isnt this called price fixing?

[TonyB13]

So these companies that set a price that their equipment must be sold at like kessil ecotech etc and not just in aquarium business airlines were accused of this a year or so ago but it seemed to disappear , isnt this called price fixing? seems like it to me the consumer doesn't it to you?

[matt]

Perhaps worth a scan...

 

https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/dealings-supply-chain/manufacturer-imposed

[malacoda]

IMHO, yeah, it can feel a bit like price fixing.  In general, as I understand it, the only reason it is legal -- and not considered price fixing -- is because it is not "a price their equipment must be sold at" ... but rather the minimum price a product can be advertised at. 

 

In other words, in theory, retailers can sell such products at lower prices, they just can't advertise those lower prices (that's why you'll sometimes see things like 'add to cart to see the price' on some online retailer sites -- they can't advertise the lower price on a website, but can show it on an cart invoice).

 

Likewise, a manufacturer can opt not to make their product available to a retail who does not agree to an MAP ... and can also legally impose fines on a retailer who violates an MAP agreement.

 

From a business perspective I can understand how it can help a manufacturer making product for a very small/limited market to remain in business and continue to provide and improve upon said products. But from a consumer perspective, yeah ... it doesn't exactly give me a warm fuzzy feeling either.

Edited December 1, 2016 by malacoda

[TonyB13]

I just scanned the doc you sent Matt thanks, yea its legal but as John says doesn't really give me the warm and fuzzies. Makes me not really wanna buy from those manufacturers, but seems like all the major brands are that way so far in lighting anyway.  

I get on my soap box often with the airlines which i loath and I hope in my life time I will get to see a bullet train running cross country in the states so then maybe these airliners will treat people a little better till then they have no motivation to do so and  I wish i could find the news story which they were route fixing and i forget how they weaseled their way out of it.

Thanks

[sethsolomon]

the MAP pricing is the minimum Advertised price.  Its to give shops a chance to make money so websites dont just plummet the price to minuscule profit margins.

[TonyB13]

Yea I understand all the reasoning behind it but I still believe the free market system and if you (figuratively speaking) cant keep up then maybe you shouldn't be in business.

[Origami]

Yea I understand all the reasoning behind it but I still believe the free market system and if you (figuratively speaking) cant keep up then maybe you shouldn't be in business.

Manufacturers are not required to sell to distributors (LFS' in this case). As part of letting these outlets buy their product at wholesale for resale at retail, they agree to certain provisions. The MAP agreement is one of those provisions. Sellers don't have to agree with it. They can walk away. However, if they don't, they won't get the product through normal channels. Competing products in the industry are free to float to what the market will bear and will apply pressure to MAP pricing if consumers find value in the lower prices for the alternative products.

[johnnybv]

Not only is is to give the LFS a "chance to make a margin"  which by the way is so small for such a high priced items that is is hard to carry much.  The real reason is so that the product is not cheapened by someone that is OK making $10 on a $500 item.  Levis will go on sale but you will never see them below certain prices for specific styles, now the store might have stuff like "Kohls Bucks" than can be applied to them to bring the price down, but the advertised price is controlled.

John

[TonyB13]

Just dont seem right that companies control what second party sales want to do. If i can make 10 dollars a light and stay in business pay my taxes and overhead then so be it.

 

http://www.justsaynotomap.com/

[Origami]

Just dont seem right that companies control what second party sales want to do. If i can make 10 dollars a light and stay in business pay my taxes and overhead then so be it.

 

http://www.justsaynotomap.com/

At the same time, as a manufacturer or product developer you shouldn't be (legally) forced to sell to just anybody who may not meet your requirements.

 

Sent from my SM-G900V using Tapatalk

[Origami]

BTW, if the entire industry colluded to set prices, that would be anti-competitive. But, as long as their are similar products competing in the market space, it's not considered that way.

 

Sent from my SM-G900V using Tapatalk

[TonyB13]

That would be very illegal, but this i think is just wrong and not in the intrest of the consumer, and I can think of a lot of products that sell under different names but all belong to the same company.

[Origami]

That would be very illegal, but this i think is just wrong and not in the intrest of the consumer, and I can think of a lot of products that sell under different names but all belong to the same company.

But the interest of the consumer is balanced with protecting the interest of the investor/developer and, in some cases, the network of distributors.  I went through the same thinking at one point.

 

With MAP, a small LFS can compete with the likes of big chains (like Petsmart or Walmart) and a small company's network of small distributors can be maintained. Without it, larger chains can squeeze out the little shops, reducing the manufacturer's third-party distribution network to nothing. At that point, the distributor can put the screws to the developer forcing prices to go down and investment in new product to decline. Ultimately, in that scenario, innovation stalls and the innovator goes can't make ends meet and goes out of business. You, the consumer, lose because you don't get see product innovation.

 

MAP is not a way to screw you, the consumer. MAP is just one a way that a developer can retain diversity in their distribution network (that they don't own) and can, as a result, protect their future.

 

Of course, other (alternative) products can be developed and be marketed by other companies to compete with a product that is under a MAP agreement. All things being equal, this competitive force from competing products has the ability to drive MAP pricing down in order to keep marketshare. So MAP is not as anti-competitive as you might think. 

[TonyB13]

Do remember zodys,kmart, Woolworths gemco, these businesses became obsolete and went away. Thats just how it goes old business go away and new businesses with new business models take over. Do you really believe that any manufacturer cares what happens to some little business?

[Origami]

Do remember zodys,kmart, Woolworths gemco, these businesses became obsolete and went away. Thats just how it goes old business go away and new businesses with new business models take over. Do you really believe that any manufacturer cares what happens to some little business?

Yes. When distribution of product is important. Absolutely.

 

Take Ecotech Marine (one of the companies that you cited). They're a one-shop business in Allentown/Bethlehem/Emmaus, PA. Their success absolutely depends on the diversity and distribution of independent distributors. If that network is threatened, they're threatened.

 

Why do you think McDonald's (and any other fast-food franchise) puts territorial restrictions on their franchisees?

 

As a producer, distribution is an important part of getting your product out to consumers. If distribution cannibalizes itself, then you - the producer - lose. 

[TonyB13]

I am not picking on this lighting industry its a new trend that a lot of companies are getting into and have been for a while now, washer dryers that are built, the same unit for home depot as lows but put slightly different model numbers on them so you can't get them to compete for your business. You worried about home depot making money? Walmart came into evrey town and sold products below cost till they put everyone out of business legal but dirty business practice in my opinion. The company in pa do they really build it here or they stick a built in usa sticker on a Chinese product?

[TonyB13]

No matter my feelings about all this im probably gonna buy the ai 52 i cant afford the ecotechs or i would buy them.

[KingOfAll_Tyrants]

Yes. When distribution of product is important. Absolutely.

 

Take Ecotech Marine (one of the companies that you cited). They're a one-shop business in Allentown/Bethlehem/Emmaus, PA. Their success absolutely depends on the diversity and distribution of independent distributors. If that network is threatened, they're threatened.

 

Why do you think McDonald's (and any other fast-food franchise) puts territorial restrictions on their franchisees?

 

As a producer, distribution is an important part of getting your product out to consumers. If distribution cannibalizes itself, then you - the producer - lose.  

 

I'll second origami here.

 

Highly simplified example: Let's say you make the coolest bestest reef light in the world.   Your price is $100, the price at the LFS is $200; net profit for LFS is probably around $50 once shipping, labor, etc. is factored in.

 

You'll advertise it, and all the LFS in the US will buy it from you to sell.  In total they buy say 1000 a month, divided among 100 stores.  At the same time, BigBoxOnlineVendor.com wants to list it as well, and they not only have a more efficient business model, and have a higher sales volume (say 2000 a month), but also want to buy in more profit margin.  So they walk in, and say "hey we want 2000 this month, but you need to sell it for $80/piece".  They will almost certainly sell it for less than $200 (say $150) and make more net profit because their business is different from the LFS.

 

You can tell BBOV.com to pound sand, but at the same time they're by far your biggest individual sale.   When you're expanding, maybe you can tell them off, but when other vendors are making similar products (and there are bad clones on ebay), you need the sales to keep your business operating.   

 

If you let BBOV.com do that, then the LFSs will either drop your product (and push other products which are as good/almost as good as yours).  Note that if this happened for every product the LFS will go bankrupt.   In either case, then BBOV will be your only purchaser, and they can cut even further into your profit margin.   

 

Not good.  So MAP and the like gets around this.  

 

I would argue that, at least in its usual form, MAP is actually good for consumers in the long run, lest the entire market for a product turn rapidly into a race to the bottom each time a new type of product comes to market - with the resulting reduced quality from both manufacturers and retailers, poorer customer service, etc.   Especially in a hobby like fishkeeping (to say nothing of reef keeping), lack of scale +lack of profit margin = lack of good stores = worse for us all.  

Edited December 4, 2016 by KingOfAll_Tyrants