BTW I got a call back from the FTC today.
They are looking into it, we will conference some time next week, and they will, if they deem appropriate, forward it to their litigation department.
They also suggested that I go to the state AG's office, and I will - you should too!
Here's the text of what I ended up sending them...
Office of Policy and Evaluation
Room 394
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Ave, NW
Washington, D.C. 20580
Dear Sir or Madam:
I write to you today to inquire about the legality of a common practice within the recreational scuba diving equipment industry.
A majority of the leading manufacturers in this industry have adopted policies that appear to serve to control prices to the retail consumer.
Specifically, according to multiple local dive shops that I have discussed the matter with, many of these manufacturers write into their dealer agreements a policy that bans discounts from list price of more than a nominal usually 10% - amount.
Further, manufacturers specifically disclaim any and all warranties on their products if they are purchased outside of authorized channels, and many ban any direct marketing or sales at all, including Internet and mail order purchases, regardless of price. Several of these manufacturers actually display materials in local dive retailers explaining that these sales channels are both unauthorized and will result in the voiding of all warranties, and I have personally seen these materials displayed by retailers.
Further, two vendors with which I have personal experience appear to require that the purchase price of their products be disclosed to register their warranty, and that registration is required for the warranty to be valid both requirements appear to enhance their enforcement of retail pricing policy. One such vendor allows online registration of consumer warranties but it cannot be completed unless you identify an authorized dealer of their products as the source from which the product was obtained effectively barring registration of purchases from online retailers.
As a former CEO of a company in Chicago who commonly dealt with retail sales to consumers and business interests, it is my understanding that policies that act to restrain the actual retail price at which products are sold frequently constitute a per-se violation of anti-trust law. For instance, I operated for years under the understanding and belief, as a consequence of conversations with corporate counsel and my general understanding of business law, that if I, and other companies in my line of business, were to meet and discuss fair trade pricing, or if we were to collude with others (including the manufacturers of products we sold) to effectively accomplish the same goal, we would be in direct violation of the law.
One vendor, in particular, actually publishes these prices, denotes their purpose, and calls them Fair Trade pricing on their web site! All they leave out is what, if any, enforcement mechanisms they may employ to keep their dealers in line!
There are, in fact, internet-based discounters. But these products are commonly known as gray market or are explicitly sourced and provided outside of the United States, and manufacturers typically refuse to provide any warranty or support for these products.
There is, apparently, some prior legal effort on your part in this general arena. Specifically, Case 96-6112 out of the Southern District Court of Florida, which terminated with a final default judgment, was filed by the US against the Scuba Retailers Association. That suit apparently dealt with the associations attempt to prevent a snorkel manufacturer from selling directly to consumers, and threats to blackball the vendor if they continued in their plans to do so. Further, this apparently is not the only instance of such action, in that there also exists a case in the 1992/1993 time frame on related subject matter.
An almost-exact situation appears to exist today with nearly all of the quality lines of scuba equipment. A threat to cancel dealership distribution simply due to the mode of sale or the pricing that a particular retailer sets on a product looks, to me at least, to be a near-exact copy of the behavior alleged in the aforementioned complaint.
Next, I turn to the existing law that I have been able to research. While the US Supreme Court has, in the last 10 years or so, ruled that maximum vertical price restraints (setting the maximum price a retailer can charge) is not a per-se illegal act, it has left undisturbed the per-se illegality of fixing minimum prices that retailers can charge. Thus, the alleged restraints, which I have had repeated to me multiple times by various dive shop retailers, if actually true would appear to be a per-se violation of the law.
Further, is it not reasonable to believe that all of these manufacturers have come to adopt almost precisely the same policy that of no direct, Internet, or mail-order sales, and no more than a 10% discount off retail through some concerted and perhaps even collusive method of action?
It appears that the previous Association has been replaced or supplanted by perhaps a less formal, but no less collusive, set of arrangements with at least as deleterious an effect on competition in the marketplace.
As a concerned consumer and a recreational scuba diver who has purchased over $2,000 worth of products from local retail sources specifically to avoid having the warranty voided by going to online and mail-order dealers, none of whom could sell me such products with a factory warranty, I urge your office to investigate these practices to determine whether they conform to applicable United States Law, and to take appropriate action to redress any violations you may find as a consequence.
I would appreciate being informed of the FTCs understanding of the legality of these practices, and kept up to date on any investigation you may conduct in this matter.
- snip
