http://www.ftc.gov/bc/antitrust/manufacturer_requirements.shtm
"If a manufacturer, on its own, adopts a policy regarding a desired level of prices, the law allows the manufacturer to deal only with retailers who agree to that policy. A manufacturer also may stop dealing with a retailer that does not follow its resale price policy. That is, a manufacturer can implement a dealer policy on a "take it or leave it" basis."
Unless I am reading this wrong it seems the Federal Trade Commission disagrees with you.
Bob….
Well, thank you very much for this and your research but I must strongly disagree with you as you must read the entire article. I read this article years ago and formulated a totally different position.
We do not carry any manufacturer’s products. About 12 years ago we were thinking about handling Predator products until we found out that we had to maintain a certain price structure or Predator would cut us off. So, I could choose to play their game, buck it or do without. I chose to do without and since then we would never handle any product that imposes MAP policies. With my way of thinking and taking things personal and believing in 'right', I would be working to support lawyers to fight the MAP policy. I chose to not fight that battle as there are too many other avenues in Billiards to make money without the hassle of dealing with BIG BROTHER breathing over my shoulders and imposing MAP. MAP is illegal; period. It stifles free competition and makes the merchants jump through hurdles to do business. Retailers can sell below MAP but on sort of an underground approach. This is wrong.
Several years ago a Predator dealer sent us an email that Predator sent out to all their distributors stating that MAP is legal and enforcable so you better go along or face the consequences. That was the general nature of the email. I couldn't believe what I was reading. And so I wrote the following article which addresses your FTC findings and blows it to shreds. If you have the head to read it, you'll see my point as it relates to your FTC findings and an actual example of a merchant trying to impose MAP.
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This is one mans opinion….
I encourage each and every one of you to take the time to actually sit there and digest exactly what I am saying here as the ramifications are tremendous to our industry and sport.
It’s not often that I will sit down and take pen to paper in this magnitude but I am in such an uproar over recent events that I feel obligated to say something. Has the USA and its peoples degenerated to such an extent that we now put profits over morality and right? I’d like to think not but the silence is deafening. I cannot believe that merchants within the billiard industry have not spoken up about such manipulation and price fixing. I am equally surprised that the billiard publications (Billiards Digest, Inside Pool) have not picked up on this most very serious story about price manipulation which affects each and every consumer out there today. However, it’s not surprising that the billiard publications don’t report on such stories since Predator is a major advertiser in their publications.
So, now you ask just what is it that I am talking about? Well picture this my friends…. What do you think if I were to tell you that Chevron, BP, Shell or any other gasoline supplier sent out memo’s to their retailers that they could not sell a gallon of gas below $5 a gallon regardless of the wholesale price discount. How would you feel about that?
Better yet, what if I were to tell you that GM told it’s new car showrooms that the most they could discount a vehicle to the consumer would be 20% otherwise they’d pull their license or stop shipping cars to that showroom. How would you feel about that?
What would you say? I would venture to say that you’d be upset to say the least. Rest assured there would be incredible public outcry and as sure as the sun would come up tomorrow, the Attorney General would certainly become involved.
However, in the small niche market of billiards, just such events are taking place right at this very moment. The culprits are Predator Products, the manufacturers of those Chinese made, glued-up shafts and production cues.
Here’s my take on the situation in reviewing Predator’s attorney’s letter and his 51 page (yes I digested 51 pages of legal mumbo jumbo) report citing case law supporting (or trying to) ‘price-fixing’. This attorney’s report, lulled Predator into the false sense of security of believing that they can manipulate the market and force their distributors into submission. The title of the letter was: “Predator: Price Restraints on Retailers in Light of Recent Court Precedent”. Their own attorney admits that they are promoting "Price Restraints".
I would venture to say that in Predator’s quest to manipulate and control the market they retained big gun attorneys to produce a report supporting their, what I like to term, an illegal stance and price fixing strategy. I’m sure Predator paid dearly for this report. In all fairness, I’m certain that if I were to pay an attorney, I could produce a report in my defense which would support my stance that Price Fixing, such as Predator is trying to sell to its distributors, is illegal. You get whatever you pay for and this report that Predator obviously paid for is the end result. Predator wanted price fixing strategy and their paid lawyers (otherwise known as hired guns) provided the scant proof.
The keyword(s) here is the admission of the attorney to call the report and its manipulation of the market – “Price Restraints”. The attorney is correct in calling it that as it is “Price Restraints” which Predator is trying to sell to their distributors. Predator is trying to sell ‘price fixing’ as ‘resale price maintenance’ which is nothing more than a play on words.
I have spoken with several of Predator’s large distributors who have admitted to me that they are going to go along with Predator for fear of being “cut-off” by Predator. I guess when a large portion of your business depends on Predator Products, then the manufacturer can force you into doing whatever it is that they want you to do. What happened to right –vs- profits? What happened to protecting the rights of consumers and keeping with American tradition of a free enterprise system? This is what happens when companies put profits over morality. This is why American business is degenerating. This is why and how the MBA (‘Me Before Anyone’) generation is trying to run business today.
Predator is relying upon the 51 page document to put into force their new price fixing policy where distributors cannot discount more than 20% from MSRP. Additionally, Predator is also telling distributors that they cannot give away any free merchandise when selling Predator products as well so as to appear as a value added promotion. In doing so, Predator is manipulating the market, destroying competition, controlling and monopolizing the marketplace.
Predator is relying upon “the rule of reason” which distinguishes between restraints and anticompetitive effects that are harmful to the consumer -vs- procompetitive effects that are in the consumers best interest.
So, there you have it. You have two statements of law:
1) restraints and anticompetitive effects that are harmful to the consumer (actual Predator tactics)
2) procompetitive effects that are in the consumers best interest (Predator defense strategy)
Predator is relying upon procompetitive law to support their price fixing strategy. Now, let us take a few moments to shoot holes into this nonsensical law.
I would be quite amused to see Predators defense as how they are promoting procompetitive effects that are in the consumers best interest when they are price fixing whereby causing increased pricing for the consumer and where dealers are forbidden to do any ‘value added’ promotions featuring Predator Products. How can these tactics be in the ‘best interest’ of the consumer?! Furthermore, how can threatening their distributors by cutting them off be procompetitive?
Case law specifically states that the law is replete with procompetitive justifications. However, a few recent studies on this subject also cast doubt on the conclusion that the practice meets the criteria for the procompetitive rule. More simply put, Predator's stance on their procompetitive marketing strategy will NOT hold up in a court of law and can easily be challenged.
Antitrust laws primary purpose is to protect interbrand competition and 'price fixing' is trying to eliminate intrabrand price competition and aids in the manufacturers position against competing brands.
And, setting minimum resale prices may also have anticompetitive effects, and unlawful price fixing is designed to obtain monopoly profits. This is, in my opinion, exactly what Predator is trying to do. Predator is trying to monopolize the market and monopolize profits by using strong arm tactics and threatening its distributors that they either play along or be cut-off – hardly a procompetitive defense as Predator is alleging.
Retail price fixing can facilitate Predator to organize retail cartels. It can also be abused by a powerful manufacturer such as Predator. Thus, the potential anticompetitive consequences must not be ignored or underestimated.
Notwithstanding the risks of unlawful conduct, it cannot be stated with any degree of confidence that retail price fixing, always or almost always tends to restrict competition and decrease output. Argument overlooks that, in general, the interests of manufacturers and consumers are aligned with respect to retailer profit margins. That’s serious and consumers interests should never be aligned with retailer profits.
In one such case, a manufacturer who sold its products to distributors (much like Predator does), and whose distributors who agreed to resell them at set prices, the court found that the manufacturer’s control of resale prices to be unlawful. Please read that again.
In all fairness to Predator, each side of the debate can find sources to support its position, it suffices to say here that economic literature is replete with procompetitive justifications for a manufacturer's use of resale price maintenance otherwise known as ‘price fixing’ or as Predator’s own attorney put it, “Price Restraints on Retailers”.
A single manufacturer's use of price restraints tends to eliminate intrabrand price competition; this in turn encourages retailers to invest in tangible or intangible services or promotional efforts that aid the manufacturer's position as against rival manufacturers. Resale price maintenance also has the potential to give consumers more options so that they can choose among low-price, low-service brands; high-price, high-service brands; and brands that fall in between. Consumers might learn, for example, about the benefits of a manufacturer's product from a retailer that invests in fine showrooms, offers product demonstrations, or hires and trains knowledgeable employees.
While the above paragraph may hold true for manufacturers such as Louie Vuitton and Calvin Klein, it does not hold true for Predator Products. I don’t know of a single “showroom” in billiards who invests in chandeliers and elegantly carpeted “showrooms” to sell their Predator products to upscale clients who are more interested in service than price. I would venture to say that the vast majority of billiard enthusiasts are more price conscience than anything else. Therefore, Predator relying upon this as defense for price fixing is not in line with one argument of procompetitive law.
CONTINUED…..
