Titan LX Leisure pro question

[T23]

Hmmm. Ok, maybe I'm a missing something here, but my understanding has always been that MSRP was just that ... a suggested retail price. I've also understood it was illegal for a manufacturer to set a fixed price, as in we are supposed to be all for competitive, free trade, etc. A good example here is a lot of food products used to be produced with the price preprinted on the packaging and you don't see that any more.

Now I do know some manufacturers, cosmetics and leather goods for two quick examples, get around this be leasing space in department stores so they can control their desired consumer price and product image. Is that what is happening here? If not, then why are LDS not totally free to sell at whatever price they want or their local market will bear?

 

[redacted]

Hmmm. Ok, maybe I'm a missing something here, but my understanding has always been that MSRP was just that ... a suggested retail price. I've also understood it was illegal for a manufacturer to set a fixed price, as in we are supposed to be all for competitive, free trade, etc. A good example here is a lot of food products used to be produced with the price preprinted on the packaging and you don't see that any more.

Now I do know some manufacturers, cosmetics and leather goods for two quick examples, get around this be leasing space in department stores so they can control their desired consumer price and product image. Is that what is happening here? If not, then why are LDS not totally free to sell at whatever price they want or their local market will bear?

Retailer can't fix prices but manufacturers can. In the case of Scubapro and Aqualung, what we have is the mfgr legally doing it for the retailers so they don't have to. In all too many cases, the retailer's business model does not include any serious price competition so the above lines may be very attractive to those LDSs. When those names were the big names in scuba and gray market was a taboo, it was probably quite effective. Now, I believe Scubapro and Aqualung are just two of a number of quality scuba name brands and there market share is steadily falling.

The LDSs are free to sell their merchandise at any price they choose. But their dealership is subject to be cut off if they don't tow the price line.

 

[mike_s]

Hmmm. Ok, maybe I'm a missing something here, but my understanding has always been that MSRP was just that ... a suggested retail price. I've also understood it was illegal for a manufacturer to set a fixed price, as in we are supposed to be all for competitive, free trade, etc. A good example here is a lot of food products used to be produced with the price preprinted on the packaging and you don't see that any more.

Now I do know some manufacturers, cosmetics and leather goods for two quick examples, get around this be leasing space in department stores so they can control their desired consumer price and product image. Is that what is happening here? If not, then why are LDS not totally free to sell at whatever price they want or their local market will bear?

MSRP is just that, a suggest price, as you said above. AL dealer agreement allows them to sell/advertise for no less than 10% below the set price.

You would think that it would be illegal for a manufacturer to set a fixed price, but believe it or not, the US Supreme Court just in the past year rendered a decision that supports the dealers in allowing them to set the price. (the finding wasn't scuba related, but was a different product, but it would relate to any retail item.) I'll find reference to the case for you and post it. EDIT: It was PSKS, Inc v Leegin Creative Leather Products, Inc.. All kinds of interesting reading on the subject, including several posts on scubaboard about it in the past year.


You last question about the LDS not being able to set prices for what the local market will bear is EXACTLy what the scuba manufacturers don't want to allow to happen.

 

[T23]

mike_s,

Thanks for that. I'm no lawyer so I'd sure like to learn more about this in general as a consumer. Part of what I was going by if what is on the FTC web site Illegal Business Practices
though that may indeed be out-of-date in terms of the Supreme Court ruling you mentioned. For now this is what the FTC is saying, though:

"Vertical agreements between buyers and sellers
Certain kinds of agreements between parties in a buyer-seller relationship, such as a retailer who buys from a manufacturer, also are illegal. Price-related agreements are presumed to be violations, but antitrust authorities view most non-price agreements with less suspicion because many have valid business justifications.

Resale price maintenance agreements. Vertical price-fixing -- an agreement between a supplier and a dealer that fixes the minimum resale price of a product -- is a clear-cut antitrust violation. It also is illegal for a manufacturer and retailer to agree on a minimum resale price.

The antitrust laws, however, give a manufacturer latitude to adopt a policy regarding a desired level of resale prices and to deal only with retailers who independently decide to follow that policy. A manufacturer also is permitted to stop dealing with a retailer who breaches the manufacturer’s resale price maintenance policy. That is, the manufacturer can adopt the policy on a "take it or leave it" basis.

Agreements on maximum resale prices are evaluated under the "rule of reason" standard because in some situations these agreements can benefit consumers by preventing dealers from charging a non-competitive price.

Non-price agreements between a manufacturer and a dealer. Manufacturer-imposed limitations on how or where a dealer may sell a product, e.g., service obligations or territorial limitations, are generally not illegal. These agreements may result in greater sales efforts and better service in the dealer’s assigned area, and more competition with other brands. Some non-price restraints may be anticompetitive. For example, an exclusive dealing arrangement may prevent other manufacturers from obtaining enough access to sales outlets to be truly competitive. Or it might be a way for manufacturers to stop competing so hard against each other. Take the case against the two principal manufacturers of pumps for fire trucks. It involved agreements that required their customers, the fire truck manufacturers, to buy pumps only from the manufacturer that was already supplying them. That meant that neither pump manufacturer had to fear competition from the other.

Tie-in sales. The sale of one product on condition that a customer purchase a second product, which the customer may not want or can buy elsewhere at a lower price, is a tie-in. Requirements like these are illegal if they harm competition. A recent example: The FTC charged a pharmaceutical manufacturer with tying the sale of clozapine, an antipsychotic drug, to a blood testing and monitoring service."

 

[mike_s]

FTC might need to update their website to the latest ruling of the US Supreme Court.

from http://www.supremecourtus.gov/opinions/06pdf/06-480.pdf

Cite as: 551 U. S. ____ (2007) 1
Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in thepreliminary print of the United States Reports. Readers are requested tonotify the Reporter of Decisions, Supreme Court of the United States, Wash-ington, D. C. 20543, of any typographical or other formal errors, in orderthat corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES
No. 06–480


LEEGIN CREATIVE LEATHER PRODUCTS, INC.,
PETITIONER v. PSKS, INC., DBA KAY’S
KLOSET . . . KAY’S SHOES
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FIFTH CIRCUIT
[June 28, 2007]​

JUSTICE KENNEDY delivered the opinion of the Court.
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.​

Theres another 53 pages to read of that PDF if anyone is interested.... or if you're having trouble falling asleep at night, this will help.

 

[shoturtle]

FTC might need to update their website to the latest ruling of the US Supreme Court.

from http://www.supremecourtus.gov/opinions/06pdf/06-480.pdf

Cite as: 551 U. S. ____ (2007) 1
Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in thepreliminary print of the United States Reports. Readers are requested tonotify the Reporter of Decisions, Supreme Court of the United States, Wash-ington, D. C. 20543, of any typographical or other formal errors, in orderthat corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES
No. 06–480


LEEGIN CREATIVE LEATHER PRODUCTS, INC.,
PETITIONER v. PSKS, INC., DBA KAY’S
KLOSET . . . KAY’S SHOES
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FIFTH CIRCUIT
[June 28, 2007]​

JUSTICE KENNEDY delivered the opinion of the Court.
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.​

Theres another 53 pages to read of that PDF if anyone is interested.... or if you're having trouble falling asleep at night, this will help.

any lawyers out there can define what the rule of reason is?

 

[mike_s]

any lawyers out there can define what the rule of reason is?

Not a lawyer,, nor did I stay at a Holiday Inn Express last night, but this is the answer you are looking for.

The rule of reason is a doctrine developed by the United States Supreme Court in its interpretation of the Sherman Antitrust Act. The rule, stated and applied in the case of Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911), is that only combinations and contracts unreasonably restraining trade are subject to actions under the anti-trust laws and that size and possession of monopoly power are not illegal.​

Basically, the decision in PSKS, Inc v Leegin Creative Leather Products, Inc overtuned the decision of Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911) which has been the precedent of antitrust price setting for the past 90+ years. Dr. Miles is the same as referenced above in bold in the above past 2 posts.

 

[shoturtle]

I read a good chuck of that decision, dr miles did not charge the mfrg with a vertical cartel when it will in the lower court, so the court did not consider it. with the overturn of the dr miles case, it seem that the ftc really have nothing to change, it is business as usual. that 90 year old law is still in place.

 

[mike_s]

I read a good chuck of that decision, dr miles did not charge the mfrg with a vertical cartel when it will in the lower court, so the court did not consider it. with the overturn of the dr miles case, it seem that the ftc really have nothing to change, it is business as usual. that 90 year old law is still in place.

The FTC section I was refering to about changing was the section regarding "vertical pricing", which is what was ruled on.

 

[shoturtle]

The FTC section I was refering to about changing was the section regarding "vertical pricing", which is what was ruled on.

the "rule of reason" is still in play, companies are allow some vertical pricing and i guess it is up to the ftc to decide what is within reason still