Price fixing and the Supreme Court

[smeyer418]

Ok I don't know where to put this so I am posting it here so it can be moved. We have had the descussion of whether a cruise line can prohibit a TA from discounting its commission- and having your agent not rebate is not an anti trust violation. In those discussions I have said that it is per se illegal for a manufacturer to set the price a retailer has to charge when reselling its goods. I pointed out that when a cruise line sells a block of rooms to a TA or a reseller group its illegal to tell the group what price it can resell those rooms(this is different than setting a number of rooms to sell and pay the TA an enhanced commission). Well the Supreme Court just agreed to revisit this per se rule in the retailing enviorment. The case deals with a manufacturer who stopped selling to a retailer for selling at less than the manufacturers suggested price.

 

The per se rule means that no such price setting is allowed. The Supreme Court has agreed to determine whether a less strict standard of "rule of reason" should apply. The manufacturer claims that by setting the price the retailers compete on other things like service. If the Supremes buy this prices will increase on non-commodity goods and on some items discounting will be a thing of the past.

[Toyz711]

just look at how they have sold the barbie doll to retailers for years. they had to sign contract that they will not discount the doll below a certain level. if mattel caught a dealer selling a doll for less then allowed (by their contract) that dealer was cut off. that's why, even with overproduction, you never saw the high $$ dolls discounted much. price control or product control?

[garycarla]

Not sure what the issue here is, because many TA will discount the cruise compared to what NCL sells it for. Or offer OBC or something else, which in effect discounts the cruise.

 

I know the cruiselines have made it difficult to ADVERTISE lower rates, but I know some TA's will sell at different prices. Just try *****.com and see the different rates you will get

[mbisson]

When I was a kid I remember seeing "Fair Trade Prices" for lots (at least it seemed liked lots) of things. Would this be an attempt to overturn the Consumer Goods Pricing Act that Congress passed in 1975?

 

I was at a conference of University stores several years ago, and we were approached by some of the designer labels to carry their goods in our clothing departments. Some of them were insisting that we sell for the price they list and that even if an item didn't sell my only option would be to destroy their garments. We could not even reduce price in an attempt to clear it from the shelves. They said that clearance pricing and discounting would destroy the image they have built with the public. Needless to say, I declined their kind offer!

 

-Monte

[Twaincruisers]

I never agreed with the SC decision to allow that retailers could be forced to sell at a set price. That being said, I think there are a lot more important issues the SC could be considering...then again maybe it is just better to let them be distracted.

[KeystoneCruiser]

Unfortunately I think it works both ways. Just last year, there was a mom and pop gas station that sold BP gas. It had been in business for 50 years at the same site. BP then opened a new gas station/mini mart on the opposite corner and told the mom and pop that they were no longer going to sell them gas. When the mom and pop pointed out that they had a contract with BP for 8 more years, BP simply started charging less at their company owned station across the street than they were selling the gas to the mom and pop store. The company owned BP on that corner was always about 10 cents or more cheaper than ANY other gas station in the metro area. You can guess what happened, it put the mom and pop station out of business (although they tried to hang on) and now the company owned BP is one of the highest stations in the area!

[seahorse]

Ok I don't know where to put this so I am posting it here so it can be moved. We have had the descussion of whether a cruise line can prohibit a TA from discounting its commission- and having your agent not rebate is not an anti trust violation. In those discussions I have said that it is per se illegal for a manufacturer to set the price a retailer has to charge when reselling its goods. I pointed out that when a cruise line sells a block of rooms to a TA or a reseller group its illegal to tell the group what price it can resell those rooms(this is different than setting a number of rooms to sell and pay the TA an enhanced commission). Well the Supreme Court just agreed to revisit this per se rule in the retailing enviorment. The case deals with a manufacturer who stopped selling to a retailer for selling at less than the manufacturers suggested price.

 

The per se rule means that no such price setting is allowed. The Supreme Court has agreed to determine whether a less strict standard of "rule of reason" should apply. The manufacturer claims that by setting the price the retailers compete on other things like service. If the Supremes buy this prices will increase on non-commodity goods and on some items discounting will be a thing of the past.

 

The travel business is a little more complicated. There are marketing groups.......consortiums etc. that TA`s belong to and these groups contract for different pricing. A lot of them purchase net/net "product". That is below what my net from the cruise line is.

 

If I wanted to purchase net/net then I would have to outright buy the cabins and I would "own" them. I could charge anything that I wanted. If I didn`t sell all of them......I lose.

 

A normal booking is done through me, I am a conduit between the cruise line and the buyer. They own the product. I feel that they have a say in how I sell the product. If they do not like the way I sell, they can put a "stop sell" on my agency.

 

In retail you have to buy the hard goods. If they don`t sell, then after a while, you can discount. Bose comes to mind. They are letting wholesalers sell their products......but not The Wave System. You can only buy that product from Bose. The only cheaper Wave System is the reconditioned ones and they are only sold through Bose.

 

So a TA is selling the Cruise Line`s product that they own (normally) so I think that they ,IMO, dictate what I sell it for.

 

There are many other scenarios, but it is late and I am tired:o

[garycarla]

Well put seahorse!

 

It is their product and they can do what they want with it. If someone does not like, then they do not have to buy it. And if nobody buys it, they go out of business.

 

Only when someone has some CONTROL over a situation should the government get involved, like electric, water, etc. But that opens up another whole can of worms that I hope we don't get into here.

 

Bottom line, the cruiseline has a product and they can do what they want with it. It is their business investment, nobody elses.

[smeyer418]

Unfortunately I think it works both ways. Just last year, there was a mom and pop gas station that sold BP gas. It had been in business for 50 years at the same site. BP then opened a new gas station/mini mart on the opposite corner and told the mom and pop that they were no longer going to sell them gas. When the mom and pop pointed out that they had a contract with BP for 8 more years, BP simply started charging less at their company owned station across the street than they were selling the gas to the mom and pop store. The company owned BP on that corner was always about 10 cents or more cheaper than ANY other gas station in the metro area. You can guess what happened, it put the mom and pop station out of business (although they tried to hang on) and now the company owned BP is one of the highest stations in the area!

 

Actually in most states there is a implied convenant of fair dealing in every contract which this would surely violate. Unfortunately not in every state.

 

In any case - yes a company can charge what ever it wants. It only becomes an anti-trust issue when a company dictates what others must sell a product at.

 

Bose is verticaly intergrated it owns it own stores and doesn't sell anywhere else. It can legally control the price it sells its products for.

 

What issue was that I was pointing out was the Supreme Court is reviewing whether a company can restrict by price what others sell its product/services at. They haven't changed it yet, it is still a per se violation

 

BTW if you belive we truely have a free market economy read this as an example

 

http://www.washingtonpost.com/wp-dyn/content/article/2006/12/09/AR2006120900925.html?referrer=email

 

and it was a good republican that realised that big business tended towards monoplies-inefficient controlers of price.

[mbisson]

Actually in most states there is a implied convenant of fair dealing in every contract which this would surely violate. Unfortunately not in every state.

 

I was think out here that probably would've fallen under the predatory pricing rules.

 

-Monte

[Lydia B.]

hey would that happen to be the BP station on Morse Rd. near I-270? If so we must both live in Columbus...yep go Bucks! Lydia of Ohio