I've done quite a bit of investigation of this prior to and up to the current time (part of the stuff on my web page linked below...)
Virtually all large manufacturers and distributors in the US require a dealer to not sell below a certain specified minimum price (typically no more than 10% off "list", and in some cases at no discount at all.) This is NOT part of the dealer's agreement with the manufacturer (such agreements are per-se illegal in the US under anti-trust law) but rather is a "policy document" that "magically" appears and is imposed, unilaterally, after the dealer agreement is signed. Essentially all of these "policies" are nearly word-for-word identical.
Its not a "contract" or "agreement" to restrain pricing, and as such its a loophole in the law that is being exploited. The policy simply says that if they catch you selling at more than 10% off list (or whatever the policy price is) they will refuse to sell you more product.
This policy is doubly-damaging; not only do you as a shop get cut off from the gear you want to sell, but you also lose your access to repair parts (which they will only sell to "authorized dealers"), which means that IF you get cut off you orphan your existing customer base. That is the real threat - a shop could change brands if it got cut off, but orphaning all the divers it has sold gear to up to that point is another matter. The latter would generate so much anger, so quickly, that it would likely result in the shop failing. The longer a shop has carried a particular brand (and the more if it has been sold to local consumers) the more effective the threat becomes.
It is the combination of these two factors that tends to keep the local shops in line, but they all know this going in to the deal - the shops are hardly "dupes" or "victims" - in fact, they are willing participants. Shops have been sold this policy as "beneficial" to them in that it keeps Joe in the next town from competing with them on price.
In reality what it does is drive a good part of the customer base online - now NEITHER Joe NOR Jack get the sale! Worse, it drives some of the traffic out of the store (many people don't even bother looking any more, knownig that the online price won't be beaten or even approached within reason), and you can't sell someone product without the traffic.
Second, don't believe for a second that LeisurePro sells at cost, or at 5% over cost, or any such nonsense, as is almost always claimed by the dive shop folks on this board.
They do not.
I have been able to verify distribution prices on close to a hundred items they sell, in small (under 20) quantities, and every last one of them carries a mark-up of at least 20%, and in many cases 30% or more, over small-quantity wholesale. As just one example look at their Pelican box pricing; they're marking those up quite nicely.
So the situation is really much worse than the shops would have you believe. They all claim LP is selling "below cost", when in fact they are not.
Finally, LP does have a showroom. They are also located in one of the most punitive, and highest-cost, places to run a business in the United States - New York City proper. They also have staff, pay employment taxes, etc, and in fact, they are quite "nice" to their staff - the company is owned by Orthodox Jews, and they really DO honor the Jewish work week restrictions (they are CLOSED on Saturdays, orders entered Friday will ship Monday, they have more holiday time off than your local shop does, etc.)
