WJL
Contributor
That's exactly correct. If price restraints are imposed from above, and not by agreement among competitors, they are presumptively legal. At least in the U.S. I have no idea what the laws are in the Great White North.
Halcyon Prouduction, DIR, and ironic facts of life
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That's exactly correct. If price restraints are imposed from above, and not by agreement among competitors, they are presumptively legal. At least in the U.S. I have no idea what the laws are in the Great White North.
SeaJay
Contributor
Coke alert! Coke alert!
You owe me a new keyboard, bud.
Sorry, Gen... That was funny.
The Nine West suit definitely brings to light the problems in the scuba industry... I don't see why it's illegal in one industry, but not another.
This adds huge credibility to Gen's argument, guys.
WJL
Contributor
I'm trying to explain what the law is, not what it could be or what it might be. In United States v. Colgate & Co., 250 U.S. 300 (1919) the Supreme Court ruled that a manufacturer does not engage in concerted action in violation of Section 1 of the Sherman Act when it announces a pricing policy unilaterally and refuses to do business with distributors that fail to adhere to the policy. Id. at 307. Just how aggressive a manufacturer can be in enforcing its pricing policies has been a much-litigated issue since then. The doctrine was refined in the Parke-Davis, General Motors, and Albrecht cases. The next major case was Monsanto Co. v. Spray-Rite Services Corp., 465 U.S. 752 (1984), the result of which was to give manufacturers greater latitude to bring pressure on dealers to adopt the manufacturer's favored pricing approach. Termination of a non-conforming dealer in response to complaints from other dealers is not sufficient to prove concerted action, a key ingedient of a Section 1 case.
Actions challenging vertical price fixing are not impossible, they are just difficult to prove, given the current climate of anti-trust enforcement. The complaint filed by the FTC against Nine west is an example of that. The FTC in this case was not acting as a court, it was acting as a prosecutor enforcing the antitrust laws. The FTC thought that Nine West was too coersive in its tactics and filed an action. Rather than fight, Nine West agreed to a consent decree limiting its business practices. This was not a decision by a court construing the scope of the antitrust laws. Both sides settled rather than run the risks and bear the expense inherent in a lengthy antitrust lawsuit.
Dryglove
Contributor
Ooops....nt
"The Colgate Doctrine" is one of the seminal points in the history of US anti-trust law, but relying on it is nowhere near as solid ground as many people claim it is, despite other decisions since.
Nine West never went to trial, but among the most important points of that case is not just that they agreed to pay a significant fine, but that they agreed to drop the policies, in writing, and not re-instate them.
The bottom line is pretty clear on this - Nine West thought that protecting their retailers from price competition with other retailers of their identical product would "help their brand."
But they didn't think it would do so strongly enough to fight the issue in court when it was contested, rather, they decided not only to drop the policy but promised not to reinstate it, and to add explicit contractual language making clear that retailers were free to set their own prices wherever they wanted.
This is true even though it would appear they'd win the case at trial. Nonetheless, they settled with a fine of millions, which is a hell of a lot more than they would have paid out in inside and outside counsel costs to contest the case, including any appeals.
Obviously, the poker bet on going to trial didn't look so good to Nine West management.
Such an evaluation can come from one of two possible conclusions - either there is a significant risk of loss (and the cost of contesting it is not worth that risk) or the actual benefit of the policy is close enough to nil that it is better to drop it, guilty or not, than contest the case and risk a loss, irrespective of how slight the risk of actually losing.
The parallel with the scuba industry is pretty clear and convincing.
The argument that manufactuers make with these policies is always that it "helps both the brand and retailers, in that supporting margins leads to better service.[/b]
In fact, a close analog of that exact argument was made by JJ right here in this thread.
That's pretty clearly bunk, but it is a good-sounding excuse.
A manufacturer is quite free to demand certain service and customer care metrics be met by their dealers. There are no market dynamics that are harmed by doing so; indeed, such demands are good. They are also transparently verifyable, which is important, in that objective standards benefit everyone - the manufacturer, the dealer and the customer.
The use of an indirect means of attempting to get to the desired goal, when a clear, verifyable, simple and direct means exists, is clear evidence that there are additional motives that have nothing to do with promoting a "service" environment, nor with brand value per-se.
Demanding those verifyable metrics does not result in price supports. It may result in certain levels of pricing, but that's ok - the decision as to exactly how much the market support demanded by the manufacturer costs, per unit, for any dealer is thus theirs to come up with. Even better, they not only make the determination, they spend their margin there as required, because instead of "fostering" a particular metric of professionalism and customer service it is simply demanded as a condition of getting the dealership!
A contractual arrangement with concrete metrics that are verifyable vastly trumps simply handing someone price maintenance. The latter provides no assurance that any of the funds gained will actually end up where the manufacturer wants them to.
WJL
Contributor
Karl, I can tell you from personal knowledge that you're off-base here. Nine West had to respond not just to the FTC action, they were facing 56 companion cases from state's attorneys general and some others. They easily would have spent as much as the fine on their attorneys and consultants if they fought all those cases and won every one. And, of course they could have lost. Losing even one of those cases would have created some serious issue preclusion problems for them, not to mention opening them up to a host of follow-on private lawsuits. So they settled, as did the FTC, without having a court ever decide if what they were doing was legal or illegal.
WJL
Contributor
The problem with this suggestion is that "metrics" measuring customer service are inherently difficult to define and verify, especially from long distance, by a manufacturer who has no direct control over the independent dealer. Any measurement procedure you can come up with along these lines will be harder and more expensive to police than a simple agreement to sell at a certain price. Manufacturers have a hard enough time even policing prices, and all that they have to do is have somebody walk into the store and look at the tags. Think about how much it would cost you to do that that for all your dealers on a regular basis. Then think about how much more expensive it would be to measure and verify customer service "metrics" for all those same dealers on the same schedule. The expense of monitoring dealer compliance is why manufacturers fall back to the admittedly indirect mechanism of price maintenance.
-hh
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"For every problem, there is a solution that is neat, plausible {alt: simple} and wrong"
- H.L. Mencken (http://www.io.com/~gibbonsb/mencken.html)
Just one simple question. It has to do with Halycon's recent filing requesting that DIR be Trademarked, and the fact that there are already several DIR backplate manufacturers besides Halycon, such as FredT and ScottK...
Mark (words only): DIR
Current Status: Newly filed application, not yet assigned to an examining
attorney.
Date of Status: 2003-04-22
Filing Date: 2003-04-09
Registration Date: (DATE NOT AVAILABLE)
Law Office Assigned: LAW OFFICE 110
Current Location: M1D -TMO Law Office 110 - Docket Clerk
Date In Location: 2003-06-11
- (courtesy of G. Mossman, Esq)
Question: if Halycon is granted the DIR trademark, what's your (Halycon's) Trademark position going to be for existing DIR BP manufacturers such as FredT & ScottK? Are you:
a) Going to promptly licence the TM to them for free?
b) Require them to pay you a licencing fee?
c) Entirely withhold its use from them?
d) Ignore Trademark infringements?
Afterall, the knowledgable diving public already knows that FredT & ScottK make good DIR BP products; its not just exclusively Halycon. Plus, we're talking about "DIR" products that are in production today and being sold.
For better or worse, a DIR Trademark create the temptation for Halycon to use it as legal leveraging to restrict/eliminate their existing competitors in the DIR BP product lines.
But legal wranglings do nothing to improve these products. If anything, restricting the competition ultimately leads to fewer choices and higher prices, which is also ultimately bad for the customer. I trust that you can see my concern.
-hh
that does not actually link, in a solid and verifyable means, to the desired outcome is not an indirect means.
Its a sham at best.
Price maintenance in no way dictates service levels, expertise, or anything else. It might if you carried only one line of gear, all of which was covered by this, and sold no other services that were not covered by such.
But all of these manufacturers that I've seen agreements for thus far in fact demand that you sell things that dilute the strength of the maintained price!
In fact, it can be argued (and I do!) that the imposition of price maintenance has in fact largely caused the "puppy mill" mentality on dive training, in that it has permitted classes to be effectively given away (in some cases literally); effectively allowing the hardware sales to subsidize training, and they all demand that you in fact SELL that training!
Not only does the manufacturer not get the desired "high quality experience" in representation of their gear, they get what is arguably damage to the consumer:shop relationship and to the quality of the customer base!
As for Nine West, yes, they were sued by both a whole lot of states AND the FTC. That is interesting in and of itself, in that an awful lot of state AGs thought what they were doing was illegal - not just the feds - and were confident enough to bring the suit.
This was not just one "wild hair" US attorney - it was also almost all the of state AGs!
Its a sham at best.
Price maintenance in no way dictates service levels, expertise, or anything else. It might if you carried only one line of gear, all of which was covered by this, and sold no other services that were not covered by such.
But all of these manufacturers that I've seen agreements for thus far in fact demand that you sell things that dilute the strength of the maintained price!
In fact, it can be argued (and I do!) that the imposition of price maintenance has in fact largely caused the "puppy mill" mentality on dive training, in that it has permitted classes to be effectively given away (in some cases literally); effectively allowing the hardware sales to subsidize training, and they all demand that you in fact SELL that training!
Not only does the manufacturer not get the desired "high quality experience" in representation of their gear, they get what is arguably damage to the consumer:shop relationship and to the quality of the customer base!
As for Nine West, yes, they were sued by both a whole lot of states AND the FTC. That is interesting in and of itself, in that an awful lot of state AGs thought what they were doing was illegal - not just the feds - and were confident enough to bring the suit.
This was not just one "wild hair" US attorney - it was also almost all the of state AGs!
detroit diver
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In any case, it was NOT precedent setting case law. It was a settlement. Your Nine West arguement is based on what if's, not the law.
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