Let's see what the FTC has to say about vertical price restraints in the biz.

[earl]

An explicit price constraint meaning here is a number, you cannot sell below this number?

My LDS even tells its customers that -- I get a sale postcard; on the postcard it says that, due to manufacturer constraints, it can't offer certain brands of gear at a sale price.

-earl-

 

[earl]

Oh, and this seems relevant, but may have been mentioned already.

Genesis, do you mind if I have a copy of you letter to mail to my congressmen and perhaps the FTC as well?

-earl-

 

[Genesis]

No problem in the letter copy....

I'm writing another one to denote what I have in my hot little hands now, and will post it here. Feel free to pick it up when I do and run with it.

 

[King_Neptune]

Just kind of curious on how this one was going...

=-)

 

[Genesis]

Whether its ILLEGAL is being debated and varies from state-to-state, as the law varies from state-to-state.

On a federal level its yet another matter.

The US FTC doesn't comment on what they're doing as a matter of policy. You find out if they decide to run with something when there are charges filed or someone signs a consent agreement.

Most state AGs have the same kind of policy.

The other issue is, of course, whether these organizations think there is enough economic impact to bother with it. That's a much tougher call - they don't go after everything they could possibly chase, even if they DO think there's a case there.

Its a waiting game at this point....

I've got multiple 'major' manufacturer's documents on these policies, as have some others. We'll see what comes of it...

 

[MikeFerrara]

I am not an expert but I don't believe the way it's done is illegal. I can do what I want but if a manufacturer doesn't like it they can cut me off. They even try to tell us how to teach and ehat else we can sell and how much. they can't force us but they can cut us off. The insurance companies won't back anything that isn't backed by the manufacturer. That is why we don't buy anywhere except from the manufacturer and we don't service anything without authorization from the manufacturer. Price constraints (If you want to call them that are not (at least not the only thing) hurting the LDS. The most damaging thing is how it limits the range of products and services we can offer at any price.

A diver buys a inexpensive reg online. They come to me for service. I can't service it because I am not an authorized dealer and service center for that brand. A diver comes in with an Aqualung reg for service. I cant service it because I can't afford an aqualung dealership. The same is true for Scubapro. We would love to offer service on all brands but we can't.

I can find parts and I can find manuals but the insurance company will drop us like a bad habit. The same is true for buying (for resale) anyplace other than the manufacturer.
It isn't price fixing, it's extortion.

 

[Genesis]

Demanding money "or else" is extortion by definition

The question is whether or not its ILLEGAL.

It may be, and it may not be. In the EU this kind of thing is flat-out against the law. In the US there are some exceptions to the anti-trust laws, many of them developed over the years by various courts and case law (rather than by statute), and as such its a LOT more complicated to figure out whether something that looks like its illegal on the face of a staute really is or is not. If you get close enough to the gray area the AG may not go after it even if it may be against the law; these guys are all about percentages and wins, and don't like to lose - they have limited resources, you see..

One of the things that I expressed to the Florida AG's office, Mike, was a complaint that you proffered here - and which made a lot of sense to me. That was how these actions and the machinations that some use to get around it serve as an anti-competitive effort on other, related lines of business.

For example, you sell a training class for $500. The guy down the street sells $2,000 worth of gear to a diver, all of which is price-restrained. To get around this he "gives away" the training that you charge $500 for at a cost of zero!

What he's done, effectively, is debased the value of YOUR training, and he did so by what looks to be an unfair competitive action. Its an unfair act because unless you also engage in price-fixing to artificially crank up YOUR margins on hardware sales you are simply unable to meet that "price" on the training.

In effect you are coerced by his actions to hide behind the same kind of price-support system, and that coercion is (or darn well ought to be) improper.

I don't know if that goes anywhere, but its one of the effects of the system that exists today that I dislike greatly - perhaps even more than the other aspects of this - because it discourages "stand-alone" training sales at their true value.

 

[MikeFerrara]

It would be hard to disagree with that post.

 

[Genesis]

"Think outside the box" on the board for a potential solution...

 

[Arnaud]

Guys, I've just read with amazement your passionate exchanges. While it seems to me nobody wants to see their LDS go out of business, there is a serious price gap between the US and Europe. A DUI 50/50 dry suit sells for $2400 in the US and $1500 in UK though it's manufactured in San Diego. A Scubapro MK25/S600 sells for $550 in the US and about $375 before taxes in France.

This shows that shipping charges have nothing to do with the problem. As to the argument that LDS will go out of business if the pricing rules are changed, I only see one answer: there's plenty of LDS in Europe. They sell equipment, air and training for 30% to 50% less than in the US.

The diving community tends to have more disposable income and to travel more than the average. We also tend to research things more. With the expansion of the Internet, information and trades are global. Ergo the expanding awareness that you're being screwed by at least 30 cents each time you spend a buck on scuba gear in the US. If I have the option to buy something from a legit source at a significant discount, I'm afraid I will. And I have a hunch that most will, too.

I don't know about the subtlety of the anti-trust laws. I do know about market laws, supply and demand, parallel imports and bootlegging. This is what's going on and there's no reason why it should stop if the situation were to remain the same.

Padi has some interesting stats on their website (http://padi.com/english/common/padi/statistics/1.asp). They certified 855,000 individuals in 2000 vs. 107,000 in 1980. Looks like an expanding market to me. Lower margins and bigger volume. Ever heard of that business model? The bigger the divers' market gets, the more the big chains will get into that business. And the big chains have ways of getting their suppliers on their knees…

In general, the mom and pop store model is soon to be listed on the WWF preservation list next to the whales and the elephants. Seen a lot of new independent butchers or pharmacies these days? One reason I see this not happening to LDS in Europe is that their prices are competitive. I haven't found any major price difference between European brick and mortars and Internet-based businesses. In fact, Leisure Pro's prices are pretty much in synch with any European LDS.

In the US, LDS will probably go out of business like most independent retail businesses, unless they are able to change their practices and fight their suppliers to achieve it. And it's obvious that the manufacturers' restrictions on Internet sales are not going to last long. Silent movies disappeared fairly quickly after the "Jazz Singer" was made…

As to paying $25 for air, that sounds like the safest way to accelerate the decaying process.