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Bargain hunters
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Consumer groups are launching a campaign on EBay to get around the Supreme Court's 2007 ruling making minimum price agreements between retailers and manufacturers once again illegal (sorry). Predictibly, this is being at least partly astroturfed by the retailers, who want to be able to compete on price.
I have a bunch of thoughts on this, but no firm conclusion as yet:
1. I'm not sure how much this will actually affect the final price of the goods. It may just push the competition back to the manufacturer level. On the other hand, one could argue that since there are relatively few companies in a given category of good, they'll be able to collude more effectively than the relatively fragmented retail industry.
2. Allowing agreements in restraint of trade is generally a bad idea--but unlike, say, deals between Standard Oil and the railroad trust, these don't actually impact third parties. I'm not sure there's a principled reason to forbid entities from writing a minimum price for the product they make into a private contract.
3. This may actually broaden the distribution of some products. Bose won't sell their products with any discounting, though they've been weakening that slightly lately with a few coupons here and there. So if they can't set a minimum price--indeed, a price--they won't deal with a distributor, but pull back into their own stores. That makes it harder for consumers to find their products.
Of course, I know many of my audiophile friends would argue that this is a feature, rather than a bug.
4. The groups behind this are itching to prove that this has raised prices by commissioning a study. Expect that study to be very, very, VERY carefully timed to capture the broad inflation earlier in 2008, while neatly slicing out the price collapse in goods like LCD televisions that followed the financial crisis.
5. Distributors used to love agreements like this, which let them compete on customer service rather than price. What's changed? I presume we're seeing a fracture between high-end/bricks and mortar retailers, who are happy to end price competition, and internet vendors. I'd also wager that Mom-and-Pop stores like the minimum price agreements, while Best Buy et. al. want to use their massive purchasing power to crush smaller competitors. Still, I'm a little surprised.
I have a bunch of thoughts on this, but no firm conclusion as yet:
1. I'm not sure how much this will actually affect the final price of the goods. It may just push the competition back to the manufacturer level. On the other hand, one could argue that since there are relatively few companies in a given category of good, they'll be able to collude more effectively than the relatively fragmented retail industry.
2. Allowing agreements in restraint of trade is generally a bad idea--but unlike, say, deals between Standard Oil and the railroad trust, these don't actually impact third parties. I'm not sure there's a principled reason to forbid entities from writing a minimum price for the product they make into a private contract.
3. This may actually broaden the distribution of some products. Bose won't sell their products with any discounting, though they've been weakening that slightly lately with a few coupons here and there. So if they can't set a minimum price--indeed, a price--they won't deal with a distributor, but pull back into their own stores. That makes it harder for consumers to find their products.
Of course, I know many of my audiophile friends would argue that this is a feature, rather than a bug.
4. The groups behind this are itching to prove that this has raised prices by commissioning a study. Expect that study to be very, very, VERY carefully timed to capture the broad inflation earlier in 2008, while neatly slicing out the price collapse in goods like LCD televisions that followed the financial crisis.
5. Distributors used to love agreements like this, which let them compete on customer service rather than price. What's changed? I presume we're seeing a fracture between high-end/bricks and mortar retailers, who are happy to end price competition, and internet vendors. I'd also wager that Mom-and-Pop stores like the minimum price agreements, while Best Buy et. al. want to use their massive purchasing power to crush smaller competitors. Still, I'm a little surprised.
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