Halcyon Prouduction, DIR, and ironic facts of life

[MechDiver]

Another one for the kill file.

 

[Jackknife]

Free speech dude! It's the American way!

Isn't Democracy Great?

 

[Jackknife]

MechDiver once bubbled more than once...
Jackknife is right on another one fo the kill file.

Yep, I agree with you halcyon is about to kick the bucket!

 

[WJL]

Genesis once bubbled...

....The problem I've seen with price protection, beyond the fact that you have to use a loophole in the law to do it at all (the clear original intent of the Sherman act is to prohibit these practices), is that it inherently unbalances the market...

Karl,

We've bandied words on the subject of the Sherman Act before, and we probably will again. Your comments are erroneous in a number of particulars, and seem to be the product of a imcomplete understanding of the law.

- The ability of manufacturers to enforce resale price maintenance restrictions is not a "loophole" in the antitrust laws. To the contrary, the Supreme Court has stated on numerous occasions that except where a supplier has monopoly power, it is completely free to impose unilateral resale price restrictions on its distributors.

- The "original intent" of the Sherman Act is not easily discerned, even by eminent judicial scholars and political historians. Senator Hoar, closely involved in the drafting of the Senate version of the bill in the Judiciary Committee, stated that the language of the bill was intended to reaffirm common-law principles relating to contracts, combinations and conspiracies in restraint of trade. Senator Sherman's remarks about the intent of the statute contain some contradictions as to what the common law was and what the bill would do. The concensus of commentators then and now is that the statute's use of unelaborated common-law words and references seems simply to have invested the courts with a new jurisdiction. The scope and menaing of the Sherman Act have been worked out in dozens of subsequent Supreme Court decisions. The most important of the early decisions is the case of Standard Oil Co. v. United States, 221 U.S. 1 (1911) in which the Court declared the Rule of Reason: despite its all-inclusive language, the statute denounces only unreasonable conduct. The Rule of Reason analysis, supplemented by other rules such as the per se prohibition of collusive price-fixing, has been applied ever since.

...Assume no price controls. JJ is correct in that Halcyon makes no more money with its "FTP" pricing than if it didn't have it - their price to the dealer is the same either way.

If the controls are dropped, then shops are unable to subsidize their training, fills and even trips (possibly) with hardware sales. Its simply impossible. You now have to make a business out of hardware sales on their own feet, without them paying for other stuff. Likewise for the compressor, mixing station, and training.

Is this bad?

No, I argue that its good!

....

Your argument assumes that the only significant economic linkage is between hardware sales and training. Your argument is based on the implicit assumptions that a) training is a loss leader at virtually all dive shops (in my assessment you are probably correct here) and b) that the only thing that profits from hardware sales supports is training and air fills. This second assumption is incorrect.

As JJ explained above, he believes that imposing resale price restraints on his dealers allows him to have his line offered in shops that also offer higher levels of customer support. Customer support, like dive training and air fills, costs money, and it has to be paid for somehow, or the shop offering it will go out of business. The resale price maintenace paradigm has been adopted by many manufacturers, not just Halcyon and not just in the scuba industry, as a way of attempting to secure a high-quality distribution network. It is a reasonable solution to a difficult problem. It is emphatically not illegal, and not the result of a "loophole" in the law.

 

[Dryglove]

WJL once bubbled...

he believes that imposing resale price restraints on his dealers allows him to have his line offered in shops that also offer higher levels of customer support. Customer support, like dive training and air fills, costs money, and it has to be paid for somehow, or the shop offering it will go out of business. [/B]

Micro management at its best. Go into bussiness for yourself then be told how to run it. Oh yea i forgot they are trying to help you so you dont force yourself out of bussiness. I am not pointing this at just halcyon but all manufacturers who pull this crap yet they do very little to stop places like leisure pro which doesnt apply to halcyon.

 

[WJL]

lal7176 once bubbled...


Micro management at its best. Go into bussiness for yourself then be told how to run it. Oh yea i forgot they are trying to help you so you dont force yourself out of bussiness. I am not pointing this at just halcyon but all manufacturers who pull this crap yet they do very little to stop places like leisure pro which doesnt apply to halcyon.

The manufacturer employing the strategy of enforcing resale prices is not doing it out of some pernicious desire to manage the reseller's business. They are trying to increase their own sales. They are using the price maintenance strategy as a tool to convince the shop to carry and promote their line in the first place. They are telling the reseller "Look, if you carry our line, we guarantee you that you won't be undersold on price. We make all our dealers sell our products at the same price. You will make an attractive gross profit on our line." That promise gives the reseller the ability to invest in such things that come out of the gross such as customer service, warranty repairs, inventory, demos, and training, without worrying that the competing reseller down the street or on the net will undercut them on price while offering none of those same services.

 

[KrisB]

WJL once bubbled...
The manufacturer employing the strategy of enforcing resale prices is not doing it out of some pernicious desire to manage the reseller's business. They are trying to increase their own sales. They are using the price maintenance strategy as a tool to convince the shop to carry and promote their line in the first place. They are telling the reseller "Look, if you carry our line, we guarantee you that you won't be undersold on price. We make all our dealers sell our products at the same price. You will make an attractive gross profit on our line." That promise gives the reseller the ability to invest in such things that come out of the gross such as customer service, warranty repairs, inventory, demos, and training, without worrying that the competing reseller down the street or on the net will undercut them on price while offering none of those same services.

Which is really a bunch of bull. If it was the dive shops that called each other to arrange this, it would be called price fixing and would be illegal, but because it comes from above it's ok?

If this stipulation were removed, I'm sure we wouldn't see many dive shops go under. In fact, it would make them better by having to justify a higher price... perhaps through higher customer service.

 

[Dryglove]

WJL once bubbled...


The manufacturer employing the strategy of enforcing resale prices is not doing it out of some pernicious desire to manage the reseller's business. They are trying to increase their own sales. They are using the price maintenance strategy as a tool to convince the shop to carry and promote their line in the first place. They are telling the reseller "Look, if you carry our line, we guarantee you that you won't be undersold on price. We make all our dealers sell our products at the same price. You will make an attractive gross profit on our line." That promise gives the reseller the ability to invest in such things that come out of the gross such as customer service, warranty repairs, inventory, demos, and training, without worrying that the competing reseller down the street or on the net will undercut them on price while offering none of those same services.

And look what happens. A lot of divers buy their gear online for half the price of the LDS. Once again i have only seen halcyon sold new at discounted prices on ebay every so often. But a lot of the other manufacturers that set a minimum price for the LDS can easily be purchased online for substantial savings.Thats a lot of LDS customers lost because of high priced slow moving products due to price. At one time you could find really good bargains on halcyon gear but not no more.

 

[Genesis]

As JJ explained above, he believes that imposing resale price restraints on his dealers allows him to have his line offered in shops that also offer higher levels of customer support. Customer support, like dive training and air fills, costs money, and it has to be paid for somehow, or the shop offering it will go out of business. The resale price maintenace paradigm has been adopted by many manufacturers, not just Halcyon and not just in the scuba industry, as a way of attempting to secure a high-quality distribution network. It is a reasonable solution to a difficult problem. It is emphatically not illegal, and not the result of a "loophole" in the law.

It IS a loophole in the law.

If the manufacturer was to send that document around and say "this is our policy, sign HERE to indicate that you consent and will abide it" they would be sued instantly by the FTC. That is PER SE illegal.

If the dealers were to get together and agree among themselves to do this, that would likewise be PER SE illegal.

This is a loophole in the law. But its not as wide as some people think it is. Nine West (the shoe folks) were sued and entered into a consent agreement over just such a pricing policy - they forbade discounts without permission (e.g. for sales) and that drew the FTC's fire.

http://www.ftc.gov/opa/2000/03/ninewest.htm

According to the FTC's complaint, Nine West divisions entered into agreements with retailers that fixed retail prices for their shoes and restricted promotion periods - called "clearance windows" - when retailers could promote sales or sell shoes at reduced prices. Retailers who deviated from Nine West's policies were threatened or penalized. In response, retailers communicated to Nine West that they would not deviate from the policy in the future.

The FTC alleged that Nine West's practices artificially propped up the prices of Nine West products and restricted competition among retailers who sold Nine West brands in violation of federal law.

The FTC's settlement will bar Nine West from fixing the price at which dealers may "advertise, promote, offer for sale or sell any product." It also bars Nine West from "requiring, coercing or otherwise pressuring dealers to maintain, adopt or adhere to any resale price." Finally, the settlement bars Nine West from notifying dealers in advance that they are subject to a temporary or partial suspension of supply if they sell Nine West shoes below a designated price. Nine West will be required to use disclaimers on price lists reaffirming retailers' freedom to set their own prices. The settlement also contains certain record-keeping provisions to allow the FTC to monitor compliance.

If you read that (its one of MANY links you will get back by typing "Nine West Antitrust" into Google) you will find that the practices complained about sound suspiciously like what goes on in this industry.

Of course women's shoes is a much larger market than scuba gear, and thus got the attention that this industry might not.

If this was not a "dodge", then nobody would have a problem with securing an actual agreement - a contract - to fix prices.

But they do.

 

[docmartin]

interesting case of wing rage. what happened? a halcyon truck ran over your puppy?