End of Backdoor Price Fixing Good for the Projector Market? - AVS Forum
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post #1 of 84 Old 06-28-2007, 06:28 PM - Thread Starter
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Until today manufacturers were legally unable to directly dictate retail prices to their dealers. To enforce a pricing floor many manufactures used authorized dealership agreements to maintain pricing. Authorized dealers not following stated and unstated pricing rules would have their authorization revoked. To ensure compliance by consumers. manufacturers could deny warranty service if purchases were made from non-authorized dealers. Today the Supreme Court issued a ruling allowing manufactures to directly fix the retail price of their products. Will this be an improvement over the current projector distribution system?

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post #2 of 84 Old 06-28-2007, 07:00 PM
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Sounds like an attack on capitalism to me.
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post #3 of 84 Old 06-28-2007, 08:23 PM
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Its not the retail price that we are worried about, its the wholesale price. 8)

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post #4 of 84 Old 06-28-2007, 08:59 PM
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Quote:
Originally Posted by mdputnam View Post

Until today manufacturers were legally unable to directly dictate retail prices to their dealers. To enforce a pricing floor many manufactures used authorized dealership agreements to maintain pricing. Authorized dealers not following stated and unstated pricing rules would have their authorization revoked. To ensure compliance by consumers. manufacturers could deny warranty service if purchases were made from non-authorized dealers. Today the Supreme Court issued a ruling allowing manufactures to directly fix the retail price of their products. Will this be an improvement over the current projector distribution system?


Wasn't that used to be illegal, price fixing? No competition, might as well be monopoly.
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post #5 of 84 Old 06-28-2007, 09:24 PM
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That's the problem though... soon the only price will be retail, and you can be sure that MSRPs for your favorite gear isn't going to drop to compensate for this. While I'm sure the bulk-sales Optomas and Panasonics will continue to be inexpensive, the Yamahas and Marantzes will stay where they are. This benefits nobody but the manufacturers and retailers. The manufacturers are already protected--they can merely raise their wholesale prices to raise income. The retailers are taking a hit now but that's entirely their fault... now we're going to have to subsidize Best Buy's and Circuit City's horrible customer service policies. And at the same time, they're exploring ways to screw us all out of money with now-you-see-it-now-you-don't "rebates" and bait-and-switch tactics (like BB's in-store website snafu).

Normally this price-fixing ability would be a good thing. No more haggling or "state secret" pricing. If Panasonic says the AE1000 is going to sell for $3995, then it's going to sell for that at AVS, at Costco, at Visual Apex, at Best Buy, and at Joe's Bag O' Projectors.com.

That would be if you could trust manufacturers, and since they won't even usually give us honest brightness readings, do you expect them to price their one-and-only-allowed price to be fair and competitive? Oh well, just buy from someone else except oops... they are priced high too. Buy from the internet? Nope, same (legally enforced) price. Orwell had it right, except it was 2024 not 1984. You'll pay one state-sponsored price for everything, and you will have one 'authorized' vendor for everything. The highest bidder becomes your one-and-only operating system manufacturer, your one-and-only digital music supplier, your one-and-only phone provider, etc...



This is just another step towards corporate government. There was a reason price-fixing had been illegal for 96 years. Now all they have to do is to revamp the patent system so that anything can be patented forever (first come, first serve, that pesky prior art thing becomes irrelevant), and change copyright laws so that everything costs a fee to use, even your own name.

Theoretically speaking, I can see where a court might find continual price drops between discounters and traditional retailers to be a threat to business, but for crying out loud.. that is competition.. it's capitalism! I'm disappointed in this but not surprised, given how quickly our rights and our foundations are being eroded everywhere.

I wonder how long it will be before those pesky online discounters are put out of business by the good guys (e.g. Best Buy, Sears, and all the other places that think giving you a product at MSRP is doing you a favor)?

Remember kids, internationally speaking price-fixing isn't a crime, and you can see how well price collusion works for consumers. OPEC is a shining example of how the system can work well... just don't ask who it's working well for.

At least we won't have to worry about trade wars since China and other bulk manufacturers will be able to finally destroy the major CE brands, given the bulk guys won't mind if their products are discounted and won't set fixed prices. I suppose we need to add a fourth economic system to the current list of communism, capitalism, and socialism: corporatism. It's like communism except the profits all go to the hands of the state companies and their executives.

In the end I guess this will all be meaningless, because just like DRM companies will find that they cannot fix a price without taking heavy losses from competitors that won't price fix. So this is another bad experiment courtesy of the usual corporate government bribes and influencing.

The only constant in life is that you cannot trust groups of people to do the right thing... ever.



(I mean it all with a .)
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post #6 of 84 Old 06-28-2007, 11:33 PM
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Too funny, I was expecting some upset posts about this. Some might want to actually read the ruling. Here are a few excerpts.
Quote:


Washington The Supreme Court ruled today in a 5-4 decision to make it easier for manufactures to require retailers stick to minimum advertised prices (MAP), a move that could raise prices at retail, the dissenting justices said.

The high court's decision over rules a previous anti-trust statute that said MAP agreements were illegal. In the future courts will decide on a case by case basis whether the MAP agreement violates anti-trust laws.

It is a flawed anti-trust doctrine that serves the interests of lawyers, Justice Anthony Kennedy wrote, adding the old legal standard required "manufacturers to choose second-best options to achieve sound business objectives.

Dissenting justices said the ruling would likely drive up retail prices.

The Consumer Electronics Association issued the following statement on the ruling.

CEA applauds the Supreme Court decision today reversing the per se rule against resale price maintenance. The Supreme Court holding that the rule of reason should apply to the legality of manufacturer pricing decisions, means simply that all the facts will be examined before a finding of illegality - replacing a black and white rule of illegality in every case. Reasonableness has come back to the antitrust laws, and in the consumer electronics industry, where sales training, industry marketing, and after-sales service are highly valued by manufacturers and reputable retailers, it makes perfect sense to consider these factors when evaluating a manufacturer's requirement that threshold prices be maintained.

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post #7 of 84 Old 06-28-2007, 11:36 PM
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BTW, for what it's worth this is probably going to have very little effect on things. MAP prices have existed for decades.
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post #8 of 84 Old 06-29-2007, 04:56 AM
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Yes...try to buy an Epson projector below MSRP...


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post #9 of 84 Old 06-29-2007, 08:19 AM - Thread Starter
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This may not be a total loss for consumers in the under $10k projector market it. Under the old system most brick and mortar stores don't waste the display space required for demoing these lower price projectors mainly because of the price competition and low profit margins. With everyone selling at the same price, competition will be based more on services offered with the sale (like previewing the projector before you buy). I see the big winners in this as the folks in the CEDIA channel and the big losers are the internet retailers. National large box retailers will have the financial resources to legally challenge manufacturers if they set a MAP that they don't like, so for them its probably a neutral ruling.

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post #10 of 84 Old 06-29-2007, 08:54 AM
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The OP's post made it sound like the MAP/MSRP restrictions had been outlawed, while QQQ's quote from the ruling makes it sound like quite the opposite, that it is now to be decided on a case by case basis if MSRP / MAP is being used in an anti-competitive way, which in practice will basically mean that manufacturers will continue to use enforced MSRPs and MAPs.
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post #11 of 84 Old 06-29-2007, 10:46 AM - Thread Starter
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Quote:
Originally Posted by sethk View Post

The OP's post made it sound like the MAP/MSRP restrictions had been outlawed, while QQQ's quote from the ruling makes it sound like quite the opposite,

Q's news quote is mixing up MAP, and RPM.

The difference now is that a manufacturer can directly, as part of a reselling agreement, tell a retailer not to sell a product below a minimum price. This is know as Resale Price Maintenance (RPM). Before this ruling RPM was an automatic, or per se, violation of the Sherman Anti Trust Act. In its place, the court instructed judges considering such agreements for possible antitrust violations to apply a case-by-case approach, known as a "rule of reason," to assess their impact on competition. Until this ruling some manufactures have maintained minimum prices by resorting to an implied RPM revoking a reselling agreement without cause when a retailer is selling their goods below implied pricing, the implied price was typically the MAP price.

On the other hand, under MAP, a manufacturer agrees to reimburse retailers for a fraction of their advertising expenditures if retailers do not advertise the product at below a specified price. MAP has always been judged according to a rule of reason and subject to a case by case review by a court. To date there has been very little litigation on challenging MAP agreements due in part to the high cost of litigation.

Due to the cost of litigation only large box retailers will have the financial ability to challenge manufacturers in court. Knowing this most manufacturers will negotiate with big box retailers and dictate to smaller retailers. The bottom line is smaller discounters will be subject to RPM and more manufacturers will be openly enforcing RPM.

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post #12 of 84 Old 06-29-2007, 10:52 AM
 
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The decision is here:
http://www.supremecourtus.gov/opinions/06pdf/06-480.pdf

An interesting relevant excerpt(from the syllabus not the opinion):
Quote:


(1)
Economics literature is replete with procompetitive justifica-tions for a manufacturer's use of resale price maintenance, and the few recent studies on the subject also cast doubt on the conclusionthat the practice meets the criteria for a per se rule. The justifica-tions for vertical price restraints are similar to those for other verti-cal restraints. Minimum resale price maintenance can stimulate in-terbrand competition among manufacturers selling different brands of the same type of product by reducing intrabrand competitionamong retailers selling the same brand. This is important becausethe antitrust laws' primary purpose . . . is to protect interbrand competition, Khan, supra, at 15. A single manufacturer's use of ver-tical price restraints tends to eliminate intrabrand price competition;this in turn encourages retailers to invest in services or promotional efforts that aid the manufacturer's position as against rival manufac-turers. Resale price maintenance may also give consumers more op-tions to choose among low-price, low-service brands; high-price, high-service brands; and brands falling in between. Absent vertical pricerestraints, retail services that enhance interbrand competition might be underprovided because discounting retailers can free ride on re-tailers who furnish services and then capture some of the demand those services generate. Retail price maintenance can also increaseinterbrand competition by facilitating market entry for new firmsand brands and by encouraging retailer services that would not beprovided even absent free riding.

The opinion, in a nutshell:
Quote:


In Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373 (1911), the Court established the rule that itis per se illegal under §1 of the Sherman Act, 15 U. S. C. §1, for a manufacturer to agree with its distributor to setthe minimum price the distributor can charge for the manufacturer's goods. The question presented by the instant case is whether the Court should overrule the per se rule and allow resale price maintenance agreements to be judged by the rule of reason, the usual standard applied to determine if there is a violation of §1. The Court has abandoned the rule of per se illegality for other verticalrestraints a manufacturer imposes on its distributors. Respected economic analysts, furthermore, conclude that vertical price restraints can have procompetitive effects. We now hold that Dr. Miles should be overruled and that vertical price restraints are to be judged by the rule of reason.

In other words, horizontal price-fixing is per se illegal, but vertical price-fixing is not (no longer anyway) per se illegal and is now subject to the rule of reason.
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post #13 of 84 Old 06-29-2007, 11:17 AM
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There are many ways a seller can circumvent this to discount a product and there will still be plenty of competition.

1) Offer a secondary product at a discount or free.
2) Free Install
3) Floor/Demo Model
4) Extended Warranty

As long as the receipt is at MSRP what can they do.

That's the good part about Capitalism. We get to decide the best way to get the best deal abd there are always be sellers that will find a way to beat a government mandated system.
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post #14 of 84 Old 06-29-2007, 11:24 AM
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Quote:
Originally Posted by mdputnam View Post

Due to the cost of litigation only large box retailers will have the financial ability to challenge manufacturers in court. Knowing this most manufacturers will negotiate with big box retailers and dictate to smaller retailers. The bottom line is smaller discounters will be subject to RPM and more manufacturers will be openly enforcing RPM.

You will ultimately have a new, and more interesting, angle with Robinson-Patman if the above is true. Enforcing RPM for one group while not doing it for another should be one of the first, and easiest, tests to determine whether a policy is anti-competitive. After that test, you then most likely have an RP issue to resolve over advantaging one customer over another, with neither a "separate market" nor a cost-to-serve defense available.

Bill

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post #15 of 84 Old 06-29-2007, 11:25 AM
 
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Mainly I'm just pissed off about how these "strict constructionists" who testified before congress during their confirmation about how they supposedly respected stare decisis have basically gone on a rampage of overturning precedent in fact while pretending not to. Although at least in this one Kennedy wrote the opinion and outright overturned precedent and didn't play a stupid semantics game about not really overturning anything as they do exactly that.
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post #16 of 84 Old 06-29-2007, 11:26 AM
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Quote:
Originally Posted by chhelo View Post

There are many ways a seller can circumvent this to discount a product and there will still be plenty of competition.

1) Offer a secondary product at a discount or free.
2) Free Install
3) Floor/Demo Model
4) Extended Warranty

As long as the receipt is at MSRP what can they do.

That's the good part about Capitalism. We get to decide the best way to get the best deal abd there are always be sellers that will find a way to beat a government mandated system.

The easiest way is with a separate SKU. One that is designed for big box, and another for more traditional retail. In order to make the SKUs distinct, a warranty distinction is typically made, with the lower priced unit having a shorter warranty.

This has been done for a while.

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post #17 of 84 Old 06-29-2007, 11:27 AM
 
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Quote:
Originally Posted by chhelo View Post

There are many ways a seller can circumvent this to discount a product and there will still be plenty of competition.

1) Offer a secondary product at a discount or free.
2) Free Install
3) Floor/Demo Model
4) Extended Warranty

As long as the receipt is at MSRP what can they do.

That's the good part about Capitalism. We get to decide the best way to get the best deal abd there are always be sellers that will find a way to beat a government mandated system.

Huh? What government mandated system are you talking about? You have it backwards.
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post #18 of 84 Old 06-29-2007, 11:29 AM - Thread Starter
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Quote:
Originally Posted by chhelo View Post

That's the good part about Capitalism. We get to decide the best way to get the best deal abd there are always be sellers that will find a way to beat a government mandated system.

Huh? Here in the US capitalism is a government mandated system.

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post #19 of 84 Old 06-29-2007, 11:42 AM
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If i'm understanding this right all stores are going to be selling it for the same price? So why even buy something in your own state anymore and pay tax. I'll just order from out of state and save a few extra hundred dollars. Does this work on cars too?

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post #20 of 84 Old 06-29-2007, 11:50 AM
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This is anti-consumer no matter how you look at it and I think a very bad decision. We needed more protection from RPM, not less, as it is already rampant and now sure to get worse. What it basically does is remove choice from the consumer and gives it to the manufacturer.

Without RPM, you have a choice, buy discount with no/little service, or buy full service. Sure, there are always freeloaders, but most full service retailers can deal with that. I spent several years in a ComputerLand back when they were the big thing for PCs and it wasn't hard to spot freeloaders. I resent that fact that the manufacturer thinks they should be able to dictate that I have to buy full service when in many cases I know far more than most sales people about a product and just want the box and you'll never see me again. Besides that, what "full service" did someone selling purses and belts provide? This was plainly a bad decision for the case at hand as there is no "full service" to be provided here. It's simply about appearing "exclusive".

That's been the big problem with RPM and why this is such a bad decision, in most cases, RPM is all about appearing exclusive, not to help full service dealers. One of the worst areas for this now is in baby products. Many brands forbid any discounting and there is certainly no service needed with the products. I think this is even worse since it hurts those who can't afford better, safer brands otherwise who might be able to if they could find a 20% off sale.
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post #21 of 84 Old 06-29-2007, 11:57 AM
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Quote:
Originally Posted by Buttabean View Post

If i'm understanding this right all stores are going to be selling it for the same price? So why even buy something in your own state anymore and pay tax. I'll just order from out of state and save a few extra hundred dollars. Does this work on cars too?

Exactly another reason this is such a bad practice. I bought some furniture a few years ago that had RPM from the manufacturer. I would have said forget it as I hated to support a company with such a policy, but we had searched months for something both my wife and I liked. Checked dealers within a 200 mile radius and everyone had the exact same price and said they couldn't drop a single dollar. Did the local full service dealer get my business? No, the dealer in the next state over who offered free delivery and no sales tax did.

One more thought, I have to disagree with the poster who said retailers will find a way to discount on stuff like this anyway. I haven't seen that. Most don't offer other free or discounted products and you usually don't want anything else anyway. Most of the dealers I've seen live in mortal fear of doing anything that even remotely resembles discounting a product that has RPM on it. And you certainly can't get someone on the web to negotiate a price on something on their site except in rare instances and even then they have no way of knowing if you're checking them out for the manufacturer or not, so a discount there isn't going to happen.
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post #22 of 84 Old 06-29-2007, 12:14 PM
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As cynical as I am of laws being passed to grow the corporate/government kleptocracy I don't think this is a bad thing. Remember it's just giving manufacturers the right to enforce pricing and protect their product if they want it. If the new inforcement of their MAP restricts the sale of their products, or makes their product in any way less competitive, they'll drop it post haste.

But for manufacturers that want to maintain a certain level of service, thus enhancing their products reputation and perception in the marketplace - I think that's a good thing. Of course they'd better be sure the market will pay the premium or they'll be the ones to suffer.

The biggest winners will be the direct to internet manufacturers that won't have to compete as much with slashed price gray market selling of premium brands. And by the way it will also make counterfeits easier to spot and police - which will do nothing but help the consumer. I don't see anything wrong with it.
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post #23 of 84 Old 06-29-2007, 12:33 PM
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To those who see the sky falling, I tell them that this is really no big deal.

Manufacturers have always had the option not to do business with distributors who did not adhere to their pricing polciies, whatever they may be. Prior to this decision, the only thing that a manufacturer and distributor could not do was actually AGREE on prices.

Thus, before this decision, if a manufacturer wanted to stop discounting, it could have done so pretty easily. Today, it is just a little easier for them to accomplish the same thing.

Again, as someone who counsels companies on pricing issues, it has been my experience that many companies merely have not had the will to stop discounting. This decision won't change that.

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post #24 of 84 Old 06-29-2007, 01:47 PM
 
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it really changes nothing, if Panasonic charges a lot less for a comparable projector that Epson makes, then people will buy the Panasonic and not the Epson. Epson will either have to drop their prices or stop selling the projector. Of course the opposite could happen and Panasonic could raise their pricing but competition what it is, someone will undercut in order to buy market share

The other issue is that while its bad for the consumer its not really bad for the business. Outside of the local dealers that dont discount much anyway, there is really very little markup on the equipment these days and it makes it hard to survive in this cut throat world.

My biggest example is the this place called Dave's Video in studio City Cal. It was the king of Laser Disc both in selling equipment and selling and renting the movies They also sold big RPTV and some audio equipment. As it was situated in a very good location, people all over the entertainment industry came to buy and rent there stuff there. Then came DVD and their players and now they had to compete with Best Buy, Circuit City and the rest. Eventually they went out of business. One day I came to rent a movie and their was a sign that said that due do low margins they couldnt compete anymore. The shame was that their staff was extremely knowledgeable about the equipment and the movies and everything else you would want to know about HT. Now we get to buy the stuff really cheap from BB but the people who work there dont have a clue
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post #25 of 84 Old 06-29-2007, 01:59 PM - Thread Starter
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Quote:
Originally Posted by Daniel Hutnicki View Post

Now we get to buy the stuff really cheap from BB but the people who work there dont have a clue

But, that's why we have AVS and the forum! The collective wisdom here is even better than Dave's Video!

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post #26 of 84 Old 06-29-2007, 02:05 PM
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It was the king of Laser Disc

Aaaaah Laserdisc's, the good old days! Now it's all on-line. Let's hope this crazy Internet thing catches on.

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post #27 of 84 Old 06-29-2007, 02:11 PM - Thread Starter
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Quote:
Originally Posted by Bear5k View Post

After that test, you then most likely have an RP issue to resolve over advantaging one customer over another, with neither a "separate market" nor a cost-to-serve defense available.
Bill

Currently, different retailers pay different prices for the same equipment, there is nothing in the Antitrust Laws preventing that. Big box chains negotiate from a position of strength, smaller retailers take what ever the manufacturer offers. It is not unusual for a manufacturer to have several "levels" of distribution agreements.

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post #28 of 84 Old 06-29-2007, 02:35 PM
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For everyone who thinks this law is "bad", I have a solution for you.

If you don't want the product at the selling price, then don't buy it.
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post #29 of 84 Old 06-29-2007, 02:50 PM
 
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That's a solution?
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post #30 of 84 Old 06-29-2007, 02:53 PM
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Quote:
Originally Posted by mdputnam View Post

Currently, different retailers pay different prices for the same equipment, there is nothing in the Antitrust Laws preventing that.

You mean except for the Robinson-Patman amendment to the Clayton Act, of course? Oh, yeah, and that whole "predatory pricing" thing.

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