Friday, August 29, 2008
What Would Be As Bad Or Worse...
A year ago the Supreme Court decided that manufacturers could impose limits on the discounts retailers can give on the selling of their products, overturning an antitrust ruling that had stood for 96 years. The central argument revolved around product image, and wanting to protect retail outlets that the manufacturer approved of; the subtleties depend on the product line and the manufacturer in question.
Wizkids had already taken a preliminary step in the direction of controls earlier by unceremoniously gutting their distribution system a couple years back and signing an exclusive distribution partnership with Alliance/Diamond, restricting the primary (wholesale) sales of their product to brick and mortar retail establishments. This was the latest step in responding to such retailers' complaints that Internet-based retailers were seriously undercutting their sales by offering much deeper discounts than they felt they could afford.
While Wizkids has yet to take any more steps, in the past couple years they've vecome increasingly imitative of other "industry standard" practices, so today's announcement that Mayfair Games will be imposing a 20% cap on discounts offered by retailers could be worrisome.
My most recent bulk purchase - for Secret Invasion - was (including shipping) a 36.4% discount over MSRP, and a hair shy of 40% when one adds in the PA state tax that would have accompanied the higher price. Even at that, I've been gravely reconsidering my purchases due to the difficulty of completing even the basic 60-piece set, much less any notions of actually getting the damned chase pieces.
Were Wizkids to step in, especially after having raided their MSRP twice in the past couple years, and limit discounts to 20% -- or even 30% -- that would essentially mark the end of the line for me and new Clix.
For the sake of maintaining the archive, I've reprinted the two article links below, starting with the earlier decision:
Supreme Court Drops Ban on Vertical Pricing
Could Have a Major Effect on Hobby Gaming
Published: 07/03/07, Last Updated: 01/01/50 12:00am
On the last day of its term the Supreme Court reversed a ruling that had stood for 96 years and ruled instead that it was not automatically a violation for manufacturers and distributors to enforce minimum retail pricing on retailers. The case, Leegin vs. PSKS, was based on an appeal from Leegin Creative Leather Products of a $1.2 million judgment stemming from the company's decision to cut off Texas retailer Kay's Kloset for its refusal to adhere to Leegin's no-discount policy.
In deciding in favor of Leegin the Supreme Court overturned the flat ban on resale price agreements, based on the Sherman Antitrust Act, enunciated by the Court in 1911 in the case involving Dr. Miles Medical Company. In that 1911 case, the court decided that these vertical pricing agreements did not benefit the consumer and banned them outright. Now, in a 5-4 decision, the Court's new conservative majority has decided that in certain cases these pricing agreements may actually promote competition.
The decision does not mean that it is now acceptable for manufacturers to immediately implement programs that will turn their 'minimum suggested retail prices' into ironclad minimum retail prices, which, if not followed at the retail level, would result in the cut-off of supply or other punitive measures. What the Supreme Court decision means is that cases involving the imposition of vertical pricing by producers and distributors will now be considered on a 'case-by-case' basis in which courts will endeavor to determine the impact of such a pricing policy on competition. The only certain outcome of the precedent-shattering decision will be a slew of court cases as various groups of manufacturers attempt to establish their right to control retail prices.
The arguments cited by the Justices in the Leegin case do provide some potential insights in how the courts might decide similar cases in the future. Leegin's pricing policy was part of a marketing strategy for an upscale line of leather goods that were to be sold only in small boutiques that could provide copious amounts of customer service, so customer service can be considered an important factor. The court also cited 'product demonstrations' and the provision of specialized consumer services -- two elements that could certainly apply to hobby game stores that regularly provide demonstration of new games and hold organized play events, while losing sales on the very products that they are demonstrating and supporting to non-brick-and-mortar Internet discounters. Using this criteria the Leegin decision would appear to clear the way for game manufacturers to implement minimum retail prices, but the companies will have to be prepared to litigate to gain this right -- and under antitrust laws litigants face the possibility of triple penalties if they lose.
Now the Mayfair Games decision:
Online Discounting of Games—One Year Later
Mayfair Using Supreme Court Decision to Control Pricing
August 29, 2008
Roughly a year after the Supreme Court decision allowing companies to control the prices at which retailers sell their products under certain circumstances (see “Supreme Court Drops Ban on Vertical Pricing”), one game company that we’re aware of, Mayfair Games, has used the decision aggressively to control the prices at which its products are sold.
Mayfair has instituted a policy, the Mayfair Authorized Retailer Program, that restricts discounts above 20% off retail on its games. VP-Sales Bob Carty talked about the status of the program in the Future of the Hobby Channel panel at Gen Con Trade Day (see “The Future of the Hobby Channel”). “We're in the process of the second stage of enforcement,” he told the audience. “We’ve gone from 113 retailers discounting product in November… when we started releasing Third Edition [of Settlers of Catan]; we now have between six and 11 in any given week. And I think that's a big step. Six of them are habitual and on the blacklist but they're still getting product, and we know where, and we're going to deal with them very shortly.”
One other game company, WizKids Games, has made significant efforts to reduce Internet discounting by controlling sales to Internet-only retailers (it began this strategy prior to the Leegin decision, see “Joe Hauck, WizKids EVP on Internet Retailing”), although it is not using price controls based on Leegin to our knowledge.
A year ago the Supreme Court decided that manufacturers could impose limits on the discounts retailers can give on the selling of their products, overturning an antitrust ruling that had stood for 96 years. The central argument revolved around product image, and wanting to protect retail outlets that the manufacturer approved of; the subtleties depend on the product line and the manufacturer in question.
Wizkids had already taken a preliminary step in the direction of controls earlier by unceremoniously gutting their distribution system a couple years back and signing an exclusive distribution partnership with Alliance/Diamond, restricting the primary (wholesale) sales of their product to brick and mortar retail establishments. This was the latest step in responding to such retailers' complaints that Internet-based retailers were seriously undercutting their sales by offering much deeper discounts than they felt they could afford.
While Wizkids has yet to take any more steps, in the past couple years they've vecome increasingly imitative of other "industry standard" practices, so today's announcement that Mayfair Games will be imposing a 20% cap on discounts offered by retailers could be worrisome.
My most recent bulk purchase - for Secret Invasion - was (including shipping) a 36.4% discount over MSRP, and a hair shy of 40% when one adds in the PA state tax that would have accompanied the higher price. Even at that, I've been gravely reconsidering my purchases due to the difficulty of completing even the basic 60-piece set, much less any notions of actually getting the damned chase pieces.
Were Wizkids to step in, especially after having raided their MSRP twice in the past couple years, and limit discounts to 20% -- or even 30% -- that would essentially mark the end of the line for me and new Clix.
For the sake of maintaining the archive, I've reprinted the two article links below, starting with the earlier decision:
Supreme Court Drops Ban on Vertical Pricing
Could Have a Major Effect on Hobby Gaming
Published: 07/03/07, Last Updated: 01/01/50 12:00am
On the last day of its term the Supreme Court reversed a ruling that had stood for 96 years and ruled instead that it was not automatically a violation for manufacturers and distributors to enforce minimum retail pricing on retailers. The case, Leegin vs. PSKS, was based on an appeal from Leegin Creative Leather Products of a $1.2 million judgment stemming from the company's decision to cut off Texas retailer Kay's Kloset for its refusal to adhere to Leegin's no-discount policy.
In deciding in favor of Leegin the Supreme Court overturned the flat ban on resale price agreements, based on the Sherman Antitrust Act, enunciated by the Court in 1911 in the case involving Dr. Miles Medical Company. In that 1911 case, the court decided that these vertical pricing agreements did not benefit the consumer and banned them outright. Now, in a 5-4 decision, the Court's new conservative majority has decided that in certain cases these pricing agreements may actually promote competition.
The decision does not mean that it is now acceptable for manufacturers to immediately implement programs that will turn their 'minimum suggested retail prices' into ironclad minimum retail prices, which, if not followed at the retail level, would result in the cut-off of supply or other punitive measures. What the Supreme Court decision means is that cases involving the imposition of vertical pricing by producers and distributors will now be considered on a 'case-by-case' basis in which courts will endeavor to determine the impact of such a pricing policy on competition. The only certain outcome of the precedent-shattering decision will be a slew of court cases as various groups of manufacturers attempt to establish their right to control retail prices.
The arguments cited by the Justices in the Leegin case do provide some potential insights in how the courts might decide similar cases in the future. Leegin's pricing policy was part of a marketing strategy for an upscale line of leather goods that were to be sold only in small boutiques that could provide copious amounts of customer service, so customer service can be considered an important factor. The court also cited 'product demonstrations' and the provision of specialized consumer services -- two elements that could certainly apply to hobby game stores that regularly provide demonstration of new games and hold organized play events, while losing sales on the very products that they are demonstrating and supporting to non-brick-and-mortar Internet discounters. Using this criteria the Leegin decision would appear to clear the way for game manufacturers to implement minimum retail prices, but the companies will have to be prepared to litigate to gain this right -- and under antitrust laws litigants face the possibility of triple penalties if they lose.
Now the Mayfair Games decision:
Online Discounting of Games—One Year Later
Mayfair Using Supreme Court Decision to Control Pricing
August 29, 2008
Roughly a year after the Supreme Court decision allowing companies to control the prices at which retailers sell their products under certain circumstances (see “Supreme Court Drops Ban on Vertical Pricing”), one game company that we’re aware of, Mayfair Games, has used the decision aggressively to control the prices at which its products are sold.
Mayfair has instituted a policy, the Mayfair Authorized Retailer Program, that restricts discounts above 20% off retail on its games. VP-Sales Bob Carty talked about the status of the program in the Future of the Hobby Channel panel at Gen Con Trade Day (see “The Future of the Hobby Channel”). “We're in the process of the second stage of enforcement,” he told the audience. “We’ve gone from 113 retailers discounting product in November… when we started releasing Third Edition [of Settlers of Catan]; we now have between six and 11 in any given week. And I think that's a big step. Six of them are habitual and on the blacklist but they're still getting product, and we know where, and we're going to deal with them very shortly.”
One other game company, WizKids Games, has made significant efforts to reduce Internet discounting by controlling sales to Internet-only retailers (it began this strategy prior to the Leegin decision, see “Joe Hauck, WizKids EVP on Internet Retailing”), although it is not using price controls based on Leegin to our knowledge.
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