Could MAP be considered an antitrust violation?

[gbroadbridge]

Its not price fixing.....has nothing to do with the actual end cost.....matter of fact, the ACCC almost approved it a couple of years ago.....

Forcing a retailer to advertise a set price and not below it is illegal (here).
You can advertise whatever price you like.

Minimum resale prices

Suppliers can recommend resale prices for their goods and services, but they can’t stop resellers advertising or charging a lower price.

www.accc.gov.au

 

[FUNGI]

Forcing a retailer to advertise a set price and not below it is illegal (here).
You can advertise whatever price you like.

Minimum resale prices

Suppliers can recommend resale prices for their goods and services, but they can’t stop resellers advertising or charging a lower price.

www.accc.gov.au

Agreed.......but its coming........

 

[BeanAnimal]

I just read an email from an online vendor stating they "can not give coupons for many MAP products because the manufacturer believes it violates MAP"

The vendor is mostly full of crap. In most cases, the MAP agreement refers to Minimum Advertised Price - meaning that they can't advertise for less, but can sell for less. They simply cite MAP as an excuse to keep margin as high as possible. In most states and with most contracts, the vendor can sell for any price they wish even a loss without legal retribution form the OEM or wholesaler. That said, it can put them in an awkward position.

Evidently I'm not very familiar with the law but lately the FTC has been quite active and I've been reading some articles about what the FTC does. This MAP situation in the aquarium industry feels pretty much like what the FTC tries to prevent. Companies coordinating with others so prices don't go down.

Yes - but there is a lot of case law (precedent) support MAP pricing and exclusivity, territory and franchise langue is often put into contracts to exploit the grey areas of the law. In most cases, it is not a battle that you are going to win.

 

[FUNGI]

The vendor is mostly full of crap. In most cases, the MAP agreement refers to Minimum Advertised Price - meaning that they can't advertise for less, but can sell for less. They simply cite MAP as an excuse to keep margin as high as possible. In most states and with most contracts, the vendor can sell for any price they wish even a loss without legal retribution form the OEM or wholesaler. That said, it can put them in an awkward position.



Yes - but there is a lot of case law (precedent) support MAP pricing and exclusivity, territory and franchise langue is often put into contracts to exploit the grey areas of the law. In most cases, it is not a battle that you are going to win.

Missed replying the part about coupons....and Mr. BeanAnimal is correct as far as the vendor not lowering the cost/coupons......he just wanted full pop for the item.

 

[BeanAnimal]

I will also add that on the wholesale side, the game is lopsided too. The manufacturer may demand MAP and aim to punish anybody selling at a lower price (even if that is agains the law and actual contract) but they will grant certain favored vendors extra margin by reducing their wholesale price, even if they swear to all of their resellers that wholesale prices are fixed too....

 

[FUNGI]

Robinson-Patman Act.....

 

[MikeTheNewbie]

After more reading, I understand that the reason MAP is allowed here in the U.S. is to protect brands and prevent the situation where resellers can offer lower cost by offering worse service which affects not only the brand but also the consumer.
I don't think that applies to the online aquarium trade.

• The main service online vendors offer is advertising and delivering the product. Warranty is usually managed by the manufacturer and shipping is a commodity since everyone uses one of 3 major shipping companies that offer minimally differentiated service.
• Based on the tone of online vendors emails, it doesn't look like they benefit from MAP either as they are not allowed to compete. I imagine some vendors are more efficient than others and could compete in pricing if they were not limited by manufacturers implementing MAP.
  Example: Unfortunately, most MAP products are higher-priced products. Some lower-priced products are MAP because the margins are very slim.
• Another aspect that doesn't look appropriate is that there is a very large number of brands that implement MAP in the aquarium trade (See lists below). In some cases most or all the brands that offer certain products are in MAP lists, because of this consumers don't have other alternative than buying from a MAP brand. Example: Aquarium controllers. Neptune, Coralvue, Focustronic, are all in the MAP lists.

I have noticed that the FTC is very active lately, their chair is in the news quite frequently showing good things they are doing for consumers and the industry. I think they have the ultimate word on the matter and it would be useful for customers to communicate objectively what is happening. Who knows, they might do something about it.

Here is some useful info I found to raise a complaint, it took me less than 5 minutes

Link	Antitrust Complaint Intake The official website of the Federal Trade Commission, protecting America’s consumers for over 100 years. www.ftc.gov
Industry or market	Aquarium equipment and supplies industry
Type of complaint	Agreements between competitors
How will this conduct affect competition	increased prices reduced innovation
There is a field where they ask about the company/brand you are complaining about, fortunately some of the largest online vendors publish lists of MAP controlled brands	https://www.bulkreefsupply.com/payment-pricing-promotions https://www.saltwateraquarium.com/map-price-controlled-brands/ https://www.marineandreef.com/Articles.asp?ID=286

 

[Devaji]

this come up about every 6 months or so. it's a valuable thought and discussion. but in the end one must remember the game ( business/money) is rigged in favor of those who have it.

the aquarium trade is small peanuts in the large scale of things so even if someone (FTC) decided they where indeed breaking the law I doubt anything or not much would come of it.
but by all means log a complaint.

edit: if you really want something to chap your hide read listen to the audio book the creature from Jekyll island, about the creation of the "federal" reserve the biggest scam in the history of the world .

 

[BeanAnimal]

After more reading, I understand that the reason MAP is allowed here in the U.S. is to protect brands and prevent the situation where resellers can offer lower cost by offering worse service

Again, in most cases MAP does not regulate price, just advertised price. The vendor can set whatever price that they want, but they by contract can’t advertise that price. The manufacturer can’t typically legally enforce the sale price but will use pressure to try to anyway. Most retailers don’t argue, as it protects their margins.

A good retailer will often work with you to make a sale though. This is typically (as backwards as it sounds) your local brick and mortar. They will offer a good customer a discount from MAP to keep them from ordering online. It is always worth asking.

 

[Biokabe]

After more reading, I understand that the reason MAP is allowed here in the U.S. is to protect brands and prevent the situation where resellers can offer lower cost by offering worse service which affects not only the brand but also the consumer.
I don't think that applies to the online aquarium trade.

You don't understand why MAP is allowed.

The FTC doesn't care about any particular brand being protected, nor do they care about resellers offering lower costs and worst service. Manufacturers care about those things (that's why we use MAP), but we don't have to ask for special permission and demonstrate harm in order to be allowed to use MAP.

The reason why MAP is allowed is that the US economy operates on a fundamentally free, market-based system. Outside of specific discriminatory cases, businesses are allowed to pick and choose who they want to do business with. As a manufacturer, I can't compel anyone who purchases products from me to act in certain ways - but I can choose to not sell to them, and (in the case of online listings) I can withdraw permission for them to use my intellectual property to further their business interests.

Taking each of your points in turn:

• The main service online vendors offer is advertising and delivering the product. Warranty is usually managed by the manufacturer and shipping is a commodity since everyone uses one of 3 major shipping companies that offer minimally differentiated service.

Online vendors are not service companies. They are profit-seeking entities who exist to sell you products. The main service they offer is access to products. They're middlemen who acquire products from manufacturers, mark them up, and sell them to the general public. In a perfect world they wouldn't exist, but the reason they do is that manufacturers would typically rather deal in bulk. As a manufacturer, I would rather spend my money on developing new products and let my retailers handle the last-mile logistics (which are very expensive to develop). I can ship my products in bulk on pallets (much cheaper than parcel delivery) to my retailers and let them figure out how to actually get them into the hands of customers.

• Based on the tone of online vendors emails, it doesn't look like they benefit from MAP either as they are not allowed to compete. I imagine some vendors are more efficient than others and could compete in pricing if they were not limited by manufacturers implementing MAP.
  Example: Unfortunately, most MAP products are higher-priced products. Some lower-priced products are MAP because the margins are very slim.

As someone who talks to the retailers on the other end, I can tell you that those emails are carefully worded to make you not question the prices. Most retailers absolutely love MAP-protected products and fight to be able to carry them - especially brick and mortar shops. It means that they don't have to worry about taking a loss on a product as long as they can sell it. They can deflect all pricing criticism and dump it on the shoulders of the manufacturer. They would just love to offer you a discount, really they would, but they just can't because of the big bad MAP. In all honesty, manufacturers don't care what price a retailer sells the product at - we just care what it's advertised at.

And it also means that if they ever decide they don't want to carry a product any longer, they can move it off their shelves quickly - the only thing MAP does is cut them off from purchasing. If they don't care about restocking the product, they are free to discount it to their heart's content.

• Another aspect that doesn't look appropriate is that there is a very large number of brands that implement MAP in the aquarium trade (See lists below). In some cases most or all the brands that offer certain products are in MAP lists, because of this consumers don't have other alternative than buying from a MAP brand. Example: Aquarium controllers. Neptune, Coralvue, Focustronic, are all in the MAP lists.

Unless those companies are actively colluding to set their prices, it's utterly irrelevant how many companies are MAP-protected. Again, MAP is not a special program implemented by the government. It's a business strategy, most famously implemented by Apple, that is used to maintain brand value in the face of cut-throat/idiotic retailers who will do anything to capture a sale - including taking a loss on the sale. Many companies use it because it's one of the few ways to control online sales without forcing the company to take complete control of the sales chain.

Again, in most cases MAP does not regulate price, just advertised price. The vendor can set whatever price that they want, but they by contract can’t advertise that price. The manufacturer can’t typically legally enforce the sale price but will use pressure to try to anyway. Most retailers don’t argue, as it protects their margins.

A good retailer will often work with you to make a sale though. This is typically (as backwards as it sounds) your local brick and mortar. They will offer a good customer a discount from MAP to keep them from ordering online. It is always worth asking.

This is spot-on. With online vendors, it's all about volume and profit margin. They're not expecting to ever do business with you again, so they have to make sure to maximize the value of every transaction with you.

A brick & mortar can actually build a relationship with you. If they give you a $50 discount on a $500 light, they can be reasonably certain that it'll come back to them in the future. One of my local shops gave me a $400 discount on my MAP-protected tank (about $1700 MAP), a decision that has paid for itself multiple times since then. It's also much harder to police pricing at a brick & mortar store. Maybe a company like Apple has the resources to do so, but smaller companies just don't have the manpower to check out every reefing store in the country to make sure they're pricing at MAP.