Predator Products and Illegal Price Fixing? Hello Friends… This is one mans opinion…. I encourage each and every one of you to take the time to actually sit there and digest exactly what I am saying here as the ramifications are tremendous to our industry and sport. It’s not often that I will sit down and take pen to paper in this magnitude but I am in such an uproar over recent events that I feel obligated to say something. Has the USA and its peoples degenerated to such an extent that we now put profits over morality and right? I’d like to think not but the silence is deafening. I cannot believe that merchants within the billiard industry have not spoken up about such manipulation and price fixing. I am equally surprised that the billiard publications (Billiards Digest, Inside Pool) have not picked up on this most very serious story about price manipulation which affects each and every consumer out there today. However, it’s not surprising that the billiard publications don’t report on such stories since Predator is a major advertiser in their publications. So, now you ask just what is it that I am talking about? Well picture this my friends…. What do you think if I were to tell you that Chevron, BP, Shell or any other gasoline supplier sent out memo’s to their retailers that they could not sell a gallon of gas below $3 a gallon regardless of the wholesale price discount. How would you feel about that? Better yet, what if I were to tell you that GM told it’s new car showrooms that the most they could discount a vehicle to the consumer would be 20% otherwise they’d pull their license or stop shipping cars to that showroom. How would you feel about that? What would you say? I would venture to say that you’d be upset to say the least. Rest assured there would be incredible public outcry and as sure as the sun would come up tomorrow, the Attorney General would certainly become involved. However, in the small niche market of billiards, just such events are taking place right at this very moment. The culprits are Predator Products, the manufacturers of those Chinese made, glued-up shafts and production cues. Here’s my take on the situation in reviewing Predator’s attorney’s letter and his 51 page (yes I digested 51 pages of legal mumbo jumbo) report citing case law supporting (or trying to) ‘price-fixing’. This attorney’s report, lulled Predator into the false sense of security of believing that they can manipulate the market and blackmail their distributors into submission. The title of the letter was: “Predator: Price Restraints on Retailers in Light of Recent Court Precedent”. Their own attorney admits that they are promoting "Price Restraints". I would venture to say that in Predator’s quest to manipulate and control the market they retained big gun attorneys to produce a report supporting their, what I like to term, an illegal stance and price fixing strategy. I’m sure Predator paid dearly for this report. In all fairness, I’m certain that if I were to pay an attorney, I could produce a report in my defense which would support my stance that Price Fixing, such as Predator is trying to sell to its distributors, is illegal. You get whatever you pay for and this report that Predator obviously paid for is the end result. Predator wanted price fixing strategy and their paid lawyers (otherwise known as hired guns) provided the scant proof. The keyword(s) here is the admission of the attorney to call the report and its manipulation of the market – “Price Restraints”. The attorney is correct in calling it that as it is “Price Restraints” which Predator is trying to sell to their distributors. Predator is trying to sell ‘price fixing’ as ‘resale price maintenance’ which is nothing more than a play on words. I have spoken with several of Predator’s large distributors who have admitted to me that they are going to go along with Predator for fear of being “cut-off” by Predator. I guess when a large portion of your business depends on Predator Products, then the manufacturer can blackmail you into doing whatever it is that they want you to do. What happened to right –vs- profits? What happened to protecting the rights of consumers and keeping with American tradition of a free enterprise system? This is what happens when companies put profits over morality. This is why American business is degenerating. This is why and how the ‘Me Before Anyone’ generation is trying to run business today. Predator is relying upon the 51 page document to put into force their new price fixing policy where distributors cannot discount more than 20% from MSRP. Additionally, Predator is also telling distributors that they cannot give away any free merchandise when selling Predator products as well so as to appear as a value added promotion. In doing so, Predator is manipulating the market, destroying competition, controlling and monopolizing the marketplace. Predator is relying upon “the rule of reason” which distinguishes between restraints and anticompetitive effects that are harmful to the consumer -vs- procompetitive effects that are in the consumers best interest. So, there you have it. You have two statements of law: 1) restraints and anticompetitive effects that are harmful to the consumer (actual Predator tactics) 2) procompetitive effects that are in the consumers best interest (Predator defense strategy) Predator is relying upon procompetitive law to support their price fixing strategy. Now, let us take a few moments to shoot holes into this nonsensical law. I would be quite amused to see Predators defense as how they are promoting procompetitive effects that are in the consumers best interest when they are price fixing whereby causing increased pricing for the consumer and where dealers are forbidden to do any ‘value added’ promotions featuring Predator Products. How can these tactics be in the ‘best interest’ of the consumer?! Furthermore, how can threatening their distributors by cutting them off be procompetitive? Case law specifically states that the law is replete with procompetitive justifications. However, a few recent studies on this subject also cast doubt on the conclusion that the practice meets the criteria for the procompetitive rule. More simply put, Predator's stance on their procompetitive marketing strategy will NOT hold up in a court of law and can easily be challenged. Antitrust laws primary purpose is to protect interbrand competition and 'price fixing' is trying to eliminate intrabrand price competition and aids in the manufacturers position against competing brands. And, setting minimum resale prices may also have anticompetitive effects, and unlawful price fixing is designed to obtain monopoly profits. This is, in my opinion, exactly what Predator is trying to do. Predator is trying to monopolize the market and monopolize profits by using strong arm tactics and threatening its distributors that they either play along or be cut-off – hardly a procompetitive defense as Predator is alleging. Retail price fixing can facilitate Predator to organize retail cartels. It can also be abused by a powerful manufacturer such as Predator. Thus, the potential anticompetitive consequences must not be ignored or underestimated. Notwithstanding the risks of unlawful conduct, it cannot be stated with any degree of confidence that retail price fixing, always or almost always tends to restrict competition and decrease output. Argument overlooks that, in general, the interests of manufacturers and consumers are aligned with respect to retailer profit margins. That’s serious and consumers interests should never be aligned with retailer profits. In one such case, a manufacturer who sold its products to distributors (much like Predator does), and whose distributors who agreed to resell them at set prices, the court found that the manufacturer’s control of resale prices to be unlawful. Please read that again. In all fairness to Predator, each side of the debate can find sources to support its position, it suffices to say here that economic literature is replete with procompetitive justifications for a manufacturer's use of resale price maintenance otherwise known as ‘price fixing’ or as Predator’s own attorney put it, “Price Restraints on Retailers”. A single manufacturer's use of price restraints tends to eliminate intrabrand price competition; this in turn encourages retailers to invest in tangible or intangible services or promotional efforts that aid the manufacturer's position as against rival manufacturers. Resale price maintenance also has the potential to give consumers more options so that they can choose among low-price, low-service brands; high-price, high-service brands; and brands that fall in between. Consumers might learn, for example, about the benefits of a manufacturer's product from a retailer that invests in fine showrooms, offers product demonstrations, or hires and trains knowledgeable employees. While the above paragraph may hold true for manufacturers such as Louie Vuitton and Calvin Klein, it does not hold true for Predator Products. I don’t know of a single “showroom” in billiards who invests in chandeliers and elegantly carpeted “showrooms” to sell their Predator products to upscale clients who are more interested in service than price. I would venture to say that the vast majority of billiard enthusiasts are more price conscience than anything else. Therefore, Predator relying upon this as defense for price fixing is not in line with one argument of procompetitive law. While price agreements setting minimum resale prices can have procompetitive justifications, they may have anticompetitive effects in other cases and unlawful price fixing, designed solely to obtain monopoly profits, is an ever present temptation and is the case here with Predator as is this writers opinion. On the other side of the coin which is really not the case here, retail price maintenance, furthermore, can be abused by a powerful manufacturer. A dominant retailer, for example, might request retail price maintenance to forestall innovation in distribution that decreases costs. A manufacturer might consider it has little choice but to accommodate the retailer's demands for price restraints if the manufacturer believes it needs access to the retailer's distribution network. This is all not good for consumers no matter how you slice it up. Predator loses this argument as well. A manufacturer with market power such as Predator, might use resale price fixing to give retailers an incentive not to sell the products of smaller rivals or new entrants. As should be evident, the potential anticompetitive consequences of price restraints must not be ignored or underestimated. If Predator is allowed to get away with its recent pricing manipulation, where will it end? Will Predator next require its distributors to cease selling certain other products in order to maintain their Predator distributorship? If Predator is allowed to price-fix, there is no end in sight as to where Predator and others may go with this. Hardly procompetitive. Price fixing agreements establishing minimum resale prices can have either procompetitive or anticompetitive effects, depending upon the circumstances in which they are formed. And support of Predator’s anticompetitive policy, would be, in my opinion quite easy to display. As a final matter, that a dominant manufacturer or retailer can abuse retail price maintenance for anticompetitive purposes may not be a serious concern unless the relevant entity has market power. Does one wonder whether or not if Predator has “market power”? Once again, hardly procompetitive. As discussed earlier, respected authorities in the economics literature suggest the per se rule is inappropriate, and there is now widespread agreement that retail price maintenance can have procompetitive effects. It is also significant to point out that both the Department of Justice and the Federal Trade Commission-the antitrust enforcement agencies with the ability to assess the long-term impacts of retail price maintenance-have recommended that the Court replace the per se rule with the traditional rule of reason. Once again, the rule of reason: The rule distinguishes between restraints with anticompetitive effect that are harmful to the consumer and those with procompetitive effect that are in the consumer's best interest. Resale price maintenance was legal under fair trade laws in a majority of States for a large part of the past century up until 1975. It is also of note that during this time when the legal environment in the United States was most favorable for resale price maintenance, no more than a tiny fraction of manufacturers ever employed resale price maintenance contracts. No more than one percent of manufacturers, accounting for no more than ten percent of consumer goods purchases, ever employed resale price maintenance in any single year in the United States; the fraction of U.S. retail sales covered by resale price maintenance in its heyday has been variously estimated at from 4 to 10 percent. Bottomline….. The Sherman Act seeks to maintain a marketplace free of anticompetitive practices, in particular those enforced by agreement among private firms (such as Predator is trying to perpetrate). The law assumes that such a marketplace, free of private restrictions, will tend to bring about the lower prices, better products, and more efficient production processes that consumers typically desire. In determining the lawfulness of particular practices, courts often apply a “rule of reason.” They examine both a practice's likely anticompetitive effects and its beneficial business justifications. Nonetheless, sometimes the likely anticompetitive consequences of a particular practice are so serious and the potential justifications so few (or, e.g., so difficult to prove) that courts have departed from a pure “rule of reason” approach. And sometimes the Court has imposed a rule of per se unlawfulness - a rule that instructs courts to find the practice unlawful all (or nearly all) the time. It’s certainly an uphill climb for Predator but Predator would have you believe otherwise. On the one hand, agreements setting minimum resale prices may have serious anticompetitive consequences. In respect to dealers: Resale price maintenance agreements, rather like horizontal price agreements, can diminish or eliminate price competition among dealers of a single brand or (if practiced generally by manufacturers) among multibrand dealers. In doing so, they can prevent dealers from offering customers the lower prices that many customers prefer… Resale price maintenance agreements can help to reinforce the competition-inhibiting behavior of firms in concentrated industries. In such industries firms may tacitly collude, i.e., observe each other's pricing behavior, each understanding that price cutting by one firm is likely to trigger price competition by all. Where that is so, resale price maintenance can make it easier for each producer to identify (by observing retail markets) when a competitor has begun to cut prices. And a producer who cuts wholesale prices without lowering the minimum resale price will stand to gain little, if anything, in increased profits, because the dealer will be unable to stimulate increased consumer demand by passing along the producer's price cut to consumers. In either case, resale price maintenance agreements will tend to prevent price competition from “breaking out” and they will thereby tend to stabilize producer prices. One surely has to wonder if Viking, Pechauer, McDermott and Predator are all towing the same line here to support their own product lines, do away with competition and charge higher prices to the consumer. Does anyone out there believe these tactics to be procompetitive? Predator’s own attorney writes, “More subtle indication of anticompetitive behavior is retailers colluding to fix prices and collectively mandating the manufacture requires other retailers to follow suit. Such pull from the retailer side would be anticompetitive, as it would give inefficient retailers higher profits. Additionally, a manufacturer must not use price restraints to discourage retailers from selling rival products. If a manufacturer has a large market share and sets price restraints, or a large portion of manufacturers in an industry set price restraints, a court will look closely at the restraint to determine its legality”. Since Predator, Brunswick, McDermott, Pechauer and Viking are all practicing ‘price fixing’ tactics (which accounts for “a large portion of manufacturers”) , one has to wonder if collusion or cooperation are factors in this case. One also has to wonder if retailers or distributors have contacted Predator to complain about some merchants selling products at lower prices whereby Predator instituted this new price fixing policy to satisfy the needs of some of its retailers against lower price retailers. We’ve all heard of retailers complaining about retailer “X” who is selling product for less than retailer “Y”. If so, this would be anticompetitive. Those who express concern about the potential anticompetitive effects find empirical support in the behavior of prices before, and then after, Congress in 1975 repealed the Miller-Tydings Fair Trade Act. Those Acts had permitted (but not required) individual States to enact “fair trade” laws authorizing minimum resale price maintenance. At the time of repeal minimum resale price maintenance was lawful in 36 States; it was unlawful in 14 States before the Subcommittee on Antitrust and Monopoly of the Senate. Comparing prices in the former States with prices in the latter States, the Department of Justice argued that minimum resale price maintenance had raised prices by 19% to 27%. This was great for manufacturers but not for consumers! The Federal Trade Commission (FTC) staff, after studying numerous price surveys, wrote that collectively the surveys “indicated that resale price maintenance in most cases increased the prices of products sold.” Most economists today agree that, in the words of a prominent antitrust treatise, “resale price maintenance tends to produce higher consumer prices than would otherwise be the case.” It is uniformly acknowledged that resale price maintenance and other vertical restraints lead to higher consumer prices. Economic discussion, such as the studies the Court relies upon, can help provide answers to these questions, and in doing so, economics can, and should, inform antitrust law. But antitrust law cannot, and should not, precisely replicate economists' (sometimes conflicting) views. That is because law, unlike economics, is an administrative system the effects of which depend upon the content of rules and precedents only as they are applied by judges and juries in courts and by lawyers advising their clients. And, that fact means that courts will often bring their own administrative judgment to bear, sometimes applying rules of per se unlawfulness to business practices even when those practices sometimes produce benefits. Those who wish courts to change so well-established a legal precedent bear a heavy burden of proof. In-other-words --- good luck Predator. A brief for Consumer Federation of America comments by Wal-Mart's founder 25 years ago that relaxation of the per se ban on minimum resale price maintenance would be a ‘great danger’ to Wal-Mart's then-relatively-nascent business. In-other-words, Wal-mart’s business model was structured around low price competition. Imagine if manufacturers set restraints – there may have never been a Wal-mart (which some may argue is a good or bad thing). New distributors, including internet distributors, have similarly invested time, money, and labor in an effort to bring yet lower cost goods to Americans. What about malls built on the assumption that a discount distributor will remain an anchor tenant? What about home buyers who have taken a home's distance from such a mall into account? What about Americans, producers, distributors, and consumers, who have understandably assumed, at least for the last 30 years, that price competition is a legally guaranteed way of life? Putting the Court's estimate together with the Justice Department's early 1970's study translates a legal regime that permits all resale price maintenance into retail bills that are higher by an average of roughly $750 to $1000 annually for an American family of four. Just how much higher retail bills will be after the Court's decision today, of course, depends upon what is now unknown, namely how courts will decide future cases under a “rule of reason.” But these figures indicate that the amounts involved are important to American families and cannot be dismissed as “tiny.” The per se rule forbidding minimum resale price maintenance agreements has long been embedded in the law of antitrust. It involves price, the economy's ‘central nervous system.’ It reflects a basic antitrust assumption that consumers often prefer lower prices to more service. It embodies a basic antitrust objective of providing consumers with a free choice about such matters. In conclusion, Predator’s attorney writes… “As far as a set ‘rule of reason’ or set procedures for litigating a case under the new rule, the Court gives scant guidance. It states, that as courts gain experience in these cases, courts will set rules and procedures to eliminate anticompetitive practices. Thus, how the “rule of reason” will actually be applied in specific circumstances will not be known until the new rule is litigated”. He continues…. “In light of the application of the rule of reason to price restraints, Predator may set a price restraint restricting the sale price charged by its retailers. However, prior to setting the restraint, Predator should document the motivation and reasons, considering the above factors to ensure the price restraint is done to promote competition in the industry”. In conclusion – The Final Bottomline… I don’t know how you read those two statements above my friends, but it is up to Predator to document each and every reason as to why it is price fixing each and every item it sells and in doing so, Predator must show how it is done to promote competition in the industry. This is certainly a hercluean task my friends and surely impossible for Predator to display. OK, so to recap: Predator must show how setting prices at a discount of no more than 20%, how Predator is not allowing its distributors to ‘value add’ to Predator Products and how threatening distributors that they will be cut-off if they don’t tow the Predator line can possibly be done to promote competition in the industry is beyond comprehension. The only thing these things do is manipulate the market, increase costs to consumers, monopolize Predator Products and lastly add to Predators own coffers. And, by Predator’s own attorney’s words, there is no guarantee that the courts would rule in Predator’s favor. To the contrary, Predator’s attorney states so himself, “thus, how the “rule of reason” will actually be applied in specific circumstances will not be known until the new rule is litigated”. There is not enough case law. And, what law is on the books is very much against price fixing. In-other-words my friends, if someone challenged Predator’s motives, Predator’s own attorney is not sure as to what the outcome would be if Predator enforced its price fixing strategy. It is this writers opinion, that while Predator may have deep pockets, Predator is also very deeply at risk because should Predator lose its fight, it would be libel for mega millions in damages. Very interesting my friends and if I were a betting man, I’d lay odds against Predator; given big gun attorneys to fight for the consumer and distributors, my money is on us! My opinion, and this is sad to say, but I believe that Predator is relying, in large part, on the ignorance of their distributors and fear-factor to further their own agenda. However, should industry leaders cower in light of Predator’s, what I like to term as illegal price fixing, then the consumers should vote with their pocket-books and boycott Predator products until such time as to break the back of Predator to remove price fixing tactics from their distributors. In addition, Brunswick, McDermott, Viking and Pechauer are also ‘price fixing’ to their distributors with the same maximum 20% discount to consumers on advertised pricing (Pechauer 10%). Where will it end? Where does the problem really begin. I don’t think one can fault Predator itself but one needs to look into the background and recent history of the company and its management. This writer believes Predator has lost sight of itself being an American Company. At one time Predator manufactured all its products right here in sunny Jacksonville, Florida. However, to increase profits and produce more product for less money, Predator abandoned American workers and went over seas to Communist China. In dealing with the Communists, perhaps now one can understand Predator’s way of thinking and their stance on price fixing as a way of life. Predator needs to wake up and realize that this is the USA and we’re not Communists ruled by a dictator. And, Predator cannot dictate to its distributors at what price they can or cannot sell their products. We have freedom of speech and freedom of choice and freedom to compete without restraint. Predator Products anyone? And, that’s my two cents worth. Thank you for reading this and I will have no further comments as I’ve devoted just about all the time I want to on this subject. Now it’s up to you. Kind regards, Joe Barringer P.S. For those of you who want to see who is representing Predator. Pretty impressive but sheer power does not make a wrong into a right. And remember: power corrupts and absolute power corrupts absolutely. Do the Predator distributors and consumers want to give Predator that power? And, many of you are probably asking just what sparked my decision to write this? I received this information some times ago and was motivated to write this. I wrote about half and let it fall by the wayside until recently when one of my suppliers wrote me and said that they were enforcing ‘price fixing’ tactics on products we sold. I told them that they could shove their ‘price fixing’ tactics where the sun never shines. Their decision inspired me to finish what I had started out to do. No one will ever threaten to cut me off for how I price products that I sell into a free market society. And, if Predator distributors don’t do something about this, they can expect other manufacturers to follow suit and impose price fixing restraints on most all their product lines which they carry. The distributors have the investment in inventory and a free enterprise system ensures free competition. Predator would have you believe otherwise. I got the email and so will they. The end. |
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