Date:         Fri, 13 Jun 1997 09:54:45 -0400
Sender:       Vanagon Mailing List <vanagon@vanagon.com>
From:         "The Bus Depot" <list@busdepot.com>
Subject:      Re: re price fixing  (NO VW CONTENT)


> So how come Trek is able to sue Costco for undercutting local dealer
prices
> by pulling in "gray market" bikes. (They did lose at least.)
> How come Trek bikes are pretty much the same price everywhere? (Because
> they'll cut their distributorship if they go too low.)
> How come (almost) every stereo/video dealer in the country will not
> advertise Sony prices?
> (Because Sony will make it hard for them to get gear, or refuse to pay
> "co-advertising" kickbacks.)
> How come the price of John Deer lawnmowers is the same across many
> retailers in the Puget Sound area? Stihl chainsaws?

Actually, the courts have upheld the right of retailers to sell "gray
market" products.  Even Kmart sells gray market watches, etc.  For those
who don't know, a gray market products is a product that the retailer
brings here from overseas himself, rather than getting it from the
manufacturer's authorized US distributor. By bypassing the US distributor
and buying at the right price overseas, he can often buy it much cheaper. 
One of the gripes of the manufacturers, though (and perhaps a legitimate
one), is that the US distributor (or US arm of the foreign manufacturer) is
bearing the cost of maintaining parts distribution, offering a US warranty,
advertising the product, etc. The gray marketeer is benefiting from all of
this, but by bypassing the distribution arm that offers it, is not helping
to support it.  It is for that reason that the courts have decided that
while gray marketing is legal, the US distributors are not required to
honor product warranties on those products that they didn't distribute. 
(i.e. if the gray marketeer got that product directly from XYZ Co. of Japan
rather than from XYZ's US distributor, when it breaks, the US branch has
the right to tell the consumer that he must go to XYZ Co. of Japan, in
Japan, for warranty service, since they were the ones who distributed that
unit. Not that they would neccessarily excersize that right.)  I like gray
market products because they help keep the "authorized" US distributors
from gouging too much, although it wouldn't be a bad idea to require the
retailer to disclose that a product was gray market if they knew
(especially since it can affect warranty coverage, etc.).

Why does everyone advertise Sony or John Deere for the same price (or not
list a price)?  Well, while the manufacturer can't control the SELLING
price of the product (that would be price fixing), they can somewhat
control the ADVERTISED price.  As you alluded to, when a retailer
advertises a Sony product, Sony kicks in a good amount of money towards
that ad (or the part of the ad that featured their product).  Sony has the
right to say, "we'll kick in money toward the ad, but only if you advertise
the item at X price (or no price at all).  Since retailer rely on those
"co-op" dollars from the manufacturers, they usually tow the line. 
However, if the retailer chooses to advertise for below that price, Sony
has no recourse other than to not pay for the ad.  And the retailer can
(and frequently does) sell the product in-store for any price he wants
without fear of recourse.

As far as the price of Stihl chainsaws or Trek bikes being the same
everywhere in the Puget Sound area, it's mainly because the retailers
generally like not having to compete, and nobody has the guts or desire to
break the price.  Stihl probably has a "suggested advertised price" on
their cost sheets, although this price must be followed by a statement that
the dealer is not required to sell at that price.  (Even McDonalds has a
disclaimer in their ads that "prices at individual restaurants may vary.") 
 If a dealer were to sell for less than that price, there's virtually
nothing Stihl could do.  They could not cut distribution to a discounting
dealer.  If it could be proven that Stihl was "out" of a product what that
dealer ordered, but had it when a higher-priced dealer ordered (which is
easy to prove), Stihl would quickly get their pants whipped in a court of
law.  In fact, a Stihl rep could not even call to DISCUSS the ISSUE of
retail pricing with the dealer, much less attempt to coerce the dealer to
raise his price.   On the other hand, it could be a hassle for the
retailer, and would certainly strain relations with his Stihl rep.  As long
as everyone else is charging the same price, the retailer has little
incentive to cut the price, make less money, and create a hassle for
himself.  So unless one retailer in your area breaks away, prices will
probably remain the same everywhere for some time.  

Like I said, there are greedy people in any business...

-Ron Salmon
 The Bus Depot
 http://www.busdepot.com