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Fixing retail prices – legally

The price we can sell our boats, motors and accessories in our dealerships may well become restricted because the U.S. Supreme Court is, again, shaking things up with its often unexpected decisions. This time, the Court has stuck down an antitrust rule that has stood for 96 years. The Court said itís not automatically unlawful for manufacturers and distributors to fix a minimum retail price (Resale Maintenance Agreement). In effect, a centuryís worth of Supreme Court decisions that had affirmed the prohibition on resale maintenance agreements is overturned, wrote dissenting Justice Stephen Breyer, for no compelling reason.

The Court decision, which was split 5-4, reportedly appears to be giving manufacturers a much wider berth to restrict retail prices. Major manufacturers said the new rule could lead to more competition and better service. Five justices agreed with them. Four dissenting justices, however, sided with consumer organizations, which argued that abandoning the old rule could force higher prices from less competition.

As a sidebar, 37 states have similar rules which will now, presumably, be trumped by the Supreme Courtís decision. The old rule asserted that resale price maintenance agreements (price setting) were an automatic violation of the 1890 Sherman Antitrust Act. Now, the Court said judges considering antitrust cases of this nature should apply ďa rule of reasonĒ on a case-by-case basis in assessing any anti-competitive impact. No question this new directive is much more favorable to the defendant.

Specifically, the case was an appeal of a $1.2 million judgment against manufacturer Leegin Creative Leather Products for cutting off retailer Kay’s Kloset for refusing to honor Leegin’s no-discount policy. Moreover, because it was under antitrust law the judgment had been tripled.

The case raises some interesting questions for our industry and it could be viewed as a double edged sword. For example, does it end marine manufacturerís long-standing insistence that having resale maintenance agreements violates anti-trust laws? What impact could this have on a discounter down the street from an independent dealer who offers the same products?† On the other hand, could it put limits on the independent dealer that he does not want?

In a nutshell, within certain limits of the Courtís decision, itís a new day when it comes to fixing the retail prices of products. But is it good or bad for boat dealers? I confess Iím not sure. But it should make for some interesting opinions in our industry. How about sharing your thoughts right here? Would resale maintenance agreements work for or against the marine dealer?

Comments

13 comments on “Fixing retail prices – legally

  1. chic longnecker

    Fixing Retail Prices:

    First and foremost it would keep consumers buying from their area dealer and keeping their spent money in their local economy. With set retail prices there should be no reason for a potential customer to shop any further than his or her closest dealer.

    Secondly, it would force manufactures to keep their set retail prices in line. If brand “X” is similiar in quality to brand “Y” but brand “X” has a set retail that can’t be justified against brand “Y” then the manufacturer would have to lower his set retail of brand “X”. Then the dealer is still entitled to his or her fair gross profit already established with the manufacturer.

    To me it sounds like a possible solution to the dealer who gives the product away and probably won’t be here in the future but makes it tuff for the full service dealers in the mean time. It also keeps the buyers money working and building the economy in his local area.

  2. Pete Peterson

    Fixing Retail Prices

    Although we do not fix the price a dealer can sell a boat for, we do other things that makes it easier for a dealer to maintain a good margin when selling our line of boats. First and foremost, manufacturers need to hold dealers to the standard that they must service what they sell. We publish a reail price list that is referred to as our Normal Selling Price. We require our dealers to never advertise price, or quote price over the phone, by fax or e-mail unless it is the Normal Selling Price.

    This has helped our dealer network build better value into the product and sell their dealership as part of the entire package. There is enough competition out there without having to compete within your own dealer network.

    Is this hard to implement? Yes, it certainly is, but after five years of holding the line, it is paying off. While other companies are struggling, we have a ten week production backlog with almost 50% of those boats pre sold.

  3. Jody Imars

    I disagree when it comes to there being no reason for a potential customer to shop any further than his or her closest dealer with set retail prices. As a stand-alone accessories store, fixed prices on boats would not be an issue for us. But for accessories and service, we see people visit us from up to 40 miles away.

    Some customers shop with us because we offer reasonable prices compared to the national chains and other stores who charge high prices nearer to where they live. There will always be people who shop strictly price. But many customers tell us they would shop with us no matter what because of how we treat them… Friendly, helpful, knowledgable staff sometimes trumps pricing. A good example is West Systems, of which we sell quite a bit. Because of their policy, we cannot discount their products, but more people buy it from us than the national chain 100′ away from us because we are friendly and can answer customers’ questions regarding the products.

    So set retail prices won’t guarantee you the “close” customers. It will mean you have to offer some other added value to make them not want to go elsewhere and pay the same price. If we see people traveling to shop with us on a weekly or monthly basis, I would think for a 1-time boat purchase, it would be more likely that people may “shop around for service” if pricing is not an issue.

  4. Gene Gooding

    Buy an I POD at any store..same price. Why? Small margin. How do they get away with this? No trade-in with I PODS.

    If you have the manufacturer set the retail price, they will squeeze the margin to get an edge. Then the dealer will not have the room to show a discount and give the customer a trade value that he likes. This is a classic catch 22. I have been in this business since 1973. I don’t know if this will change in the next 34 years.

    Chic, times like we are in today will weed out the dealer that sold for less and did not invest in his business. Norm, do you remember the large 4 Winns dealer in Cleveland that sold for less? He never invested in his business and it was a downturn that removerd him from the market.

  5. Dick Wempen

    Kinda of scary to lose control of pricing. However it is working with small 4 cylinder Bayliners since we only have four other Bayliner dealers within 100 miles of our stores. With our Lowe products we have 6 dealers with Lowe within 50 miles.

    There are a lot of issues at play here and I think that manufacturers need to look at 150 to 200 mile circles to keep their dealers fighting the competion instead of other dealers.

    Being certified is being focused on the customer – fighting another dealer due to lack of territory is just plain unnecessary.

  6. jim

    And sometimes Gene, manufacturers try to force product on a dealer that the dealer can’t sell at any price; and then he has to sell for less if he is dumb enough to take the product. Or if he is smart, he just lets some other poor dealer take the on the product. The rep can really be a big help in this situation to all parties concerned, if he so chooses, as can the manufacturer. Unfortunately, the bottom line for the builder takes precedence over all else despite how loyal the dealer may have been. The examples that can be cited are overwhelming.
    And for you Pete, manufacturers must hold dealers to a standard that they must service what they sell???? How about we dealers hold you manufacturers to quit expecting us to be final assembly? Give us a working product, and you have no worries about our level of service. If we have been in business for any length of time, we understand very well how to service our clientele—we just would like to know when you builders will start paying our retail labor rate and pay it in a timely manner without arguing about every detail.
    This whole notion of retail price control smacks of Bass Pro, Cabela’s et al—and it isn’t good for our industry at all. The next thing you know, Genmar will be selling Four Winns through Sam’s Club or something weird like that.

  7. Pete Peterson

    Jim;

    Just want you to know that we have spent the last five years building to the point where we can be assured that what is leaving the plant is as close to perfect as possible. These are still built by people and occassionally a problem may arrive, but we offer training for our dealers and if they participate annually we do pay shop rate for all warranty work and gladly. This has helped us earn the NMMA CSI recognition for the past four years.

    Pete Peterson
    World Cat

  8. Jim

    Ok Pete, I hit a nerve and I am glad to know that at least one company is on top of their game. Good for you and I hope many other builders are following suit—it makes our job in the field selling, delivering and taking care of our customers after the sale that much easier; not to mention building a loyal client base going forward for both builder and dealer.

  9. JACK DOLAN

    I WAS ONE OF THE EARLY TRACKER DEALERS. WE FOUND WE COULD RUN OUR DEALERSHIP WITH FEWER SALESPEOPLE WITH THE FIXED DEALER PRICING. WE MADE REALLY GOOD PROFITS ON THE TRADES, AT THE TIME OF THE DEAL WRITE UP WE WOULD GIVE THE CUSTOMER OUR TRADE ALLOWANCE AND ALSO THE PRICE WE INTENDED TO SELL THEIR UNIT FOR IN OUR STORE, WE GAVE THE CUSTOMER A SHORT TIME PERIOD IN WHICH HE COULD SELL HIS OWN BOAT OR TURN IT IN TO US. WE REMINDED THE BUYER OF THE ADDED SALES TAX ON THE NEW PURCHASE IF THEY OPPED TO SELL THEIR OWN TRADE. THE FACT THAT TRACKER CIRCULATED SO MANY CATALOGUES ESTABLISHED THE PRICE BEFORE THE CUSTOMER VISITED OUR STORE. OUR SALES PEOPLE COULD SPENT MORE TIME SELLING FEATURES RATHER THAN DISCUSSING PRICE. THE TRACKER SYSTEM WORKED SO WELL WE INCORPORATED IT INTO OUR OTHER BRANDS. JACK DOLAN, RETIRED

  10. Confused

    Dick Wempen wrote There are a lot of issues at play here and I think that manufacturers need to look at 150 to 200 mile circles to keep their dealers fighting the competion instead of other dealers

    In Florida the state is less than 100 miles wide and 400 long so you think that 2-3 dealers can handle ther Florida market?? Please, over population of dealers is one thing but even Marine Max has a dozen stores in Fl. The answer is do business with those you know & trust and that treat you with respect and how you want to be treated. If they don’t find some who will. If you still do business with those that don’t treat you as you think they should, the one to blame is in the mirror.

  11. Agree with Confused

    I agree with Confused reply to Dick Wempens issues about overcrowding. If the manufacturer is not allowing him enough sales or profits, he should look for another manufacturer.

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