mortar retailers have been complaining to the manufacturers for years that Internet retailers are under cutting them - and it's true. It looks like they finally found a partial solution.
I wonder how this judgment works with the First Sale Doctrine?
Forget internet sales, this is THEORETICALLY a direct blow to any discount store anywhere, including places like WalMart, Target, etc. who may get a team of lawyers fired up to appeal if it causes them trouble.
If WalMart can't discount the item below what anyone else can sell it for they no longer have an edge and the mom and pop stores can start selling those items at the same price with personalized service right next door to WalMart and be very successful doing it.
Unfortunately, that probably won't happen. What's more likely to happen is that the manufacturers, to get the volume business, will probably set the floor price to what the WalMarts of the world want and give WalMart the big discount for volume purchases. The rest of the stores in the world will have that same floor pricing yet pay MORE for the same merchandise and get squeezed out in the middle, maybe worse than they are now.
What many of you that have never been in ecommerce may not know is that "floor pricing" exists already so this is nothing new. Some manufacturers and distributors simply won't allow you to sign up (contracts involved) unless your store, online or B&M, meets certain 'criteria' that makes sure you aren't putting everything on the shelves at bargain basement prices.
Yep, I thought it was illegal too, but when we ran it past our lawyer he said the way they phrased it the term price fixing really didn't apply to their 'approval process'.
Just goes to show you can get away with just about anything if you word it right.
[edited by: incrediBILL at 6:30 pm (utc) on Aug. 10, 2007]
As a consumer, I don't like this concept at all. 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. The latter either sell based on service (there are lots of people who don't need the lowest price, and prefer convenient locations, helpful sales staff, etc.), lose money by matching prices, or go out of business.
Cutthroat competition benefits the consumer every time.
This is very odd indeed. America is supposed to be the world's champion of the free market, but this ruling goes against that.
A retailer should be allowed to use whatever strategy they think is appropriate to sell goods, including pricing appropriate to their customers. Manufacturers shouldn't have the power to interfere in that.
--A gut reaction might be to think this is not in the consumers interest, however experience has shown that large corporations use loss-leaders (selling at bwlow cost price) as a technique for closing down the competition, and then can charge what they like.--
But if they close down the competition, that will drive prices up in the long term, not down.
The more competition you have, the lower the prices and the higher the quality. Competition has to be protected above all else if you want the consumer to benefit.
"the trial court rejected Leegin's argument that its pricing structure, when analyzed under a "rule of reason" approach, was actually pro-competitive"
So, nothing much has changed. Manufacturers still can't fix the price just for the sake of keeping the price the same everywhere. They must have a "REASONABLE" excuse for doing so. I don't believe there will be too many reasonable excuses.
I think this strengthens WalMart's position. They dictate pricing to manufacturers rather than the other way around like it is for small retailers. I am sure that will continue.
How does this effect eBay? Does this only apply to recognized retailers or can this judgment be stretched to give manufacturers power over anyone selling their new products?
I can also see that this could change basic business operations - WalMart became hugely successful because of their investment in smart business operations. They ran a good business, didn't waster money and could afford to sell at lower prices because they were a lean operation. If retailers have to sell at fixed prices running a smart business will be secondary to having a slick marketing and sales program. You can no longer count on low prices driving traffic.
WalMart will be safe. They will sell a 52 ounce jar of pickles for $0.50. The manufacturer will only sell that size of jar to WalMart. Most other companies will get the 50 ounce jar and the MAP pricing will be $1.
How does this effect companies like TJ Max and Marshalls? They only sell name brand clothing that is deeply discounted.
I have had more than one manufacturer stop selling to me because I broke MAP pricing. I know they will use this law to play favorites.
|WalMart will be safe. They will sell a 52 ounce jar of pickles for $0.50. The manufacturer will only sell that size of jar to WalMart. Most other companies will get the 50 ounce jar and the MAP pricing will be $1. |
Good point. Consumer-electronics retailers and manufacturers have been playing the "model number" game for years.
|What many of you that have never been in ecommerce may not know is that "floor pricing" exists already so this is nothing new. Some manufacturers and distributors simply won't allow you to sign up (contracts involved) unless your store, online or B&M, meets certain 'criteria' that makes sure you aren't putting everything on the shelves at bargain basement prices. |
They can already legally have you sign a contract where you agree that you won't sell below a set price. Maybe this is the teeth manufactures needed to be able to legally pursue violating retailers. Instead of just dropping violating retailers, now they can sue.
If they have to, I'm sure the big stores will get creative. They may have to match prices with everyone else, but maybe you get some free stuff or gift card or whatever...
Maybe I am reading the decision incorrectly, but to me, it seems that "vertical price restraints" were always legal provided they did not violate section 1 of the Sherman Act. Whether or not they were in violation was to be decided by the "rule of reason".
This doesn't change anything, it just means that PSKS is out of luck. Future price restraints would still be subject to the same scrutiny they always have been.
I'm reading it the same way.
For a good analysis of this case see this article [knowledge.wharton.upenn.edu] from U of Penn Wharton School.
For me, the key is that retailers, while stuck with selling at a certain price, will now have an incentive to offer other things that create value. For instance, they may offer more services to the customer since they may not be able to compete with low price.
While there had been some price maintenance in the past this decision certainly pushes the pendulum in the manufacturers' favor. Sure retailers may be able to challenge this on a case-by-case basis but that may require a protracted, costly legal action.
Inefficient markets allow costs to be externalized and there is always a price to be paid for those externalized costs, often a cost that far exceeds the temporary - at the time - "savings".
Groundwater pollution is a fine example of externalized costs.
Human tragedy, a by-product of the pre-regulated industrial revolution, is another example: workers who lost limbs in the factory without recourse.
Online retail functions "efficiently", in many instances, through externalizing the cost of pre-selling or closing the deal, short of cash changing hands, to retail stores. How lovely "the efficiencies" of online retail. For example, there are fewer returns since the customer had a chance to see it, feel it, try it on, compare it, etc. in the "expensive" brick and mortar store.
Perhaps brick and mortar retail is destined to fail, at least in the world of mass produced products. If that happens then, perhaps, online retail will also fail as manufacturers simply "go direct".
Perhaps "manufacturer direct" is really the most efficient model? I'm sure online retail of mass produced products will savor the day when that happens. Unfair "competition" IF the manufacturer cuts out the inefficient - i.e., more expensive - middleman? The one obliged to carry inventory versus the "manufacture on demand", and price based upon component cost, manufacturer? Hmmmmm.
[edited by: Webwork at 10:01 pm (utc) on Aug. 10, 2007]
|Not as simple as it sounds at first. A gut reaction might be to think this is not in the consumers interest, however experience has shown that large corporations use loss-leaders (selling at bwlow cost price) as a technique for closing down the competition, and then can charge what they like. |
There is a name for it: “predatory pricing” and it is illegal in the United States. Airlines are know for doing it for years for example low price tampa-new york so other airlines stop offering the same flight. And when they are gone raise the price from $80 to $299.
Don’t confuse “predatory pricing” with this law.
This law is bad for consumers! And i am a consumer for many products!
|I think this is a direct blow to Internet sales. The brick and mortar retailers have been complaining to the manufacturers for years that Internet retailers are under cutting them - and it's true. It looks like they finally found a partial solution. |
Internet retailers don’t have costs associated with brick and mortar stores, and because they have cost leadership they can offer us consumers better deals example newegg.com tell you what way better prices than lets say “bestbuy”. We consumers can go to bestbuy and pay premium prices when we need something that day, but if I we can wait 2-3 days we can get it online and save 10% because newegg doesn’t spent that money on labor and other brick and mortar expenses and they pass the saving to us consumers. I am all for consumers I am one!
ho-hum. The only thing this means is that future cases of vertical price fixing will be judged under the rule of reason, as opposed to being per se illegal. Horizontal price fixing is still illegal. The simplified difference between the two being whether the price is set by a manufacturer for the retailer (=vertical=sometimes legal) or by a group of retailers (=horizontal= always illegal).
My suppliers can require me to abide by minimum prices, but I can't conspire with my group of buddy retailers to keep prices either artificially high (more profits in the short term) or low (killing competition, more profits in the long term, theoretically).
Another issue, is the manufacturers that require minimum prices but either enforce the policy selectively, or not at all. That one gets me steamed.
Wow, this will also kill government bids for products as well.
Will not really effect eccomerce, you just will have to start purchasing inventory overseas......
This might cause issues with auction sellers on ebay though......
I guess it could hurt the print advertising biz. What are they going to print in the sale ads every week?
|What's more likely to happen is that the manufacturers, to get the volume business, will probably set the floor price to what the WalMarts of the world want and give WalMart the big discount for volume purchases. The rest of the stores in the world will have that same floor pricing yet pay MORE for the same merchandise and get squeezed out in the middle, maybe worse than they are now. |
Wal-Mart already forces manufacturers to do this. Before Wal-Mart the manufacturers held the cards, if you wanted to sell their product you had to deal with them under their terms. That has shifted and Wal-Mart holds all the cards. Either deal with them at the prices they want or they won't sell your product.
This might be quite a good thing especially if the products are offered to the mom and pops at the same price Wal-Mart is paying.
I found that companies that try to fix pricing are dinosaurs anyways. They will be replaced by companies that concentrate on R&D, improving efficency, etc.
Trying to control the supply chain is a sign of a company that is either in trouble, or have clowns in management.
The free market economy is very efficient in dealing with companies that goes against the fundenmental principals of the free market.
Either case, they will be gone in 5 or 10 years.
In the meantime, if they want to deal with canadian distributers and retailers, they are going to have to deal with Canadian Combines and Competition act. IE. price fixing stops at the Canadian Border.
I don't see this ruling have much real world effect on most areas of everyday products in an open economy such as the U.S.
This is because this ruling does not apply to the rising manufacturing powerhouses located in countries such as China.
Imports from such areas will keep prices in check despite what local manufacturers would like to charge for their products.
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