Price fixing, restriction of trade, protection payoffs? Do we want to condone this?

Discussion in 'Archived Threads 2001-2004' started by John Morris, Feb 18, 2002.

  1. John Morris

    John Morris Guest

    This topic has been touched on before, but I finally got a taste of it firsthand this morning. With all the buzz about folks considering the AVM-20 as an alternative to the Outlaw 950, I decided to see what I could find out regarding this unit and its' pricing and availability. As part of my efforts, I searched SF/Anthem's site and found the dealer's phone numbers in Texas and Louisiana and started calling. What I heard simply stunned me.

    First, no one really wanted to talk on the phone about the Anthem or its' price. Many dealers did not even carry this unit in stock, but sold it by special order only.

    - If the dealer does not have it in stock, the wait can be up to 5 weeks, since Anthem only makes these units once a month, and only makes enought to fill all orders placed by time of run start. Anthem keeps no backstock of the AVM-20.

    - I thought great. Since dealers keep little or no backstock, none of the associated costs with stocking a product can be assigned to the units eventual cost. With the AVM-20, it is almost as though the authorized dealers ARE online dealers who ship directly from the manufacturer. Of course, it was not to be. Why?

    - Price Fixing! Anthem goods are strictly "price fixed" by the manufacturer. Dealer after dealer gave me "only one price" for the AVM-20... $3200. They said that Anthem demands that they sell this unit at full retail or risk losing their line. Finally, I found one LA dealer who was willing to give me a huge 4% discount for paying cash.

    - Restriction of Trade! All dealers must agree to a contract with Paradigm/SF/Anthem in which they are assigned a specific geographic area in which the buyer must live in order to sell them an AVM-20. I was asked by one dealer for an address within his area before he would answer ANY questions on the AVM-20. When I told him I had no local dealer, he told me that I should call Anthem and ask them for permission to talk to him first. Simply Ridiculous!

    - Protection Money! After running into Anthem blockade after Anthem Blockade, I called a friend who carries the Anthem line and here is what I was told. The reason that all the Anthem dealers are running scared is that Anthem actually has written into their dealer agreements that a fine can be levied by Anthem against any dealer who breaks the Anthem price fixing or restrictive trade covenants of the agreement. The fine is equal to 3 times the cost of the unit sold outside of the agreement. Holy Cow! No wonder they were scared! My friend said that he thought the agreement was actually against the law, but if the dealer wanted to sell Paradigm, SF or Anthem, they had no choice but to sign the agreement.

    I was shocked by this developement. Litte would I have guessed that an electronics manufacturer could impose such draconian measures on its' dealers and therefore, on its' customers. These practices seem to mirror the same tactics used by the Mob to control its' drug dealers and their street vendors. Of course, Anthem can't kill their dealers for violation of their rules... at least not yet.

    In conclusion, since we place our votes with the dollars we spend on our purchases, IMO, buying Paradigm, SF and Anthem would serve to condone and approve these type of Mob tactics used by Paradign to keep their dealers in goosestep. I will not be supporting these type of anti-business practices with my dollars, regardless of how good the gear sounds.

    Thank God for consumer friendly companies like SVS, Outlaw, Adire and their kin.
     
  2. Mark Austin

    Mark Austin Supporting Actor

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    None of what you mentioned above classifies as "price fixing" under the law.
     
  3. John Morris

    John Morris Guest

     
  4. Evan S

    Evan S Cinematographer

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    As an Economics major, I'm going to refrain from participating actively in this thread. First of all, the market bears what the market will bear. If SF feels they can move an acceptable amount of units at full retail, they may or may not be HELPING their dealers. Believe me, if sales stagnated at the $3200 price tag, SF would be the first ones to remove this price restriction. Most companies do extensive market research prior to release to find out what the maximum profit can be obtained based on various price points. If SF dropped the price of the Anthem to $2500, they may move 2X as many units, but at much greater loss of profit that it's actually more profitable to move LESS units at a higher margin.
    This is an expensive hobby and some of us cannot afford the Lexicons of the world. That's not SF's job to make their products fit into OUR budget. They are a private company trying to make as much money as they can. IMO, that's what makes capitalism great. Obviously, the Anthem line is profitable for the dealers as well or they wouldn't put up with SF's regulations.
    Looks like I just "actively" participated after all.[​IMG]
    By the way Merc, you hit the nail on the head. It's only illegal price fixing if there is collusion involved between many companies. The only time the govt. gets involved in these types of things is if it's a public good (energy, gas, etc) where they make private companies change their ways (like the AT&T breakup).
     
  5. Mark Austin

    Mark Austin Supporting Actor

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  6. John Morris

    John Morris Guest

    Evan: I see your point, but for me it is not a matter of SF/Anthem selling their product for a given dollar amount. They don't sell their items to us endusers. They sell them to local dealers for a fixed amount, and once those dealers pay for the units, it should be up to the dealer to run their business the way they choose. What business should it be to Anthem if one dealer wants to make 100% profit and another dealer only 75% profit. In effect, Anthem is forcing many other businesses to sell the AVM-20 at a fixed price... so maybe it is a type of business price fixing collusion.?
     
  7. Mark Austin

    Mark Austin Supporting Actor

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  8. Evan S

    Evan S Cinematographer

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    John, they are trying to protect their dealer network. Each SF dealer has an assigned territory. If you are in Dallas and your dealer is selling the unit for $3200, but you can get it in Houston for $2600, would it behoove you to go to Houston? Of course it would. This gives each US dealer the piece of mind to know that they are not being undercut by another dealer.

    In my case, being close enough to Canada, I get a better deal by use of the favorable exchange rate. But there is nothing my local dealer can do about that.

    That's the way I see it. I see your point however, if I was a shop owner I would want to do things my way after paying the fixed price of the Anthem. Or, If I didn't want to put up with the BS, I wouldn't carry the line.

    You know, recently Ford debuted the new Thunderbird coupe. Demand was so high do you know they made dealers have prospective buyers sign a release form saying they wouldn't resell the car within 12 months of buying it (because it was fetching prices of 20-30K more than what Ford was selling it for because Demand greatly exceeded supply). So, there are concessions made by dealers in plenty of instances besides this one. It's not unusual. It is a free market and the dealers don't have to carry SF/Paradigm but they do because there is money to be made.
     
  9. AjayM

    AjayM Screenwriter

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    I would bet dollars to donuts that if you were standing in the dealers show-room the pricing would be a little different, since I'm assuming that none of these dealers know you personally. Most of these types of contracts force dealers into not advertising a price below a certain price point, this protects the other dealers in the area from being able to stock up, blow them out at low prices and then forcing the other dealers to drop the line (in theory anyways). You'll never get ultra-low quotes on high-end equipment over the phone, again unless the dealer knows you personally, the item is a close-out or a non-new piece, etc.

    Anthem can't tell the dealer what to sell the units for, they can tell him they can't advertise (that includes phone calls) certain prices, but it's up to the dealer to sell for whatever they want.

    Specific sales areas, this isn't anything new either, and is put in place to protect the dealers. It's usually not strictly enforced, and can't be strictly enforced. Although in today's internet world it helps to make sure that the products aren't sold online.

    The "fine" things sounds kind of fishy to me, although I think he's leaving some things out of that story, like if you violate your contract with Anthem/SF that you will be dropped or you can pay to not be dropped. Or maybe that is the restitution for breaking your contract.

    It all sounds harsh, but it's the way business is done. And you can bet that other bigger high-end brands all do the exact same thing.

    Andrew
     
  10. Evan S

    Evan S Cinematographer

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    Andrew, your post hit the nail on the head. That's been my experience exactly. Dealers CAN and WILL come off that MSRP, but they are very hush hush about doing it. In December, I called 7 dealers of Paradigm to request quotes for some speakers I was looking at. NONE could quote me a price. When I told one of them I was able to make a significant purchase, he did give me a ballpark figure of what he could hit, but still could not give me the figure over the phone.
     
  11. John Morris

    John Morris Guest

     
  12. Kevin C Brown

    Kevin C Brown Producer

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    I thought that I remembered from the BIG AVM-20 thread from a while back, that someone actually spotted one for $2600 somewhere.
    I thought that it was one of the internet price comparison sites like www.dealtime.com , but I can't remember.
     
  13. Ron Alcasid

    Ron Alcasid Stunt Coordinator

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    I just ordered an AVM20 this weekend. My dealer had no problem selling me the unit below MSRP. I wasn't a rock bottom price but it wasn't full retail either.
     
  14. Frank Frandsen

    Frank Frandsen Stunt Coordinator

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    You have to go to the store with cash. The dealer may think the Anthem is testing them over the phone.
     
  15. KeithR

    KeithR Second Unit

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    John,

    If anything, this practice protects resale value---in fact, I wish more manufacturers would do this. B&W has similar practices, and is one of the few items that carries resale value well. If all this negotiating stuff was eliminated, business would be simpler, for dealers and consumers. How many times have I auditioned a product, liked it, but was unsatisfied with pricing (5%...whoop tee doo) and go to another store, or get on the phone. I don't mind paying for service, but 20% more is steep for an hour demo. Also, the reason stuff is on audiogon for 50% off on 5 mo old merchandise is because a lot of people can get 20-30%+ off products if you search around. I haven't look at Anthem's resale value, but it should help. Hence, why Outlaw receivers go for 350-400 used, when you can pick up a b-stock unit for 450. I still can't find reason to save only 50 bucks on a used piece...but one just went on audiogon for that price (i confirmed with seller)

    I think as compromise, manufacturers should allow discounting to a certain point--ala 20% for example to reward big purchases, or repeat customers. This would stabilize resale value (not including discontinued products..etc.) and I think dealers and consumers alike would benefit.

    YMMV.
     
  16. John Morris

    John Morris Guest

    KeithR: Of course, your points are valid, but the best way I've found to protect the resale value of the components that I buy is simply to buy them cheaper than anyone else. For example, if I could buy an Anthem AVM-20 for $2200, use it for half a year and then sell it, I'd bet that I could at least recoup my original cost on the unit. Conversely, if I pay full MSRP of $3200, no one will pay that for a used unit... much less a brand new one. Right now, someone is selling a brand new AVM-20 on Audiogon for $2800. Regardless, I think I'll just stick with my beta Outlaw 950 for awhile anyway.
     
  17. KeithR

    KeithR Second Unit

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    I agree John, and my entire 2 ch and HT system was bought at around 30% off all brand new, so for now, we are all stuck in the same place.
     
  18. KeithR

    KeithR Second Unit

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    I guess the other thing is that pre/pros in general have crappy resale value, as technology changes to fast in this arena. Go with the Outlaw...[​IMG]
     
  19. Doug_B

    Doug_B Screenwriter

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    I had no issues buying my AVM 20 at a good discount from a dealer who is not the closest Anthem dealer to me. I was an on-site customer, however, so I agree that there may be limitations in what is offered/discussed over the phone. The dealer was also kind enough to give me a demo unit while I waited for a silver model (for over a month).
    OTOH, the AVM 20 would have been history if the dealer had given me any crap face-to-face about discounting or geographic restrictions. In actuality, the dealer has always treated me well because I'm outside of his area (at least from his perspective; we know how far we'd go to get our equipment [​IMG] ).
    Doug
     
  20. Will

    Will Guest

     

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