Rickresource Rickenbacker Forum

Outside of factory authorized sales, there really are penalties in the high end audio field. Dealers can be punished by having product held back when they sell into another dealer's territory and product is in short supply. Vandersteen generally sets up one dealer per metropolitan area, so you have to travel a bit if you want to get a discount. Nothing would prevent a person from traveling to another city to buy cheaper, except for the time and transportation expense that would offset the discount. Something I might do on a $10K Model 5, but not on a $1K Model 1C.

When calling around for C-J gear (I have no local dealer less than 2 hours away), the first question was frequently "Where do you live?". They don't quote more than 10% off new gear over the phone, unless they are quitting the C-J line. I found one dealer in a small New England city that was getting out, so he gave me 40% off and didn't care if it got his dealership pulled. I also look for dealers that got stiffed on a special order, and you can pick up good buys that way if the customer made a good down payment.

The truth is that about 2 or 3 dozen metropolitan dealers move most of the truly high end audio gear in this country, and they are exclusively high end, new and used. The rest is sold by smaller dealers as a sideline to the mid fi gear that most people buy. Practically none is sold in discount chain stores, and very little in regional specialty chain stores. Very different from the guitar world. The "bargain" high end brands like B&K, Polk, Rotel, Adcom, etc., can be bought mailorder from the lowest bidder with no problems.

While Mr. Hall is right about certain business practices being illegal, it is also true that certain things are practically unenforceable. Price fixing mainly doesn't exist in the guitar business because cutthroat dealers are everywhere, not because of any law. However, a high end audio dealer would have to PROVE that his orders were being held back by a manufacturer. The burden of proof is on the plaintiff. Mr. C and Mr. J would just sit back and laugh their *** off while sipping cognac and listening to Mozart. A lot of the top audio gear is sold to audio neurotics that actually look for high priced gear (because they read it was great in Stereophile, etc.), thinking higher prices automatically convey sonic superiority (Is a $10K guitar REALLY better than a $2K guitar on sonic terms? Same thing with audio gear.). If a HE audio manufacturer was running six months behind on special orders, their dealers wouldn't be giving much in the way of discounts. So why do Rickenbacker dealers do it? It doesn't make sense when you think about it. If they would all quit cutting each other's throat, they could sell for close to full retail. Not a business I want in.

"So why do Rickenbacker dealers do it? It doesn't make sense when you think about it. If they would all quit cutting each other's throat, they could sell for close to full retail. Not a business I want in. "

Game theory

"Fair trade" laws became illegal in the US some many years ago. I don't understand how some companies, such as Mesa Boogie & Maytag just to name a couple off the top of my head, still get away with this. I am sure it has something to do with their franchise agreement, but then how can that agreement even hold up in the courts?

It's very unlikely there's anything in the dealer agreements that's contrary to the law. But a local sales rep can apply pressure "off the record" to keep the prices up by intimating he's looking for other dealers in the area, that orders might be delayed, or any number of other verbal suggestions- if the account isn't controlling the prices satisfactory to the supplier.

Of course this only works if it's a brand that is in some demand by consumers. Can you imagine the Bong Dong Whang Guitar factory trying this tactic?

Ken, "Fair Trade" laws were state laws that required a minimum amount of markup to be added to prevent big chains from selling anything at cost or below. Some states never had these laws and almost all the rest of them are gone, either ruled unconstitutional or repealed by popular demand.

You may be thinking of Restraint of Trade, which is definitely illegal under federal laws. If a manufacturer or wholesaler sells a product in the open market, they can't force a pricing policy or refuse to ship to someone who doesn't adhere to a price.

But that's a different issue from franchises or dealerships. It might be illegal to force a franchisee to use set prices but AFAIK there's no way to force a manufacturer to grant a franchise agreement or prevent him from cancelling it.

Of course, as always, I could be wrong.

How is it that some companies are allowed to require "minimum advertised pricing"? Is that just a dealer tactic? If not, how on earth do companies enforce it without violating restraint of trade laws? What's the practical difference between "witholding product" and "revoking a franchise or dealership agreement" on the basis of a contractual violation? I understand the ultra-fine distinctions that arise between contract/franchising law and what we call "anti-combines" legislation up here in Canada, but it sure looks like one very private area of the law (contract) is being used to cancel out other, more public concerns (restraint of trade). No doubt that's the point.

MAP isn't a dealer tactic, it's a company requirement (where it's used). But it's only about advertsing the price, it doesn't prevent the dealer from actually charging less.

Okay, here's the US rule in brief, from the FTC website at http://www.ftc.gov/bc/compguide/illegal.htm :

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.

Dave, Thanks for the FTC quote. The middle paragragh seems to sum it up. I do know that when the fair trade laws were in effect (at least here in Michigan) that they were aimed at preventing large retailers from putting the small busnesses out of business. I had a friend that was trying to whip saw two hifi dealers on the price of a McIntosh amplifier. The one dealer called up Mac and the other dealer lost it's franchise. McIntosh actually showed up the next day and cleared out all of their inventory! From a consumer's point I guess that it is good that these laws are extinct.