Why Isn't There a Free Market for Scuba Equipment?

[PhilEllis]

The retailer, after buying, could, if he chose, give away his purchase or sell it at any price he saw fit, or not sell it at all, his course in these respects being affected only by the fact that he might by his action incur the displeasure of the manufacturer who could refuse to make further sales to him, as he had the undoubted right to do.'

The above quote is the foundation of the so-called "colgate rights", granted by the famous United States v Colgate case that was the beginning of the undoing of the Sherman Anti-Trust Act. It doesn't matter how much we agree......our high court has decided that a manufacturer or distributor has the right to "do business with whomever it chooses". In so doing, it can set whatever rules it pleases for the process of that "doing business".

I doubt there are few, if any, dealers on this board who have fought this battle like I have with a scuba manufacturer. We didn't just complain.....we carried the battle until they exercised their "colgate rights". The bottom line is simple....if you displeasure a major scuba manufacturer, they will terminate the relationship. They never present a dealer agreement that specifies a contract obligation to price according to their plan. They simply establish, without your agreement and without discussion, the rules for doing business with them. Each local scuba store owner has to evaluate the damage that will be done if a particular manufacturer chooses to exercise their "colgate rights", and each must fight this fight to a degree that is within their personal "pain level".

1. You may disagree - but just like anything else in this world - when you buy something (pay your hard earned money for it,) you own it don't you. When a retailer buys a product, pays the manufacturer - he/she owns it. He or she can do whatever they want with it - upto and including giving it away free. If the manufacturer holds ownership - meaning the product can be returned by the retailer to the manufacturer for full credit - then I would agree that the retailer can be held accountable for pricing.

No scuba company will attempt to force you to sell a regulator at a certain price or to advertise it at a certain price. They are way to smart for this. If you buy a regulator today, you can sell it or advertise it tomorrow for any price you choose. However, if you do so in violation of the rules they establish, they can refuse to sell you a regulator tomorrow. In so doing.....like it or not....they are exercising their "colgate rights". You see, they never engage in the argument as to the ownership of a regulator in your possession...they admit it is yours to sell, trade, barter as you choose. The threat is that if you displease them, they will not ship you any more tomorrow. It is not a part of their contract with the dealer....it is part of their DNA! In so doing, they completely control the dealer.

The problem is MAP pricing makes it harder for retailers to move product because they can not advertise it at a price to lure in buyers. If Walmart for example were held to a MAP price on Coke... you'd never go to Walmart to get 3 - 12 packs for $10.00. You may actually decide not to buy coke at $4.99 a 12 pack. You may switch brands. In this example, MAP hurts you because you now feel priced out of purchasing Coke and even though you like Coke you may not drink it anymore. Coke sales plummet and so do Walmarts.

I totally agree with the above statement. It is basic consumer economics 101.

2. Yes, they have the right to control distribution - and even their own pricing - but not a right to dictate to a business owner how much that owner can sell it for. That is where the problem comes in. As a retailer, I don't question their prices to me. They get their money one way or the other. If they can set their price... common sense alone says I should be able to set mine. We are each privately owned businesses buying products. They buy raw goods and make a product. The manufacturer of those raw goods is not dictating to them how much they can resell their product for. Think about it.

Well, this has nothing to do with common sense. It has only to do with the law (the Sherman Act) and what the US Supreme Court says that it means. Remember, the Congress of the United States has had ample opportunity (nearly 100 years since Colgate, and dozens and dozens of cases after that one) to step in and mitigate the damage done by the Supreme Court in this regard. They have turned down EVERY opportunity to say to the Supreme Court "YOU ARE WRONG!" Regardless of what the Supreme Court ruled in regard to price controls, they have completely, absolutely passed on every opportunity to change or clarify the situation. NOT EVEN ONE PEEP from our elected representatives after Leegin v PSKS, the first of the cases to deal with the vertical price controls THAT REALLY IMPACT CONSUMERS and the heavy-handed handling of dealers by manufacturers. Apparently, the US Congress agrees with the Supreme Court.

All of this aside, minimum adverting price programs and minimum retail prices programs are a bad idea. But, they apparently aren't illegal. Above all, that is why you get no response from your state Attorney General.

Phil Ellis

 

[Doc]

This is an interesting thread but one point that has been completely overlooked is the age old......who benefits from MAP or MARP?

Re-read post #9 It began and still exists at the demand of the already established dealer networks. These shops have no qualms about yearly minimum orders of $10k- it keeps the new guys at bay. They don't really want to discount a penny from MSRP, no one does in any retail environment.

Look at the CarMax model. Name brand dealerships were scared to death of them- now they own them.

I keep beating a dead horse - the industry is dying... not because of the internet and retailers selling below MAP and MARP... but because there is NO FREE TRADE.

No, it is dying because the economy sucks, we will never again have as much time or money as we had in the 70's-80's, travel is a high end luxury, and with the instant gratification mentality of the potential majority consumer audience- fuggeddaboutit.

Unless you are the last dog standing in any town, you're toast.

After the internet retailers get big and steamroll out the dive shops, you think the manufacturer's might not notice? It is only a matter of time before manufacturers start selling consumer direct. Try to see it from their perspective. Dealerships and distributors will work until they don't work for the manufacturer. Not a moment longer.

Buy yourself a clue. PADI's "e-learning" is in preparation for the inevitable collapse of the instructor/LDS relationship. The stores are going away, so are the local OWSI's who are cranking out divers. PADI knows what the future holds, such as it is. E Learning was not a way to kill local fresh water inland instructors, they already have inoperable cancer. It was a way to get students prepared and on their way to 7 days in paradise, pointed in the direction of a PADI training facility on site with their parasol drinks. See the future demographic of the diver- surely PADI does- and it involved the leased BMW 7 series crowd, not the used Chevy truck shopper.

Pro shops for Golf, Photography or Skiing? The real camera stores are gone, actual ski shops (away from ski towns) have dwindled to very few.

SCUBA? No other such sport has such a seemingly daunting internal requirement for certification. No other sport has such a high drop-out rate after certification. No other sport sells you equipment that is essentially worthless after you walk out the door with it. No other sport has has developed marketing plans that frighten consumers from any other choice than buying the latest titanium diamond encrusted regulator lest they be acquiring live support equipment from eBay. "Oh, the horrors !!!"

The industry, from the smallest "garage shop" to the largest bricks and mortar superstore will fall victim to the short sighted avarice and greed that is the historical foundation for the industry.

When the manufacturers get desperate enough, they'll change their tune. Until then, you might like to petition Congress. It will keep you busy while you can't afford to go diving. Re-read PhilEllis above.

Much like ski travel vacations, this sport's days are numbered.

 

[mike_s]

This is the whole reason that Leisure Pro isn't an "official" "authorized dealer" of many of their products, so they don't have to contend with keeping their prices at MAP levels.

Of course manufacturers don't push it because LP moves so much product, whether it's shipped directly or "indirectly" to LP.

 

[offthewall1]

Well, thanks for some additional education on the "colgate" thing etc... however I still think a collective pounding on the Supreme Courts doors could reverse this decision if properly presented. In the current economic environment - any thing that benefits consumers has half a chance. In addition, you can add your local congressmen to the list of people to bombard with complaints. I'll be calling mine tomorrow. As Yakov Smirnoff once said... "whatacountry"

 

[offthewall1]

This is the whole reason that Leisure Pro isn't an "official" "authorized dealer" of many of their products, so they don't have to contend with keeping their prices at MAP levels.

Of course manufacturers don't push it because LP moves so much product, whether it's shipped directly or "indirectly" to LP.

That is actually not true... LP is an authorized dealer for much of what they sell. Just beware... they get around MAP simply by listing products on their site as Demo's and used - even if they are brand new. Note their grading system.. it is a slick end around the system. We will soon be doing the same thing. Everything in the store is a Demo model... our policy is you can test anything right from our showroom floor - so technically - they are all Demo models. There is more than one way to skin a cat...

 

[mike_s]

That is actually not true... LP is an authorized dealer for much of what they sell. Just beware... they get around MAP simply by listing products on their site as Demo's and used - even if they are brand new. Note their grading system.. it is a slick end around the system. We will soon be doing the same thing. Everything in the store is a Demo model... our policy is you can test anything right from our showroom floor - so technically - they are all Demo models. There is more than one way to skin a cat...

LP is becoming an authorized dealer of more products, but still not all.

They are only becoming authorized dealers because many of the manufacturers that shipped to them in the past (and denied it) are making them dealers because the othe brick-n-motar and other online dealers are complaining/whinning about having to compete in an unfair market.

so instead of letting them compete, they get LP to become an "authorized" dealer.

Yes just as you said, they find ways around that.

but LP is still not dealers for everything, such as Aqualung, ScubaPro. plus others...

 

[PhilEllis]

but LP is still not dealers for everything, such as Aqualung, ScubaPro. plus others...

If you only counted their AquaLung and ScubaPro sales, it is my belief that LeisurePro would STILL be the second largest scuba store in the nation....second only to scuba.com. Actually, I think LeisurePro WANTS to be an authorized dealer for the things they sell. However, they continue to seek "alternative" supply chains (what a joke) for AquaLung and ScubaPro merchandise.

Phil Ellis
Discount Scuba Gear at DiveSports.com - Buy Scuba Diving Equipment & Snorkeling Equipment

 

[offthewall1]

but LP is still not dealers for everything, such as Aqualung, ScubaPro. plus others...

Give it time... give it time... While they may not be authorized dealers for Apeks and Scubapro... the manufacturers are fully aware of how LP gets the merchandise and do little or nothing about... until an LDS catches them (the manufacturer) in the act... why not move their inventory?.. and the chance of an LDS owner having privilege to their records or being present when stuff is shipped to LP... well... lets just say there isn't a snowballs chance in hell of that happening.

I'm glad you mentioned these brands because somehow - some way they have positioned themselves as the Lexus's and BMW's of scuba... when in reality their products are no better than anyone elses. Check recall lists from the past few years and you'll see large quantities of both brands being recalled.

If you want to buy on name alone - you will always overspend in this industry or any other. That is part of the duping of Americans. In other places around the globe consumers are much smarter. They know that brands like Cressi are just as good and far less expensive. It is one of the reasons I get orders from throughout Europe and Asia for Cressi products but no one in the states ever orders it.

The best way to hit them is to stop buying their products - this is one way to send them a MAP dictatorial - stop ripping us off... or pay the price.

Lets see if any ex-reps will come forward (and remaining anonymous of course) rat them out... anyone anyone?

 

[Doc]

brands like Cressi are just as good and far less expensive. It is one of the reasons I get orders from throughout Europe and Asia for Cressi products but no one in the states ever orders it.

I like my Cressi BCD, but few shops sell them, or so I am told- because of the insanely high initial buy-in purchase. How much is their minimum first order?

Same insanity, different world: Surefire flashlights~ for police and soldiers (not divers) Arguably the best there is.

A company I was with did only mail order. Surefire required a "storefront". We did maintain a small display sales floor area for the rare walk-in appointments. To keep them happy, we wound up buying into a minimal sales display (glass cabinets) set for about $1500. (No flashlights, just cabinets) Very fancy.

Cops can buy Surefire lights directly from the manufacturer at what is our dealer cost and get free shipping to boot. Yes, that's what I said.

When they came in or ordered via their Department, we gave them cost + 5%, which was still more than they paid through Surefire, but everyone was happy and everything came all mounted on their weapons.

We got a letter from their legal department- noting that we had their products (listed at full MSRP) on our website, yet we were not registered with them as an Internet Dealer. Our web geek pulled up all of the flashlights and deleted the Surefire line.

He did not scan for the name Surefire, and alas- we had one of their knives shown at full retail on our website.

We next received a registered letter informing us that our dealership had been terminated.

They didn't want to talk about it.

 

[offthewall1]

I have no doubt that there is always the possibility of a dealership being terminated... and in years past especially so. I am not sure this still holds true.

Case in point (without naming names or manufacturers)

In the past three months a variety (3) manufacturers have called us about our web pricing. In each case we responded notifying them of our intent to pursue action via the FTC, our state attorney general and through a mdeia advertising campaign alerting the public to industry price fixing. We have threatened and are fully ready to show up at DEMA and Beneath the Sea and other Dive Insutry venues with beautiful full color brochures that spell out what MAP pricing is, how it is "price fixing" and how it has cost consumers hundreds of millions of dollars over the past decade.

While it still may happen (and I won't be so upset if it does - it will only add more fuel to my fire,) none of them have yet pulled our dealership. I think they know I'm serious and I think they know I'm ready, willing and able to run with this battle. Whether the legal action gains any traction is going to be dependent on a number of things... 1. At least one of 50 states attorney's being interested in pursuing it, 2. Enough of my fellow divers bombarding the states attorneys and FTC with emails, letters and phone calls, 3. Enough of our fellow divers being willing to boycott products from manufacturers knowingly engaged in MAP and MARP pricing.

You see, it's not hard to prove price fixing - whether "colgate" exists or not - because they print this literature and distribute it to every dealer. Colgate moreso seems to address tiered pricing - which allows manufacturers to sell to dealers at different prices based on the volume of merchandise they buy... thus impacting the retailers margins." The difference here is whether or not we can prove collusion among manufacturers to artificially inflate prices - thus causing a direct corralation to higher cost to the consumer. Sherman law was written to protect the consumer - not the retailer - but by pursuing a case against them as consumers and encouraging consumers to take up the battle - there is a chance.

I agree retailers alone have little chance in infuencing the auhtorities to act - but consumers have a fighting chance. With the consumers as complianants and retailers as witnesses, this case can take hold.

I believe the primary reason none of the three I've gone to war with have pulled my dealership is simply this. Right now - they don't need the headache and they don't want to lose the sales that my growing shop has afforded them. In less than 12 months we went from an idea to somewhere on the International radar as we have sold to more than 15 countries and customers in nearly every state. The bottom line is this - 1. we are moving product when so many others are not and 2. the last thing they want to do is get into a legal battle - they're all on shaky financial ground right now and 3. absent any legal battle - do they really want the dirty industry secret exposed at DEMA and Beneath the Sea - fully outlined and explained in full color brochures alerting consumers who they are and how they've bilked the consumers for the past decade plus?

Myself and a growing national consortium of dealers are prepared to share the cost for such a campaign. If you're a shop owner who wishes to make MAP and MARP go away, send us an Email with your commitment. It will not be revealed to anyone until the proper time comes.

Thank you to all of those who have already sent support via email and letter... keep spreading the word!