Buying from Non Authorized Dealers

[dschonbrun]

Warranty obligations and authorized vs. unauthorized dealers has been a long standing legal discussion which has become more pressing recently given internet stores that have minimal costs and inventory (they often drop ship).

The point of authorized dealer networks is to ensure that the public is provided with accurate product info, guaranteed new products (not refurbs), proper service, and consumer education [not to mention price management].

Leisure Pro, and other non-authorized sites on the web offer products at significantly reduced prices. In other industries, like high end watches, manufacturers preclude companies from selling online for less than MSRP or agreed upon sale price. Manufacturers like Rolex protect their name and prices by chasing and threatening litigation against unathorized dealers. For some reason, SUUNTO seems unwilling or unable to do this.

SUUNTO and wholesale distributors make the same money when dealing with online sites as with retailers (for the most part). So, they don't really care. They just want to move product. And honestly, based on their policy, since your warranty is void when a consumer buys through an unauthorized dealer, they have less risk of future expenses in fixing faulty product purchased through this channel.

Since SUUTNO allows Leisure Pro to continue selling their products, SUUNTO actually has a defacto culpability/obligation, no matter what it says on the warranty card around "authorized" dealers. The courts have begun expecting manufacturers/distributors to police their vendors. And it's as is should be. The products are licensed... and you can't advertise a company's product on your site without their express permission. If SUUNTO wanted... they could shut down LP's site while all SUUNTO products were removed... it would only take one fierce letter from SUUNTO lawyers with a copy sent to the US Attorney's office for trademark infringement.

Frankly, SUUNTO sells more product by allowing LP and other stores to continue. SUUNTO's action, or lack of it, just goes to show you that selling product is more important to them than honoring warranty claims.

All That said,.. I own a SUUNTO vector for hiking climbing, and a SUUNTO Vyper 2 for diving. Both were purchased at authorized dealers, where I negotiated 20% discounts. I believe they make good products, and I believe they could do more to support authorized dealers by cracking down on unathorized ones.

End Rant. Interested to hear what others think about this... is LP Capitalism in action, or are they breaking the law? Is SUUNTO being irresponsible?

Cheers,
D

 

[ketchumid]

Warranty obligations and authorized vs. unauthorized dealers has been a long standing legal discussion which has become more pressing recently given internet stores that have minimal costs and inventory (they often drop ship).

If SUUNTO wanted... they could shut down LP's site while all SUUNTO products were removed... it would only take one fierce letter from SUUNTO lawyers with a copy sent to the US Attorney's office for trademark infringement.

D

I'm not sure they could shut you down- this is still a free country, you can't sell something to someone and tell them what to do with it- you can chose not to sell it to them again but once it's out your door I don't think you can tell someone not to make a living. I've seen this thing before in a other sports industries and companies change their tunes all the time- when times are good they preach authorized dealers, when they have product coming out of their ears they start looking for the bottom feeders that know how to move product by not applying the regular retail rules that many retailers box themselves in by.

There are many benefits from buying from the authorized dealers, there are other times when LP or eBay make sense.

The sales channel is not one pipe, it's several-

Good discussion-
we all love our gadgets and we want them all different ways-

 

[DIR-Atlanta]

In other industries, like high end watches, manufacturers preclude companies from selling online for less than MSRP or agreed upon sale price.

And in doing so, they violate US law. And I am certain that EU has similar proscriptions against this type of behavior.

Manufacturers like Rolex protect their name and prices by chasing and threatening litigation against unathorized dealers.

This is price-fixing, which is a violation of US anti-trust law. That's why it is called the Manufacturer's Suggested Retail Price. Rolex et al may threaten litigation, but they wouldn't dare follow through (since it would be against the law to do so). The most that Rolex can do in this situation is suspend their dealership, which is what they usually wind up doing in these cases. And while that does not violate the letter of the law, it certainly violates the spirit.

And honestly, based on their policy, since your warranty is void when a consumer buys through an unauthorized dealer, they have less risk of future expenses in fixing faulty product purchased through this channel.

Moss-Magnuson specifically prohibits manufacturers from tying their warranties to sales through a particular distribution channel. The manufacturer's warranty applies, no matter where the item was purchased. If the item is defective and they offer a warranty, then they are obligated to adhere to the terms of that warranty, no matter where you bought it or for how much - that is US federal law.

The courts have begun expecting manufacturers/distributors to police their vendors.

Citation, please. My guess is that what the courts are expecting is that the vendors will actually honor the warranties (as they are required to do under US law), instead of hiding behind this nonsense of "we are unauthorized dealers, therefore we do not have to do anything".

 

[PhilEllis]

And in doing so, they violate US law. And I am certain that EU has similar proscriptions against this type of behavior.


This is price-fixing, which is a violation of US anti-trust law. That's why it is called the Manufacturer's Suggested Retail Price. Rolex et al may threaten litigation, but they wouldn't dare follow through (since it would be against the law to do so). The most that Rolex can do in this situation is suspend their dealership, which is what they usually wind up doing in these cases. And while that does not violate the letter of the law, it certainly violates the spirit.

Unfortunately for consumers, what they are doing is PERFECTLY legal and was just reaffirmed this year in the United States Supreme Court in Leegin v PSKS. The Supreme Court has been busy destroying the Sherman Anti-Trust since about 1950. The only remaining "per se" violation in price control was the vertical price control, exactly that one that controls what a retailer must get for a product. Leegin v PSKS shot that last one down.

The Courts have now made it very clear....the only business man that matters is the large manufacturer. As a retailer, the court has allowed me no opportunity to choose to run my business in a manner that I choose. A manufacturer can demand that I do things exactly as they state, and if not, they will discontinue shipment to me under their "colgate" rights, another disasterous Supreme Court decision.

Very interesting fact. If Leegin v PSKS have been decided thrity years earlier, exactly as it was decided this year, I think there would be no Wal Mart, no Sam's Club, no Office Depot, or any of the other chain retail operations, that while much hated by many, have lead the forefront in providing two decades of the greatest retail price reductions ever seen by consumers.

Anyway, just my opinion.

Phil Ellis

 

[mike_s]

For some reason, SUUNTO seems unwilling or unable to do this.

[snip]



If SUUNTO wanted... they could shut down LP's site while all SUUNTO products were removed... it would only take one fierce letter from SUUNTO lawyers with a copy sent to the US Attorney's office for trademark infringement.

[snip]

Is SUUNTO being irresponsible?

hmmm..... Why would Suunto (or Aqualung, Suunto's US dive products distributor) want to get lawyers involved when they are the one's shipping the product direct to Leisure Pro?

You're talking about a company that shipped new product available to LP before they shipped it to their authorized dealers.

They have no intention of shutting this down, just shipping more product directly to them while their sales reps give the brick-n-motar shops out there a song and dance routine about internet sales.

BTW... their lawyers are already busy....

 

[ianw2]

I'm not sure they could shut you down- this is still a free country, you can't sell something to someone and tell them what to do with it- you can chose not to sell it to them again but once it's out your door I don't think you can tell someone not to make a living.

While the manufacturer could not "shut down" the entire operation, if the sales contract had provisions for conditions for sales that were violated, there could be some remedy there. The action would be relative to the product line covered by the agreement only, though.

Moss-Magnuson specifically prohibits manufacturers from tying their warranties to sales through a particular distribution channel. The manufacturer's warranty applies, no matter where the item was purchased. If the item is defective and they offer a warranty, then they are obligated to adhere to the terms of that warranty, no matter where you bought it or for how much - that is US federal law.

Could you point to the provision of the Moss-Magnuson Act that relate to this, please?

In my reading, the act specifically enjoins "tie-in sales". Interestingly, some of the SCUBA manufacturers routinely violate this portion of the act by "requiring" annual service of regs by authorized service centers using authorized parts. If the service or the parts must be paid for by the consumer/end user, this is a "tie-in sale" that may well violate the Moss-Maguson Act..

However, I’m not sure I understand how you are interpreting the act to include enforcement of warranties on sales outside standard "channels". The act specifically excludes items for resale, such as XYZ Scuba buying from Aqualung and selling to LP or another "unauthorized" dealer.

I’m not trying to be obtuse, DIR-Atlanta, I’m really very interested in this topic. Thanks in advance for your input!

Ian

 

[PhilEllis]

If the service or the parts must be paid for by the consumer/end user, this is a "tie-in sale" that may well violate the Moss-Maguson Act.

I have actually had an attorney advance the notion that the "free parts" program offered by many scuba companies is designed to serve many interests, one among them being some insulation from the Moss-Maguson Act's prohibition against "tie-in" sales. If the parts are offered for free, they cannot possibly be a tie-in. Automotive parts became available to the public for a number of reasons, one of them being isolation from violation of the Moss-Maguson Act. Based upon the legal voice who highlighted this for me, you may well be exactly right about your conclusion.

Phil Ellis

 

[HenrikBP]

For motorcycles, the Moss-Magnusson Act means that a manufacturer can't demand that scheduled service be performed by authorized dealers only. If you as an owner can document regular oil changes etc. through receipts and such, the manufacturer can't refuse to cover warranty claims.

Not sure how exactly that applies to diving, but it *might* mean that as long as your regulators are serviced by qualified people - which may include the owner - then warranty claims can't be denied? Just speculating here - no lawyerish experience.

Henrik

 

[dschonbrun]

DIR, price fixing is illegal, but selective distribution is not. It's a subtle difference, and the courts have recognized that the distributor has the right to choose who it prioritizes first, second, third, for delivery. Proving price fixing is incredibly difficult as well.

Unfortunately, big box retailers are struggling because of the paradigm shift to lower overhead businesses on the internet. The advantages of LDS over LP are few, the LDS has local in person knowledge, the ability to try things on immediately, and pickup.... instant delivery/gratification.

But LP provides us with better pricing, larger product lines, solid availability, rush delivery, tax free purchases in most cases, low pressure selling, and ease of use. As a new diver, I went to my LDS because I wanted advice and personal treatment, and I was willing to pay for that. Now that I've got a bit more experience and research, I'll be shopping at LP.

 

[PhilEllis]

Price fixing is still illegal. I has been since the passing of the Sherman Ant-Trust Act and it will be until the entire act is invalidated. The questions is, how do you prove it and does the price fixing harm the consumer market?

The court decisions have made the "automatic" price fixing situations largely legal. The elimination of the "per se" rule to determine if there is consumer market damage from price fixing has gone away with Leegin v PSKS.

In the scuba industry, this court decision has served only to make those who desire to control the market through price even more strident. Before, they did their "price fixing" in a very suttle way. Now, they no longer have to do that.

Even if you prove that a scuba company is engaged in some of the practices prohibited by the Sherman Act, you then must prove that the violation had an actual impact on the market.

Shame on the current Supreme Court and the previous courts for allowing this important Act to become practically useless. The practices now blessed by the courts damage business, they damage consumers, and they put more power in places where less power would be better.

Phil Ellis