Why is it that.....

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tommyboy wrote:

See my response above. Essentially, it helps to level the playing field between the big and small resellers with regard to what the public sees in advertising. If I sold through resellers and wanted to protect small dealers from large predatory ones then I would probably refuse to comp any advertising that featured prices below a certain point.
I think there's still some confusion about the MAP. The Sherman Act of 1890 specifically prohibits any action taken to restrict fair trade. For details see:
http://en.wikipedia.org/wiki/Sherman_Antitrust_Act
One aspect of fair trade is the seller's right to set whatever price they like. So, a manufacturer can't have any influence at all on the reseller's pricing. You can't refuse to sell product to a reseller just because you don't like their retail prices. Believe it or not, there are darn few legal reasons for a manufacturer to refuse the sale of product to a reseller. If a reseller meets the basic terms of sale, the manufacturer must honor his purchase orders. Terms of sale include things like credit worthiness, minimum quantities, payment terms, delivery schedule, shipping methods, availability, etc.
MAP is not a price fixing technique. It's an advertising incentive. To bring it full circle to your original question in the thread, all of the dealers who advertise Festool products probably list the same price because they don't want to forfeit the advertising comps. Even if Festool had a flat pricing structure you would still see variations because some dealers can afford lower margins than others.
Ed Bennett snipped-for-privacy@ts-aligner.com http://www.ts-aligner.com
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This does not prevent a company from setting price policies. This prevents companies from conluding to fix prices.

This is not true at all. Mfgs/Distributors can refuse to sell to a company for many reasons, image, the companies method of doing business, past company history, etc. I have personally experienced this in my business, since in my industry, there are some products not made for our industry that actually work quite well, however the mfg refused to sell to us because they did not want their products associated with our industry (firearms/military).
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Locutus wrote:

If they can work it into the terms of sale then they might have a legal leg to stand on. It's a civil matter so you always have the right to sue. I think that this sort of thing happens a lot. If the items are vital to the success of your company and there is only one source and that source has refused to sell to you then your only recourse might be the courts. If I were them, I would be smart enough to give a better reason. "I don't like your industry" wouldn't fly in court.
Ed Bennett snipped-for-privacy@ts-aligner.com http://www.ts-aligner.com
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Price fixing is an anticompetitive practice--it takes two to do that tango. Festool doesn't compete with Festool--they're free to charge whatever they want to for their products and to require their dealers to agree to abide by those prices.
If, for example, Festool, Bosch, Porter Cable, and Dewalt got together and agreed that they'd all sell, say jigsaws, for the same price then _that_ would be price-fixing because you wouldn't be able to get a competing product for a lower price.
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J. Clarke wrote:

No, the first price fixing scheme you pointed out is called vertical price fixing. The second one is called horizontal price fixing. They are both anticompetitive.
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On Wed, 29 Nov 2006 14:00:47 -0800, gibraltorox wrote:

And vertical price fixing is lawful in the US. If you don't like it then take it up with the Supremes. Whining at us about it will do you no good, we have no power to change the law.
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J. Clarke wrote:

I don't think so. Gibraltorox is right. Manufacturers can "suggest" a retail price to resellers, they can even incent resellers to use that price (with advertising co-op funds, discount rates, kickbacks, or other programs), but they cannot dictate the retail price to the dealers (i.e. make it a term of sale). It would restrict competition between dealers. I don't recall ever hearing about any Supreme Court decision like this, can you cite the case?
Ed Bennett snipped-for-privacy@ts-aligner.com http://www.ts-aligner.com
Well into my 16th year of being a manufacturer.
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snipped-for-privacy@ts-aligner.com wrote:

They absolutely can and do. Many golf manufacturers work exactly the same way. If you don't like the practice, don't buy the product.
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Larry Bud wrote:

I'm guessing that you misunderstand the terms of sale. It is illegal to tell a retailer that they must agree to a specific resale price. That is not a valid reason to refuse a purchase order.
Ed Bennett snipped-for-privacy@ts-aligner.com http://www.ts-aligner.com
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snipped-for-privacy@ts-aligner.com wrote:
> I'm guessing that you misunderstand the terms of sale. It is illegal > to tell a retailer that they must agree to a specific resale price. > That is not a valid reason to refuse a purchase order.
Absolutely.
Back in the 58-61 time frame, executives from several of the electrical industry manufacturers had some unpaid vacation time at the graybar hotel courtesy of the US government after being convicted of price fixing.
As a seller, you can refuse to sell to a specific industry, but if you offer to sell to one member of that industry, then you must offer to sell to all members of that industry with the same terms and conditions applying.
Lew
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Lew Hodgett wrote:

I know that you must offer the same terms and conditions to everyone you sell to, but I wasn't aware that you could exclude specific industries. A previous poster complained that they couldn't get specific items because the manufacturer didn't want to sell into their industry (military). It seems like it would be pretty difficult to manage such a thing given the overlap in so many industries. What if I sold my product to an industrial supplier that sold product to a particular industry? Would that qualify or could I just tell all buyers in that industry that they must get it from this supplier?
Ed Bennett snipped-for-privacy@ts-aligner.com http://www.ts-aligner.com
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snipped-for-privacy@ts-aligner.com wrote:

They absolutely can and do. Many golf manufacturers work exactly the same way. If you don't like the practice, don't buy the product.
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Some years ago, manufacturers imposed a policy called "fair trade pricing" (an ironic term if ever there was one) in which they dictated the price at which their products could be sold at retail. I'm pretty sure this practice was ruled illegal; I haven't seen in used in probably 10 years or so. Isn't this the same thing you're calling vertical price fixing?
To reply by e-mail, use jcarlson631 at yahoo dot com
John
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On Wed, 29 Nov 2006 21:47:05 -0500, John wrote:

Look up "State Oil vs. Khan". Ruled that it was legal for oil companies to set maximum prices for their products. That was in late 1997.
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--John
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J. Clarke wrote:

Setting a maximum price is not the same as setting a fixed price (or a minimum price). I can see how the court would rule that this does not restrict competition!
Ed Bennett snipped-for-privacy@ts-aligner.com http://www.ts-aligner.com
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tommyboy wrote:

You can SELL it for whatever you want. You just can't advertise the lower price. The electronics industry often puts "CALL" for a price listing.
Some Garmin GPS dealers have websites that won't display the sale price until you put it in the cart, others have email autoresponders.
Wanna' see manufacturers who are tough on discounters? Look into Apple Computer or Bose. I don't think woodworking vendors have the volume to go through the gyrations electronics vendors have to make the games worthwhile, so they simply comply.
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tommyboy wrote:

Sell for more than your competition it's gouging Sell for less than your compeitition it's dumping Sell for the same as your compeititon, it's price fixing
What's a businessman to do?
The retailer has a contract with the manufacturer. If they don't like the terms, they don't have to sell the product. They are all the same price because it's the minimum, and any retailer knows they won't sell many units if they're priced higher than their competition for exactly the same product.
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Locutus wrote:

There are incentives for retailers to do this. This is one.
Another part of the equation is tacit collusion. Everyone sells at the same price and everyone makes more money. There is an incentive to cheat in the short-run, but that only creates a price war and everyone loses that game.
The last piece of the puzzle is that there is no obligation for any manufacturer to sell anything to anyone. They cannot set the price the retailer will charge, they can however restrict distribution for a variety of reasons, including the need to maintain a certain image to protect their brand name. This is not restraint of trade.
AM Wood
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Don't suppose that to be Maytag with the nautilus units ?
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It will be interesting to see how well Festool will continue to do with their marketing/supply/pricing policies. I would imagine they will be immutable until their market share sags. Then the beanie weenies won't be able to keep themselves away from "fixing" it.
Personally, in my rose colored world, I would like to think that the Festool group is keeping their pricing intact so that they can keep their product line intact and their quality up. (Toldja... rosy.... mmmmmm)
I remember all the manufacturer's beginnings in the price wars by making a lower end product to compete and swallow as much market as possble. I remember when Rockwell first made their plastic cased tools; when Porter Cable (separate at that time) responded with their plastic crap. And the same with all of them. To me (I am treading as lightly as possible here as I know how proud many are of their tools - no offense intended) most of today's tools are little more than adequate, if that. I think all the crappy tools started with the manufacturing companies getting involved in price wars intstead of focusing on product. With that in mind, it seemed like the companies were daring each other to come out with worse and worse quality tools. Most of the absolute trash has disappeared, but most of the premier tools aren't a spot on the ass of the ones I was using 30 - 35 years ago. We kept them greased, put in new bearings and switches every once and while and we were set.
I guess the offsetting factor is that you can buy an Milwaukee hole shooter for the same price I bought my first one for in 1975. Later that year I ditched my Craftsman circular saw and purchased a Rockwell 315 with metal box, rip guide and a tube of grease for $125. So from that standpoint, that is good. Tools are plentiful and their prices haven't even kept up with inflation.
Maybe, just maybe, Festool want to establish themselves in America (long established in Europe) as a quality tool manufacturer. In order to do that, you have to make a good tool, provide quality service after the sale, and keep up with the needs of your target audience. I am wondering if they are going to go the Lie-Nieson (sp?) route, or the Bridge City tool route and just make their tools available as they see fit in order to keep the quality high. Hope so. All that takes money, and maybe if they make enough they will keep ploughing it back into the company and products. Who knows...
Robert
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