Headsets: "Minimum Advertised Price"

[Will Thompson]

Just about all of the major (USA) pilot shops on the web use a "minimum
advertised price" for headsets. The actual price for a popular headset,
such as Lightspeed or David Clark are not readily available on the
website. Instead you only find out the real price after actually
ordering or requesting and waiting for an email. The shops claim the
manufacturers require this, and they can't advertise a price below the
"minimum adv. price" which is usually somewhat lower than the MSRP or
list price.

So why is this? Manufacturers *cannot* set actual selling prices, per
federal law (Sherman Act and related) so it is strange that they try to
impose this barrier. .

At any rate it is just a hassle for the consumer becaues it
intentionally makes it difficult to find the best price. You would think
the manufacturer wouldn't mind the end seller selling for the best
possible price to get more sales. UNLESS of course the manufacturer
secretly sells to different dealers at different prices.....

I've done a lot of business on the web, and it is both weird and
annoying that aviation .headsets operate differently than everything
else.

[Richard Kaplan]

This practice is common with lots of mail order products, especially
electronics. Look though any computer magazine and you will see "$CALL"
listed as prices for various electronic equipment.

--
Richard Kaplan, CFII

www.flyimc.com

[Peter]

Will Thompson wrote:

> Just about all of the major (USA) pilot shops on the web use a "minimum
> advertised price" for headsets. ...
> So why is this? Manufacturers *cannot* set actual selling prices, per
> federal law (Sherman Act and related) so it is strange that they try to
> impose this barrier. .
>
> At any rate it is just a hassle for the consumer becaues it
> intentionally makes it difficult to find the best price. You would think
> the manufacturer wouldn't mind the end seller selling for the best
> possible price to get more sales. UNLESS of course the manufacturer
> secretly sells to different dealers at different prices.....
>
> I've done a lot of business on the web, and it is both weird and
> annoying that aviation .headsets operate differently than everything
> else.

It's certainly not restricted to aviation headsets. For one example this
is very common for GPS receivers. Look at the prices at www.tvnav.com -
for many of the Garmin receivers it says to click to send email for
price. Clicking actually opens your email with the price already listed.

As to the rationale, I believe it is to help the small volume retailers
who cannot compete on price with many of the mail and internet ordering
sites or even with the bigger brick-and-mortar retailers. If the prices
were widely advertised it would become even more apparent how much more
the small stores are frequently charging. But the small stores are often
the ones where customers get a chance to see and play with the products.
And probably many of the customers who try on a headset or check out a
GPS at a small retailer end up buying from one of the cheaper mailorder
or internet shops.
If Garmin (or Lightspeed, etc.) didn't help out the smaller dealers
with a MAP policy, many would stop carrying these products and it would
hurt the overall sales of the products since they wouldn't be as accessible
to potential customers who want to 'try before they buy'.

[Cub Driver]

>So why is this? Manufacturers *cannot* set actual selling prices, per
>federal law (Sherman Act and related) so it is strange that they try to
>impose this barrier.

That's exactly why they have the concept! (It wasn't the Sherman act.
Minimum retail price fixing was stilll very much around when I was in
high school, and I post-date the Sherman act :) Basically they're
saying: I can't stop you from selling cheaper, but I damn well can
stop you from boasting about it.

Think of all the merchants who promise to meet any competitor's
"advertised price". You're supposed to bring in a clipping to show
them, and they'll rebate you the difference. Presumably they wouldn't
honor an email, since that was a private offer just to you.

all the best -- Dan Ford
email: (put Cubdriver in subject line)

The Warbird's Forum www.warbirdforum.com
The Piper Cub Forum www.pipercubforum.com
Viva Bush! blog www.vivabush.org

[C J Campbell]

"Peter" > wrote in message
news:DzKbc.181002$po.990627@attbi_s52...
>
> It's certainly not restricted to aviation headsets. For one example this
> is very common for GPS receivers. Look at the prices at www.tvnav.com -
> for many of the Garmin receivers it says to click to send email for
> price. Clicking actually opens your email with the price already listed.
>

Actually, Garmin sent a threatening letter to all their retailers saying
that they would cut off shipments of the new GPSMAP 296 for six months to
any retailer that they determined had sold (not just advertised) one of
these units for less than $1,695. The letter also said that it was necessary
to protect the reputation of Garmin. Apparently tvnav.com has retaliated by
refusing to stock the 296. I wouldn't be surprised if some of the other mass
marketers did the same. I suppose the smaller retailers would appreciate the
price protection if Garmin actually shipped them some units that they could
sell.

[G.R. Patterson III]

Richard Kaplan wrote:
>
> This practice is common with lots of mail order products, especially
> electronics. Look though any computer magazine and you will see "$CALL"
> listed as prices for various electronic equipment.

It's also common with photography gear.

George Patterson
This marriage is off to a shaky start. The groom just asked the band to
play "Your cheatin' heart", and the bride just requested "Don't come home
a'drinkin' with lovin' on your mind".

[MichaelR]

You are half right.
Manufacturers can set _minimum_ sale prices:

http://www.ftc.gov/bc/compguide/question.htm


"Will Thompson" > wrote in message
...

> So why is this? Manufacturers *cannot* set actual selling prices, per
> federal law (Sherman Act and related) so it is strange that they try to
> impose this barrier. .

[Gerry Caron]

"Richard Kaplan" > wrote in message
s.com...
> This practice is common with lots of mail order products, especially
> electronics. Look though any computer magazine and you will see "$CALL"
> listed as prices for various electronic equipment.
>
The use of MAP was much more relevant when magazine and T-A-P ads were the
primary source of customers for the mail order houses. With published ads,
they have to be set two months or more ahead of the actual publish date. If
the "other guy" set his price $10 below yours, he got more sales. So price
setting was kind of like a game of chicken. Set it a few bucks too high and
you lose sales, set it too low and you lose profit. The end result was that
most dealers actually wanted the manufacturers to set a MAP. That way all
the ads were the same -- either the MAP or "Call". They could then adjust
their price as needed when the customers actually called.

It's not so important today with almost everyone having a web site. I guess
not having the price on the site does avoid having a quick Froogle(TM)
search point everyone to the one "cheapest" dealer. If a dealer lowers his
prices, it may not be reflected in the web searches for a week or longer, if
at all. With customers having to send an email or load a shopping cart,
they get that customer interaction and can adjust prices dynamically to make
the sale.

As I mentioned, the dealers point to the manufacturers and say it's their
MAP policy; but when I worked for one of those manufacturers, it was the
dealers that asked for the MAP policy. It was a tool that let them avoid
really steep discounting which hurt their margins.

Gerry

[Peter]

MichaelR wrote:

> You are half right.
> Manufacturers can set _minimum_ sale prices:
>
> http://www.ftc.gov/bc/compguide/question.htm

The above website does not support your assertion. It states:
"If the manufacturer and a dealer entered into an agreement on a resale
price or minimum price, that would be a price-fixing violation. The
agreement could be formal, through a contract, or informal, when the
dealer’s compliance is coerced. However, if the manufacturer has
established a policy that its dealers should not sell below a minimum price
level, and the dealers have independently decided to follow that policy,
there is no violation."

So a manufacturer coercing a dealer to abide by a minimum sales price
is a violation of price-fixing legislation. But the manufacturer can
suggest a minimum sales price and hope that the dealers abide by it.

If Garmin is telling dealers that they must abide by the minimum price
for the 296 or have their supplies cut off that would constitute
coersion and I expect they would lose in court if Darrel (tvnav) or
other affected dealers decide to fight the policy.
>
> "Will Thompson" > wrote in message
> ...
>
>
>>So why is this? Manufacturers *cannot* set actual selling prices, per
>>federal law (Sherman Act and related) so it is strange that they try to
>>impose this barrier.

[C J Campbell]

"Peter" > wrote in message
news:yL%bc.182419$_w.1842540@attbi_s53...
> MichaelR wrote:
>
> > You are half right.
> > Manufacturers can set _minimum_ sale prices:
> >
> > http://www.ftc.gov/bc/compguide/question.htm
>
> The above website does not support your assertion. It states:
> "If the manufacturer and a dealer entered into an agreement on a resale
> price or minimum price, that would be a price-fixing violation. The
> agreement could be formal, through a contract, or informal, when the
> dealer’s compliance is coerced. However, if the manufacturer has
> established a policy that its dealers should not sell below a minimum
price
> level, and the dealers have independently decided to follow that policy,
> there is no violation."
>
> So a manufacturer coercing a dealer to abide by a minimum sales price
> is a violation of price-fixing legislation. But the manufacturer can
> suggest a minimum sales price and hope that the dealers abide by it.
>
> If Garmin is telling dealers that they must abide by the minimum price
> for the 296 or have their supplies cut off that would constitute
> coersion and I expect they would lose in court if Darrel (tvnav) or
> other affected dealers decide to fight the policy.

Refusing to deal with a reseller is not considered coercion. The FTC web
site at http://www.ftc.gov/bc/compguide/illegal.htm says:

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.

[MichaelR]

Actually, this was settled in the US Supreme Court in 1919. It's called the
Colgate Doctrine.





"Peter" > wrote in message
news:yL%bc.182419$_w.1842540@attbi_s53...
> MichaelR wrote:
>
> > You are half right.
> > Manufacturers can set _minimum_ sale prices:
> >
> > http://www.ftc.gov/bc/compguide/question.htm
>
> The above website does not support your assertion. It states:
> "If the manufacturer and a dealer entered into an agreement on a resale
> price or minimum price, that would be a price-fixing violation. The
> agreement could be formal, through a contract, or informal, when the
> dealer’s compliance is coerced. However, if the manufacturer has
> established a policy that its dealers should not sell below a minimum
price
> level, and the dealers have independently decided to follow that policy,
> there is no violation."
>
> So a manufacturer coercing a dealer to abide by a minimum sales price
> is a violation of price-fixing legislation. But the manufacturer can
> suggest a minimum sales price and hope that the dealers abide by it.
>
> If Garmin is telling dealers that they must abide by the minimum price
> for the 296 or have their supplies cut off that would constitute
> coersion and I expect they would lose in court if Darrel (tvnav) or
> other affected dealers decide to fight the policy.
> >
> > "Will Thompson" > wrote in message
> > ...
> >
> >
> >>So why is this? Manufacturers *cannot* set actual selling prices, per
> >>federal law (Sherman Act and related) so it is strange that they try to
> >>impose this barrier.
>

[Will Thompson]

C J Campbell wrote:

> "Peter" > wrote in message
> news:DzKbc.181002$po.990627@attbi_s52...
> >
> > It's certainly not restricted to aviation headsets. For one example this
> > is very common for GPS receivers. Look at the prices at www.tvnav.com -
> > for many of the Garmin receivers it says to click to send email for
> > price. Clicking actually opens your email with the price already listed.
> >
>
> Actually, Garmin sent a threatening letter to all their retailers saying
> that they would cut off shipments of the new GPSMAP 296 for six months to
> any retailer that they determined had sold (not just advertised) one of
> these units for less than $1,695. The letter also said that it was necessary
> to protect the reputation of Garmin. Apparently tvnav.com has retaliated by
> refusing to stock the 296. I wouldn't be surprised if some of the other mass
> marketers did the same. I suppose the smaller retailers would appreciate the
> price protection if Garmin actually shipped them some units that they could
> sell.

That looks like a pretty flagrant violation of anti-trust laws and the Sherman
Act. A manufacturer cannot dictate what price an independent seller sells
something for. I'm sure that this happens quite often (Saturn cars? Perfumes?)
but I could see their letter later being known as "Exhibit A" if somebody
starting asking Garmin questions.

[Peter]

C J Campbell wrote:

> "Peter" > wrote in message
> news:yL%bc.182419$_w.1842540@attbi_s53...
>
>>MichaelR wrote:
>>
>>
>>>You are half right.
>>>Manufacturers can set _minimum_ sale prices:
>>>
>>>http://www.ftc.gov/bc/compguide/question.htm
>>
>>The above website does not support your assertion. It states:
>>"If the manufacturer and a dealer entered into an agreement on a resale
>>price or minimum price, that would be a price-fixing violation. The
>>agreement could be formal, through a contract, or informal, when the
>>dealer’s compliance is coerced. However, if the manufacturer has
>>established a policy that its dealers should not sell below a minimum
>
> price
>
>>level, and the dealers have independently decided to follow that policy,
>>there is no violation."
>>
>>So a manufacturer coercing a dealer to abide by a minimum sales price
>>is a violation of price-fixing legislation. But the manufacturer can
>>suggest a minimum sales price and hope that the dealers abide by it.
>>
>>If Garmin is telling dealers that they must abide by the minimum price
>>for the 296 or have their supplies cut off that would constitute
>>coersion and I expect they would lose in court if Darrel (tvnav) or
>>other affected dealers decide to fight the policy.
>
>
> Refusing to deal with a reseller is not considered coercion. The FTC web
> site at http://www.ftc.gov/bc/compguide/illegal.htm says:
>
> 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.

It would make an interesting court case. While true that in general
manufacturers are free to stop dealing with retailers who undercut the
minimum price policy, the courts will apply the "rule of reason" that
takes into account the anti-competitive effects of such an action and the
market share dominance of the manufacturer. Actions by a manufacturer
that dominates the market can be held to be coersive even if the same
actions would be legal for a manufacturer in a more competitive market.
http://www.ftc.gov/speeches/anthony/aliabaps.htm :
"For example, the FTC prevented Nintendo(16) from exercising its Colgate
rights(17) to terminate or suspend retailers that did not comply with its
announced pricing policy. This severe remedy was necessary because Nintendo
commanded 80% of the market and, by virtue of this power, could have
maintained its policy without an agreement because retailers could feel
intim[id]ated."

[Peter]

MichaelR wrote:

> Actually, this was settled in the US Supreme Court in 1919. It's called the
> Colgate Doctrine.

The Colgate Doctrine doesn't apply to your original assertion that
"Manufacturers can set minimum sale prices" since to do that would require
an explicit agreement with the dealer and such agreements are illegal. In
general the manufacturer would have the right to terminate a dealer from
getting products in the future if they sold items below the suggested
price. But that doesn't allow them to "set minimum prices" since the
dealer is still free to sell his current inventory at as low a price as
he chooses.

There have also been exceptions to Colgate in cases where the manufacturer
dominates the market. Whether Garmin would fall into that category is
something the courts would have to decide on the basis of the
facts in this particular case.
>
>
>
>
>
> "Peter" > wrote in message
> news:yL%bc.182419$_w.1842540@attbi_s53...
>
>>MichaelR wrote:
>>
>>
>>>You are half right.
>>>Manufacturers can set _minimum_ sale prices:
>>>
>>>http://www.ftc.gov/bc/compguide/question.htm
>>
>>The above website does not support your assertion. It states:
>>"If the manufacturer and a dealer entered into an agreement on a resale
>>price or minimum price, that would be a price-fixing violation. The
>>agreement could be formal, through a contract, or informal, when the
>>dealer’s compliance is coerced. However, if the manufacturer has
>>established a policy that its dealers should not sell below a minimum
>
> price
>
>>level, and the dealers have independently decided to follow that policy,
>>there is no violation."
>>
>>So a manufacturer coercing a dealer to abide by a minimum sales price
>>is a violation of price-fixing legislation. But the manufacturer can
>>suggest a minimum sales price and hope that the dealers abide by it.
>>
>>If Garmin is telling dealers that they must abide by the minimum price
>>for the 296 or have their supplies cut off that would constitute
>>coersion and I expect they would lose in court if Darrel (tvnav) or
>>other affected dealers decide to fight the policy.
>>
>>>"Will Thompson" > wrote in message
...
>>>
>>>
>>>
>>>>So why is this? Manufacturers *cannot* set actual selling prices, per
>>>>federal law (Sherman Act and related) so it is strange that they try to
>>>>impose this barrier.
>>
>
>

[Cub Driver]

> 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.

Color me stupid, but I don't see a dime's worth of difference between
these two practices, except that the second is enforced from the top
down, which makes it wose than the first, which could in theory be a
mutual agreement.
all the best -- Dan Ford
email: (put Cubdriver in subject line)

The Warbird's Forum www.warbirdforum.com
The Piper Cub Forum www.pipercubforum.com
Viva Bush! blog www.vivabush.org

[Cub Driver]

>Actually, this was settled in the US Supreme Court in 1919. It's called the
>Colgate Doctrine.

What was settled? That price-fixing was legal?

Well, so it was, until the 1950s. When I was in high school, just
about everything manufactured item in the U.S. sold for the same price
everywhere, city and country.

Then the good times started.

all the best -- Dan Ford
email: (put Cubdriver in subject line)

The Warbird's Forum www.warbirdforum.com
The Piper Cub Forum www.pipercubforum.com
Viva Bush! blog www.vivabush.org

[Peter Duniho]

"Cub Driver" > wrote in message
...
> Color me stupid, but I don't see a dime's worth of difference between
> these two practices

The difference is whether the policy applies to all vendors or just some.

[MichaelR]

It's a fine point in the law, but Garmin can legally announce that they will
only sell to dealers who keep a minimum price on their products. Then, if a
dealer undercuts that price, Garmin can stop selling to them. Technically,
it's a unilateral decision by Garmin, and an independent decision by each
dealer. Since there is not an "agreement", it is not considered to be
price-fixing.




"Cub Driver" > wrote in message
...
>
> >Actually, this was settled in the US Supreme Court in 1919. It's called
the
> >Colgate Doctrine.
>
> What was settled? That price-fixing was legal?
>
> Well, so it was, until the 1950s. When I was in high school, just
> about everything manufactured item in the U.S. sold for the same price
> everywhere, city and country.
>
> Then the good times started.
>
> all the best -- Dan Ford
> email: (put Cubdriver in subject line)
>
> The Warbird's Forum www.warbirdforum.com
> The Piper Cub Forum www.pipercubforum.com
> Viva Bush! blog www.vivabush.org

[Aloft]

You didn't read down far enough....below that section is this:
Q: I own a small jewelry store and the manufacturer of TimeCo brand watches
recently dropped me as a dealer. I’m sure it’s because my competitors
complained that I sell below the suggested retail price. The explanation was
the manufacturer’s policy: its products should not be sold below the
suggested retail price, and dealers who do not comply are subject to
termination. Is it legal for the manufacturer to dictate my prices?

A: The law allows a manufacturer to have a policy that its dealers should
sell a product above a certain minimum price, and to terminate dealers that
do not honor that policy. Manufacturers may choose to adopt this kind of
policy because it encourages dealers to provide full customer service and
prevents other dealers, who may not provide full service, from taking away
customers and "free riding" on the services provided by other dealers. If
TimeCo got you to agree to maintain the suggested retail price, it would be
illegal. It also would be illegal if TimeCo agreed with your competitors to
drop you as a dealer to help maintain a price to which they had agreed.
However, a complaint from a competing retailer is not sufficient to prove
such an agreement, because the manufacturer may have decided independently
that its interests were better served by sticking with its policy.

=====

Now, what this suggests to me is that it IS legal to coerce a dealer into
compliance under threat of being dropped as a dealer. HOW this isn't
anti-competitive, God only knows.

[lance smith]

Most sites abide by the mfgers MAP but there a few who don't. Take a
look at bizrate.com and you can see who does and who doesn't abide.
Garmin seems to do a better job at policing it's resellers but you can
find lightspeed headsets for cheaper...

-lance smith



Will Thompson > wrote in message >...
> Just about all of the major (USA) pilot shops on the web use a "minimum
> advertised price" for headsets. The actual price for a popular headset,
> such as Lightspeed or David Clark are not readily available on the
> website. Instead you only find out the real price after actually
> ordering or requesting and waiting for an email. The shops claim the
> manufacturers require this, and they can't advertise a price below the
> "minimum adv. price" which is usually somewhat lower than the MSRP or
> list price.
>
> So why is this? Manufacturers *cannot* set actual selling prices, per
> federal law (Sherman Act and related) so it is strange that they try to
> impose this barrier. .
>
> At any rate it is just a hassle for the consumer becaues it
> intentionally makes it difficult to find the best price. You would think
> the manufacturer wouldn't mind the end seller selling for the best
> possible price to get more sales. UNLESS of course the manufacturer
> secretly sells to different dealers at different prices.....
>
> I've done a lot of business on the web, and it is both weird and
> annoying that aviation .headsets operate differently than everything
> else.

[G.R. Patterson III]

Aloft wrote:
>
> Now, what this suggests to me is that it IS legal to coerce a dealer into
> compliance under threat of being dropped as a dealer.

Actually not. The text you quoted says "If TimeCo got you to agree to maintain the
suggested retail price, it would be illegal.", so they can't legally coerce you by
threatening to drop you as a dealer. They *can* drop you as a dealer, but they can't
threaten to do so.

George Patterson
This marriage is off to a shaky start. The groom just asked the band to
play "Your cheatin' heart", and the bride just requested "Don't come home
a'drinkin' with lovin' on your mind".

[Cub Driver]

On Fri, 09 Apr 2004 11:40:01 GMT, "Aloft" > wrote:

>Now, what this suggests to me is that it IS legal to coerce a dealer into
>compliance under threat of being dropped as a dealer. HOW this isn't
>anti-competitive, God only knows.

I am as amazed as you, especially since it would only work in cases
where the manufacturer has a real advantage over his competitors, as
in name recognition or share of the market.

The difference between this and the Minimum Retail Price of the 1950s
appears to be merely that in the former case, the dealer who cut
prices had actually broken the law, and there could be penalties
assessed against him.

Happily the New Price Fixing doesn't usually work, because
manufacturers generally needs Wal Mart more than WM needs them.

all the best -- Dan Ford
email: (put Cubdriver in subject line)

The Warbird's Forum www.warbirdforum.com
The Piper Cub Forum www.pipercubforum.com
Viva Bush! blog www.vivabush.org