Manufacturer sells to retailer at wholesale price. Retailer sells to public at retail price.
If the Manufacturer sells a million units to retailers at a given wholesale price, enforcing a retail price does not net any more money for the manufacturer. So how is setting a minimum selling price going to help Samsung and Sony?
(OTOH, if they're talking about discounting of the wholesale price, then they're not going to really be setting a minimum price. Rather, all they have to do is offer smaller discounts to the retailer. But that's apparently not what they're talking about).
Here's the first paragraph of the WSJ article:
"Sony Corp. and Samsung Electronics Co. are trying to force retailers to rein in discounts on televisions, a tactic aimed at preserving profit margins that may also help protect chains such as Best Buy Co. and Target Corp. from cutthroat online competition."
So now we have a second inconsistency. How does setting a minimum price help to protect brick and mortar stores? If anything, that makes them less competitive rather than more. The entire story makes no sense.
There are two fundamental problems:
1. The TV industry has matured. The differences between TVs are trivial for most viewers. I really couldn't care less if my TV does 120 Hz or 240 Hz. I won't see the difference (and even if I could just barely discern it, I'm not going to actively be looking for it when watching a movie).
2. Online sales have a big advantage over brick and mortar stores. Lower inventories, lower overheads, and (often) no sales tax charged to the customer. Brick and mortar stores have become the retail showroom for Amazon and other online retailers - Best Buy gets all of the expense but none of the revenues.
Until they find a way to address those two issues, their problems aren't going to go away.
Spot on.
Ironically, if this succeeds, it provides (sort of) a price floor for Apple's TV!
This minimum price should apply to online retailers, as well. Though it should help them more as they should have lower overhead costs than a brick & mortar store so a higher minimum price would generate higher profit margins for them.
OK. That makes sense. I didn't think of it that way.
Not sure if joking, but it's not price fixing, they are enforcing minimum retail pricing on their OWN products, not setting a bar across different companies. It's the same reason you don't see large discounts on new Apple products no matter the store.
Hey Sony, I bet you could fix those margins if you made a smart TV with a great interface and content, now who else is working on that?
It may or may not be price fixing. If Sony and Samsung had discussions along these lines, then it could well involve collusion to fix prices. OTOH, if they arrived at the pricing independently, it's not an issue.
Enforcing minimum retail pricing is fraught with risks. It can be done, but it's not easy and needs to be handled very carefully. Fortunately, the precedent is well-established and the rules are pretty well known.
My understanding from a Sony retailer is that Sony is chopping the upfront margin so resellers, in an efforts to make any money, will sell at MSRP. But the reseller then has the opportunity to "earn" additional margin back each quarter based on a number of factors - the purchase and active display of demo units, marketing participation, overall volume, etc.
Not sure how accurate this is, but it makes some sense
If that's what happened, it absolutely makes sense. They are free to raise the prices they charge to resellers at any time - as long as they didn't collude to do so. There are, however, two problems with this:
1. Amazon still has a major cost advantage, so it's not clear how it helps Best Buy. In fact, it will probably hurt. For price sensitive customers, Amazon will always be lower than Best Buy. For customers who are not as sensitive to price but prefer to buy from a local store (such as some people who absolutely refuse to buy via the Internet), Best Buy's margins could be reduced which would certainly not help them.
2. Of course, raising the wholesale price will lead to an increase in the retail price (or, more accurately, a reduction in the amount of discounting). That will cost Sony and Samsung some sales. They need to hope that the increased margins more than make up for the lost sales.
I wonder how long it's going to take these people to figure out that the way to become profitable is to offer a product that's so good that consumers want to buy it enough that price is not the main factor?
Price fixing is illegal the last time that I checked.
Yes and no. There are rules by which setting prices is in fact legal. One is that you can only deal with your own prices. The headline makes it sound like these two companies are working in collusion but the article makes it sound like no, they just happen to be using the same policy, their prices could be way different. That's not really an illegal play. Just like Apple saying that no one can sell product X for less than $Y is not a no no (unless that price is way over what they are selling in their own stores).
Price fixing in the legal sense is companies setting a price together. Like back in the 80s and 90s when gas stations were found guilty. They were agreeing to keep their prices within a 5 cent range of each other and were apparently getting together to decide what each neighborhood could bear for prices. Even if the gas cost them $1 a gallon if they were in an area like Beverly Hills where they knew people could pay $5 a gallon, that's what they charged. What all of them charged.
This kind of game is what the publishers are being accused of with the whole Apple DOJ thing. There's evidence that the publishers at least banned together to get rid of Amazon having control and the whole $9.99 thing without Apple being a player, but nothing that they actually set specific prices which will make the case more difficult to actually determine any charges. So it remains to be seen if the DOJ will be successful with their whole "we know how much books should be sold for" banter or not.
"Sony Corp. and Samsung Electronics Co. are trying to force retailers to rein in discounts on televisions, a tactic aimed at preserving profit margins that may also help protect chains such as Best Buy Co. and Target Corp. from cutthroat online competition."
So now we have a second inconsistency. How does setting a minimum price help to protect brick and mortar stores? If anything, that makes them less competitive rather than more. The entire story makes no sense.
There are two fundamental problems:
1. The TV industry has matured. The differences between TVs are trivial for most viewers. I really couldn't care less if my TV does 120 Hz or 240 Hz. I won't see the difference (and even if I could just barely discern it, I'm not going to actively be looking for it when watching a movie).
2. Online sales have a big advantage over brick and mortar stores. Lower inventories, lower overheads, and (often) no sales tax charged to the customer. Brick and mortar stores have become the retail showroom for Amazon and other online retailers - Best Buy gets all of the expense but none of the revenues.
Until they find a way to address those two issues, their problems aren't going to go away.
it protects them by not letting online stores sweep in and get all the sales. Same as when they started setting mandatory street dates for big name albums, movies, books. Keeps the playing field even.
The last thing Sony and Samsung need is some company like Best Buy getting sick of the online store tricks and demanding lower wholesale pricing or they will stop carrying any products from the company. This is the kind of thing S&S are trying to avoid.
Also by leveling the playing field that whole showroom for Amazon gig lessens
it protects them by not letting online stores sweep in and get all the sales. Same as when they started setting mandatory street dates for big name albums, movies, books. Keeps the playing field even.
The last thing Sony and Samsung need is some company like Best Buy getting sick of the online store tricks and demanding lower wholesale pricing or they will stop carrying any products from the company. This is the kind of thing S&S are trying to avoid.
Also by leveling the playing field that whole showroom for Amazon gig lessens
How does it help Best Buy?
Let's say that Best Buy buys a $1,000 TV for $800. They put it on sale at $900. Amazon buys the same TV for $800 and sells it for $850.
With the new pricing policy, Best Buy and Amazon both have to pay $900 for a $1,000 TV. Amazon sells it for $950 and Best Buy sells it for $1,000.
No matter what Sony and Samsung do, Amazon has a huge cost advantage over best buy and has shown a willingness to use it. Raising prices to the stores doesn't take away Amazon's cost advantage.
I remember Apple and others getting sued for having SRP's in the mid 80's. Suggested Retail Prices were illegal.
No, they're not. Not even close. In fact, there are times when manufacturer's suggested retail price MUST be displayed (by law) - such as autos.
ENFORCING suggested retail prices can be illegal if you do it improperly, but it can also be done if you handle it correctly. But with the clarifications that people have offered above, it appears that Sony and Samsung may not be enforcing SRPs at all - they may just be setting their wholesale price high enough that it would be difficult for retailers to sell under MSRP-and that's perfectly legal as long as they didn't collude with the competitors to reach that decision.
Not that this is the worst problem to have in life ... but I'm currently using a few years old LCD 52" Sony and really want to upgrade to a 60" but I have been waiting and waiting to see what Apple does. Now I wonder if cheap 60" will be a thing of the past ... I was looking at the Sharp Aquos 240 KHz 60" LED in time for the Olympics.. (I refuse to buy a Samsung ) and I assume Sharp would join in. If prices rise or rather special deals vanish I may as well just keep on waiting a while ...
Get a 60" plasma, Panasonic makes soHume nice ones. Better picture, deeper blacks, and the new plasmas actually outlive LCD/LED panels.
Apple don't have price "fixing". They don't need it since most macs/ipads are sold in the Apple store.
The Apple store buys the hardware for the same price as retailer does. The different is that Appel store don't have to make a profit. They sell Apple hardware with about 9-11% margins.
This puts pressure on Apple retailers. If they price higher then 9-11% they are more expensive then Apple.
Usually stores make 30-40% on stuff they sell. That is one of the reason why Apple have high profits, but are not much more expensive then other brands.
The crazy thing is stores that sell stuff at a loss. Great for consumers (short term). But longterm its bad since innovative companies gets killed just because some can take huge losses. (this is how MSFT for example killed Netscape).
Sony/Samsung needs to have their great version of the Apple store.
Apple don't have price "fixing". They don't need it since most macs/ipads are sold in the Apple store.
The Apple store buys the hardware for the same price as retailer does. The different is that Appel store don't have to make a profit. They sell Apple hardware with about 9-11% margins.
This puts pressure on Apple retailers. If they price higher then 9-11% they are more expensive then Apple.
Usually stores make 30-40% on stuff they sell. That is one of the reason why Apple have high profits, but are not much more expensive then other brands.
The crazy thing is stores that sell stuff at a loss. Great for consumers (short term). But longterm its bad since innovative companies gets killed just because some can take huge losses. (this is how MSFT for example killed Netscape).
Sony/Samsung needs to have their great version of the Apple store.
Keeping in mind that Apple has far more employees per square foot than anyone I know and tends to have very expensive retail space, if they can make 22% NET on their discount levels, other companies should be able to do so, as well.
But the plasma uses so much energy that you'll pay a lot more for the privilege.
Besides, 'outlive LCD/LED panels' is a meaningless advantage - because very, very few people actually wear out an LCD or LED panel.
Not even close. The operating margin of Apple's retail stores is 22% (http://seekingalpha.com/article/317167-impressive-margins-for-apple-retail-stores). And that's the NET number after paying all expenses. To achieve that net figure, gross margins must be 30% or more.
Keeping in mind that Apple has far more employees per square foot than anyone I know and tends to have very expensive retail space, if they can make 22% NET on their discount levels, other companies should be able to do so, as well.
The higher energy price will be offset by the cheaper price of the plasma.
Apple can do this because they are producing innovative products where the consumer cannot go anywhere else to purchase. If you want the Apple experience, you want the Apple experience. In LCD land, everyone pretty much has the same thing. So this will be a big opportunity for the lower end sets to begin stepping up their game and taking the lion's share of the market. Sony's reputation as being the number one set in the industry has long been tarnished when trying to justify their higher price points, and Samsung continues to face higher competitive pressures. I think Samsung will come out a little better than Sony in comparison, but getting in a fender bender vs. a full head on collision still has its parallels.
Let's say that Best Buy buys a $1,000 TV for $800. They put it on sale at $900. Amazon buys the same TV for $800 and sells it for $850.
With the new pricing policy, Best Buy and Amazon both have to pay $900 for a $1,000 TV. Amazon sells it for $950 and Best Buy sells it for $1,000.
No matter what Sony and Samsung do, Amazon has a huge cost advantage over best buy and has shown a willingness to use it. Raising prices to the stores doesn't take away Amazon's cost advantage.
I think you are misunderstanding - Or maybe I am? In any case, how I'm understanding the article:
A TV is priced at $800 for whoever wants to buy it. Best buy puts it on the shelf for $1000, and Amazon sells it for $900. If the TV manufacturer sets the minimum price at $1000 (while still selling BB/Amazon the tv for $800) it means that Amazon no longer has the advantage of selling it below Best Buy's price. So both Best Buy and Amazon will sell the TV for $1000, and the price difference now is just tax, shipping, etc. It makes it so brick and mortor stores can compete better with online retailers.
Slightly misleading headline. Makes it sound like Samsung and Sony are enforcing the same minimum pricing, which is price fixing and is expressly illegal.
Yes, from the standpoint of the consumer electronics industry -- it's misleading, because it leads people to EXACTLY what is actually going on - and that's pretty sloppy in marketing circles.
No, they're not. Not even close. In fact, there are times when manufacturer's suggested retail price MUST be displayed (by law) - such as autos.
ENFORCING suggested retail prices can be illegal if you do it improperly, but it can also be done if you handle it correctly. But with the clarifications that people have offered above, it appears that Sony and Samsung may not be enforcing SRPs at all - they may just be setting their wholesale price high enough that it would be difficult for retailers to sell under MSRP-and that's perfectly legal as long as they didn't collude with the competitors to reach that decision.
That sounds right to me.... however, when you look at how everyone else is going to KILL THEM ON PRICING -- it's very likely they will unofficially collude to raise prices. Either that, or they just HOPE the other vendors will follow suite.
So, they will probably do it above board the way you say -- and then behind the scenes push other companies to "wink, wink" see the light.
My last experience with Sony means I will never buy Sony again. I have considered Samsung or Vizio for my next purchase. This sort of makes that decision easier. I am not sure what all this means but it for sure it is not good for consumers, weather it is price fixing or not.
I think you are misunderstanding - Or maybe I am? In any case, how I'm understanding the article:
A TV is priced at $800 for whoever wants to buy it. Best buy puts it on the shelf for $1000, and Amazon sells it for $900. If the TV manufacturer sets the minimum price at $1000 (while still selling BB/Amazon the tv for $800) it means that Amazon no longer has the advantage of selling it below Best Buy's price. So both Best Buy and Amazon will sell the TV for $1000, and the price difference now is just tax, shipping, etc. It makes it so brick and mortor stores can compete better with online retailers.
If you read the responses, it is much more likely that Sony and Samsung would be increasing the wholesale price. Increasing the retail price without changing the wholesale price wouldn't benefit Sony or Samsung a bit. In fact, it would hurt them since they'd sell less units. If the wholesale price is raised, they might possibly make enough revenue on each sale to make up for the lost sales.
Furthermore, simply setting a retail price of $1,000 and enforcing it is more likely than not illegal. There are ways around that, but they're not easy or foolproof. You can't simply demand that your retailers sell for a certain price.
This isn't as simple as it seems. Such decisions always have an element of collusion in them. For instance - if only Sony did this, Sony sales would suffer as customers bought cheaper Samsung TVs. The only way to avoid this, is to ensure your competitors also follow the same policy.
Of course, just because the decisions came at same time does not mean the companies sat together and colluded. For instance Best Buy might have held a gun to their heads and forced them to impose such a policy, otherwise BB would stop carrying their products. In such a case the companies need not collude.
Irrespective of whether this action is enforced by Sony & Samsung or initiated by Best Buy, it is still anti-competitive. For that matter, even Apple's policy of enforcing a MSRP originally, was anti competitive. Even major designer houses have found it difficult to enforce a Minimum Price because it is anti competitive.
Why is this anti competitive? For the simple reason that it handicaps efficient retailers who can sell at lower prices and still make profits and protects the inefficient guys. Could potentially drive the efficient guys out of business by handicapping them this way.
Comments
Quote:
Originally Posted by jragosta
Yes, but something doesn't add up.
Manufacturer sells to retailer at wholesale price. Retailer sells to public at retail price.
If the Manufacturer sells a million units to retailers at a given wholesale price, enforcing a retail price does not net any more money for the manufacturer. So how is setting a minimum selling price going to help Samsung and Sony?
(OTOH, if they're talking about discounting of the wholesale price, then they're not going to really be setting a minimum price. Rather, all they have to do is offer smaller discounts to the retailer. But that's apparently not what they're talking about).
Here's the first paragraph of the WSJ article:
"Sony Corp. and Samsung Electronics Co. are trying to force retailers to rein in discounts on televisions, a tactic aimed at preserving profit margins that may also help protect chains such as Best Buy Co. and Target Corp. from cutthroat online competition."
So now we have a second inconsistency. How does setting a minimum price help to protect brick and mortar stores? If anything, that makes them less competitive rather than more. The entire story makes no sense.
There are two fundamental problems:
1. The TV industry has matured. The differences between TVs are trivial for most viewers. I really couldn't care less if my TV does 120 Hz or 240 Hz. I won't see the difference (and even if I could just barely discern it, I'm not going to actively be looking for it when watching a movie).
2. Online sales have a big advantage over brick and mortar stores. Lower inventories, lower overheads, and (often) no sales tax charged to the customer. Brick and mortar stores have become the retail showroom for Amazon and other online retailers - Best Buy gets all of the expense but none of the revenues.
Until they find a way to address those two issues, their problems aren't going to go away.
Spot on.
Ironically, if this succeeds, it provides (sort of) a price floor for Apple's TV!
Quote:
Originally Posted by hittrj01
This isn't price fixing. They are only enforcing a policy, the same policy that Apple has, actually.
By that logic, the case about iBooks price fixing should be thrown out. After all, the publishers are just carrying out Apple's pricing policy
OK. That makes sense. I didn't think of it that way.
It may or may not be price fixing. If Sony and Samsung had discussions along these lines, then it could well involve collusion to fix prices. OTOH, if they arrived at the pricing independently, it's not an issue.
Enforcing minimum retail pricing is fraught with risks. It can be done, but it's not easy and needs to be handled very carefully. Fortunately, the precedent is well-established and the rules are pretty well known.
If that's what happened, it absolutely makes sense. They are free to raise the prices they charge to resellers at any time - as long as they didn't collude to do so. There are, however, two problems with this:
1. Amazon still has a major cost advantage, so it's not clear how it helps Best Buy. In fact, it will probably hurt. For price sensitive customers, Amazon will always be lower than Best Buy. For customers who are not as sensitive to price but prefer to buy from a local store (such as some people who absolutely refuse to buy via the Internet), Best Buy's margins could be reduced which would certainly not help them.
2. Of course, raising the wholesale price will lead to an increase in the retail price (or, more accurately, a reduction in the amount of discounting). That will cost Sony and Samsung some sales. They need to hope that the increased margins more than make up for the lost sales.
I wonder how long it's going to take these people to figure out that the way to become profitable is to offer a product that's so good that consumers want to buy it enough that price is not the main factor?
Quote:
Originally Posted by Bilbo63
Price fixing is illegal the last time that I checked.
Yes and no. There are rules by which setting prices is in fact legal. One is that you can only deal with your own prices. The headline makes it sound like these two companies are working in collusion but the article makes it sound like no, they just happen to be using the same policy, their prices could be way different. That's not really an illegal play. Just like Apple saying that no one can sell product X for less than $Y is not a no no (unless that price is way over what they are selling in their own stores).
Price fixing in the legal sense is companies setting a price together. Like back in the 80s and 90s when gas stations were found guilty. They were agreeing to keep their prices within a 5 cent range of each other and were apparently getting together to decide what each neighborhood could bear for prices. Even if the gas cost them $1 a gallon if they were in an area like Beverly Hills where they knew people could pay $5 a gallon, that's what they charged. What all of them charged.
This kind of game is what the publishers are being accused of with the whole Apple DOJ thing. There's evidence that the publishers at least banned together to get rid of Amazon having control and the whole $9.99 thing without Apple being a player, but nothing that they actually set specific prices which will make the case more difficult to actually determine any charges. So it remains to be seen if the DOJ will be successful with their whole "we know how much books should be sold for" banter or not.
Quote:
Originally Posted by jragosta
Here's the first paragraph of the WSJ article:
"Sony Corp. and Samsung Electronics Co. are trying to force retailers to rein in discounts on televisions, a tactic aimed at preserving profit margins that may also help protect chains such as Best Buy Co. and Target Corp. from cutthroat online competition."
So now we have a second inconsistency. How does setting a minimum price help to protect brick and mortar stores? If anything, that makes them less competitive rather than more. The entire story makes no sense.
There are two fundamental problems:
1. The TV industry has matured. The differences between TVs are trivial for most viewers. I really couldn't care less if my TV does 120 Hz or 240 Hz. I won't see the difference (and even if I could just barely discern it, I'm not going to actively be looking for it when watching a movie).
2. Online sales have a big advantage over brick and mortar stores. Lower inventories, lower overheads, and (often) no sales tax charged to the customer. Brick and mortar stores have become the retail showroom for Amazon and other online retailers - Best Buy gets all of the expense but none of the revenues.
Until they find a way to address those two issues, their problems aren't going to go away.
it protects them by not letting online stores sweep in and get all the sales. Same as when they started setting mandatory street dates for big name albums, movies, books. Keeps the playing field even.
The last thing Sony and Samsung need is some company like Best Buy getting sick of the online store tricks and demanding lower wholesale pricing or they will stop carrying any products from the company. This is the kind of thing S&S are trying to avoid.
Also by leveling the playing field that whole showroom for Amazon gig lessens
I remember Apple and others getting sued for having SRP's in the mid 80's. Suggested Retail Prices were illegal.
That's going to sell a lot of Visio HDTVs!
How does it help Best Buy?
Let's say that Best Buy buys a $1,000 TV for $800. They put it on sale at $900. Amazon buys the same TV for $800 and sells it for $850.
With the new pricing policy, Best Buy and Amazon both have to pay $900 for a $1,000 TV. Amazon sells it for $950 and Best Buy sells it for $1,000.
No matter what Sony and Samsung do, Amazon has a huge cost advantage over best buy and has shown a willingness to use it. Raising prices to the stores doesn't take away Amazon's cost advantage.
No, they're not. Not even close. In fact, there are times when manufacturer's suggested retail price MUST be displayed (by law) - such as autos.
ENFORCING suggested retail prices can be illegal if you do it improperly, but it can also be done if you handle it correctly. But with the clarifications that people have offered above, it appears that Sony and Samsung may not be enforcing SRPs at all - they may just be setting their wholesale price high enough that it would be difficult for retailers to sell under MSRP-and that's perfectly legal as long as they didn't collude with the competitors to reach that decision.
Get a 60" plasma, Panasonic makes soHume nice ones. Better picture, deeper blacks, and the new plasmas actually outlive LCD/LED panels.
Apple don't have price "fixing". They don't need it since most macs/ipads are sold in the Apple store.
The Apple store buys the hardware for the same price as retailer does. The different is that Appel store don't have to make a profit. They sell Apple hardware with about 9-11% margins.
This puts pressure on Apple retailers. If they price higher then 9-11% they are more expensive then Apple.
Usually stores make 30-40% on stuff they sell. That is one of the reason why Apple have high profits, but are not much more expensive then other brands.
The crazy thing is stores that sell stuff at a loss. Great for consumers (short term). But longterm its bad since innovative companies gets killed just because some can take huge losses. (this is how MSFT for example killed Netscape).
Sony/Samsung needs to have their great version of the Apple store.
But the plasma uses so much energy that you'll pay a lot more for the privilege.
Besides, 'outlive LCD/LED panels' is a meaningless advantage - because very, very few people actually wear out an LCD or LED panel.
Not even close. The operating margin of Apple's retail stores is 22% (http://seekingalpha.com/article/317167-impressive-margins-for-apple-retail-stores). And that's the NET number after paying all expenses. To achieve that net figure, gross margins must be 30% or more.
Keeping in mind that Apple has far more employees per square foot than anyone I know and tends to have very expensive retail space, if they can make 22% NET on their discount levels, other companies should be able to do so, as well.
The higher energy price will be offset by the cheaper price of the plasma.
Apple can do this because they are producing innovative products where the consumer cannot go anywhere else to purchase. If you want the Apple experience, you want the Apple experience. In LCD land, everyone pretty much has the same thing. So this will be a big opportunity for the lower end sets to begin stepping up their game and taking the lion's share of the market. Sony's reputation as being the number one set in the industry has long been tarnished when trying to justify their higher price points, and Samsung continues to face higher competitive pressures. I think Samsung will come out a little better than Sony in comparison, but getting in a fender bender vs. a full head on collision still has its parallels.
Quote:
Originally Posted by jragosta
How does it help Best Buy?
Let's say that Best Buy buys a $1,000 TV for $800. They put it on sale at $900. Amazon buys the same TV for $800 and sells it for $850.
With the new pricing policy, Best Buy and Amazon both have to pay $900 for a $1,000 TV. Amazon sells it for $950 and Best Buy sells it for $1,000.
No matter what Sony and Samsung do, Amazon has a huge cost advantage over best buy and has shown a willingness to use it. Raising prices to the stores doesn't take away Amazon's cost advantage.
I think you are misunderstanding - Or maybe I am? In any case, how I'm understanding the article:
A TV is priced at $800 for whoever wants to buy it. Best buy puts it on the shelf for $1000, and Amazon sells it for $900. If the TV manufacturer sets the minimum price at $1000 (while still selling BB/Amazon the tv for $800) it means that Amazon no longer has the advantage of selling it below Best Buy's price. So both Best Buy and Amazon will sell the TV for $1000, and the price difference now is just tax, shipping, etc. It makes it so brick and mortor stores can compete better with online retailers.
Quote:
Originally Posted by Mike Barriault
Slightly misleading headline. Makes it sound like Samsung and Sony are enforcing the same minimum pricing, which is price fixing and is expressly illegal.
Yes, from the standpoint of the consumer electronics industry -- it's misleading, because it leads people to EXACTLY what is actually going on - and that's pretty sloppy in marketing circles.
Quote:
Originally Posted by jragosta
No, they're not. Not even close. In fact, there are times when manufacturer's suggested retail price MUST be displayed (by law) - such as autos.
ENFORCING suggested retail prices can be illegal if you do it improperly, but it can also be done if you handle it correctly. But with the clarifications that people have offered above, it appears that Sony and Samsung may not be enforcing SRPs at all - they may just be setting their wholesale price high enough that it would be difficult for retailers to sell under MSRP-and that's perfectly legal as long as they didn't collude with the competitors to reach that decision.
That sounds right to me.... however, when you look at how everyone else is going to KILL THEM ON PRICING -- it's very likely they will unofficially collude to raise prices. Either that, or they just HOPE the other vendors will follow suite.
So, they will probably do it above board the way you say -- and then behind the scenes push other companies to "wink, wink" see the light.
If you read the responses, it is much more likely that Sony and Samsung would be increasing the wholesale price. Increasing the retail price without changing the wholesale price wouldn't benefit Sony or Samsung a bit. In fact, it would hurt them since they'd sell less units. If the wholesale price is raised, they might possibly make enough revenue on each sale to make up for the lost sales.
Furthermore, simply setting a retail price of $1,000 and enforcing it is more likely than not illegal. There are ways around that, but they're not easy or foolproof. You can't simply demand that your retailers sell for a certain price.
Of course, just because the decisions came at same time does not mean the companies sat together and colluded. For instance Best Buy might have held a gun to their heads and forced them to impose such a policy, otherwise BB would stop carrying their products. In such a case the companies need not collude.
Irrespective of whether this action is enforced by Sony & Samsung or initiated by Best Buy, it is still anti-competitive. For that matter, even Apple's policy of enforcing a MSRP originally, was anti competitive. Even major designer houses have found it difficult to enforce a Minimum Price because it is anti competitive.
Why is this anti competitive? For the simple reason that it handicaps efficient retailers who can sell at lower prices and still make profits and protects the inefficient guys. Could potentially drive the efficient guys out of business by handicapping them this way.