Marine Industry Price Fixing

[StephenSails]

I have received a phone call from a very well know marine distributor saying that if I do not maintain recommended retail prices they will close my account, "there will be no debate on this subject, simple as that".

I know a lot of people knock chandlery businesses for being expensive so you can imagine how frustrated I am. I have spoken to the office of fair trading on this matter and they are really taking their time as this is not the first call I have had from this supplier, nor is it the first time I have spoken to the OFT on this subject, in the mean time I have to maintain stupidly high prices on a range of goods that are no longer selling.

If I blow the whistle on them will I get a bad name in the industry and loose more suppliers, or is this particularly unfair practice frowned upon generally in business? I don't like it one bit. I would like to see what the end consumers think of this.

 

[pvb]

Price fixing stinks...

As a consumer, I think price fixing stinks, but it still seems to be very common. The OFT might eventually get around to doing something, but I bet the marine distributor involved hasn't put anything in writing, so it's unlikely ever to be formally contested.

However, your claim that "I have to maintain stupidly high prices on a range of goods that are no longer selling" doesn't quite make sense. If the distributor is fixing prices for all its customers, then everyone will have to charge the same stupidly high prices. If the goods are desirable to consumers, they'll still sell and, logically, you should still get a share of the market. It's the consumers who'll lose out.

In the meantime, can you offer free shipping on these goods? Or some volume-related discount? Are the goods things which people buy in particular combinations, so can you offer "buy X and get Y at half price"? How about theoretically rolling back the VAT, so the ex-Vat RRP is maintained but the consumer price is less?

 

[dickh]

Re: Price fixing stinks...

If he insists on this stance, can you not find alternative suppliers which can supply similar items and sell them cheaper? Bit cheeky - but what product is he selling? - I think you should tell everyone who it is............

 

[StephenSails]

Re: Price fixing stinks...

Unfortunatly there is only one manufacturer of this gear, there is nothing like it available from elsewhere either. If it gets messy I will go to town and make some really bad press for them but I am just seeing whether there is any thing I can do to pursuade them that they are wrong.

 

[Peppermint]

Re: If your a punter

price fixing stinks. But if your a manufacturer price means more to you than money.

You've got a clash of business models.

For many companies, assuming they've got a reasonable product, price fixes their position in the market place, premium or lower end. Their whole production/marketing plan may be based on the position they hold in the market sector.

They may have built up a network of stockists and developed a two way relationship with them. Stockist may take the whole range of a manufacturers output.

Then along comes someone and "cherrypicks" easy to sell items and discounts them. They're business model is into volume and wham bam marketing. This can cause the manufacturers business plan to get out of balance, create production shortfalls, and piss's of his stockists.

So why should a manufacturer make it easy for the "cherrypickers"? They might have shot through by the end of next week.

The most successful "cherrypickers" seem to find a grey market. Where the manufacturers goods can be bought abroad and sold back in the UK. I had some mates did really well with Porsche parts. It was a constant battle with Porsche though.

My favoured business model maintains that, certainly in a B2B sales environment, discounting is a sign of weakness. I'd sack any salesman that discounted in cash and if they give product away they better have a plan.

 

[StephenSails]

Re: Price fixing stinks...

Thanks for your reply, there are a few tricks up my sleeve like free carraige etc.

The pricing is just making the product higher than it needs to be, I feel that as with all the other chandlery items we sell being able to offer them at a competitive price is the way it should work.

I have nothing in paper from them but I think if they close my account then that will have to provide a good reason to. To be honest if they where to close my account then I would go to town and make a big thing of it as I would have nothing to loose.

I am going to chase the OFT and see what happens. In the mean time I think its fair that the public are made aware that this activity is taking place in the marine industry.

 

[Stemar]

Re: Price fixing stinks...

I'm no lawyer, but I think this is sound. No doubt some of my more learned colleagues on the forum will be able to confirm or correct it:

If they get heavy again, ask for the name of the person who's calling and tell him to put in writing exactly what they're not happy about, what items and what price they have a beef about. If you can, record the coversation. If you can't, write to them with your recollection of what they said to you. They'll either have to deny it was said, in which case you're home free, or admit it, even tacitly by not replying, when you've got evidence which could open the way to the possibility of damages if they do pull the plug.

 

[Birdseye]

That is illegal - and its not a minor crime like speeding. Its jailable, and with fines up to (I believe) 10% of the turnover of the whole group of companies. The trouble is that the OFT are incompetent and only act when pushed to do so. So you have a choice. You either become and accessory, or you gather decent evidence and take up via rather more proactive routes like the magazines and your MP.

Its rampant.

 

[Rowana]

Stephen might win the battle, but I'll bet he'll lose the war ! !

If this goes the whole hog, and comes to court, reported in the media Etc., Etc, it probably won't be long before some of his other suppliers will find "reasons" not to supply him with their goods. He'll end up out of business.

IMVHO the best thing to do is either not stock goods from this company and use the space to hold other stuff that will sell better, or else sell at the recommended price but offer free delivery or something.


My brother-in-law was involved in a bit of a wrangle some time ago, and everyone advised him to let it be. He was absolutely right, and eventually won his case and he felt vindicated. However, he just couldnt get a job again for well over a year, although he is well qualified. He eventually moved to a different part of the country where he wasn't known and has got a job there. Sometimes it's better to just keep quiet and accept the inevitable however much it goes against the grain !

 

[Stingo]

Jim

That's a real defeatists' attitude - you surprise me.

This would be a fairer world if there were more poeple like Stephen and your brother-in-law.

 

[Rowana]

Agreed!

But some of us have wives and children to support, and that is the greater priority.

It would be a wonderful world if everyone played by the rules, but I'm afraid a good many dont !

 

[Peppermint]

Re: Pragmatizm

There are no great principles at stake here. It's just business. Stephen thinks he can sell more of this stuff by selling it cheap. The manufacturer thinks thats not on. They're both engaged in making money. If Stephen goes to law he will find that, as a small business, a great deal of his time that he could spend profitably, is wasted. Small business hasn't the time to waste.

If I couldn't negotiate a deal and if I wanted to go on selling this stuff I'd look at other ways of adding value. Failing that I'd find a replacement product and target the market of the bully boy.

No matter how nailed on certain my case I'd be reluctant to go to law over it. Going to law on commercial issues in the UK is often just like spinning a coin.

 

[Rowana]

Re: Pragmatizm

Exactly ! !

 

[yachtbits]

Best Legal advice I\'ve ever been given

Never go into court as a plaintif.

Never go into court for principle, only financial gain.

That came from a solicitor I was using at the time and I think it is probably the only 100% honest legal advice I've ever had.

I think the same applies to starting an argument via OFT. You will end up with burnt fingers!

On the point of discounts though,

There has to be a point where deep discounting is too deep. To some extent a bit of control may be required to prevent damage to a manufacturers reputation by poor retailer service, which may be a direct result of operating on too smaller margins.

Would a retailer really what to provide hours of technical support on a product that he's been screwed down on price on? Probably not.

kev

 

[Ships_Cat]

Re: Best Legal advice I\'ve ever been given

But do your anti competition rules specifically forbid manufacturers controlling the price of their products down the supply chain (I live outside of UK so don't know)?

I know that there have been prosecutions in the UK for manufacturers and the sellers fixing prices but I wonder if that only applies if that denies competition ie there are no other equivalent products that an end customer can buy from other manufacturers and retailers. I also know, as others have said, that in UK those down the supply chain are regarded as guilty even if somewhat innocently involved but do not squeal to the authorities.

If is totally prohibited along the lines some seem to be saying, then I wonder how arrangements such as franchises get on where there is price fixing among all the various franchise holders (MacDonalds here, as an example, is all franchises with each outlet being a different retailer but certainly all the same pricing - lots of other chains, such as home supplies, garden centres, fast food, etc are the same). In many cases the franchiser provides supplies to the franchisees who are not allowed to use other suppliers for those things.

Another common mandatory arrangement is the manufacturer requiring that the retailer only sell his products and not those of one of his competitors - new motor vehicle retailing is an example of that in most parts of the world and I assume so in UK also. I am aware of arrangements, not in the UK, where the price of the new vehicle is also fixed or else must not be sold under a certain price unless fleet sales which may be bargained/tendered by the manufacturer on behalf of the retailer (the retailer still gets his cut). Have also seen it apply to other products as well, such as whiteware.

I generally side with the manufacturer in that he often has ultimate responsibility for the product. While the following may not be so with the product you have, they serve as examples of things which a total ban on the price setting would stifle - for many products the manufacturer is very concerned about how and where in the market his product is placed and often provides advertising, display, etc to manage who targetted and quality perceptions, etc. Price is an important element of the management of the placement of the product and it would seem silly to me to have a law denying that even if there were plenty of other competitors. Also, ultimately, the manufacturer normally ends up responsible for guarantees, even if that flows back from the retailer if the legislation is (as is in many places) that the retailer is responsible as between the customer and himself.

Unless the law in UK is so stifling that no supplier can ever set retail prices and so you are likely to become guilty by implication, then whether you stick with the producer is your decision. I personally see nothing wrong with what he is doing as long as it does not stifle competition in the whole market (and is not illegal).

John

 

[TrueBlue]

Methinks you're stuffed, there have been a lot of posts saying what the Law is; the problem is in enforcing it. in Law there there are all sorts of protecting you - even the Treaty of Rome, but you will grow old and dead in trying to obtain justice. If your supplier isn't open to finding acceptable ways for you to offer better value without upsetting him, then you're stuck - pro tem.

If you find that sticks in your craw then find ways - as you are trying to do here - to kick him in the cahones by degrees. Don't get into a situation wher it actually damages your business. Sometimes the "slowly but surely" mantra brings better results, but it's very tedious process. Try sticking pins into a copy of its Corporate Logo...