Price-Fixing Now An Option

Publish Date: 
Oct 1, 2007
By Arlo Redwine

Some manufacturers may soon prohibit dealers and Internet retailers from discounting beyond a certain point. Stores that do so anyway could be cut off from ordering product.

On June 28 the U.S. Supreme Court overturned a 96-year-old law that had made it illegal for companies to dictate minimum retail prices. Courts will decide such antitrust lawsuits case by case.

Unclear is the effect the ruling will have on the powersports industry. Companies such as Arai, RevIt and Tucker Rocky have long had minimum advertised prices, but because Internet discounters often use "Call for Our Price" listings to get around such restraints, these same manufactures may now consider price fixing.

Arai's Roger Weston says he's already talked to his attorney, but he plans to proceed cautiously. "We'd like to see how [the ruling] shakes out first," he says. "My lawyer says the decision will probably hold."

Dealers should keep in mind that the Supreme Court did not give vendors carte blanche to fix prices; it ruled only that price fixing is no longer automatically illegal. Price maintenance among competitors is still a federal felony.

Law firm Garvey Schubert Barer has posted a comment on its website in which it outlines which manufacturers would likely get away with price restraints and which would not. Those in the latter group include monopolists, companies in industries with small numbers of manufacturers and retailers, and companies that sell directly to consumers (because they compete with their own dealers).The firm also notes that all states have their own antitrust laws and that "there is no guarantee that every state's judges will follow the June 28 decision."

Protecting brand image. Most powersports manufacturers might not be interested in price fixing in the first place. They could ask, "Why create less price competition among dealers and threaten our products' ability to sell through?"

High-end manufacturers often do see benefits. "We are just trying to protect our brand image," explains Arai's Weston. Price minimums also help new brands by keeping them out of discount bins long enough to take off.

Speaking of discount bins, should dealers worry that some vendors might prevent them from moving out old inventory? Probably not, given that today's advertised price minimum policies usually exempt older stuff.

"Retailers should not advertise current helmets for more than 10 percent off MSRP," warns Weston, adding that "as anything disappears from our website or brochure, it's considered noncurrent, and that policy doesn't apply any longer."

Price fixing also could have little effect on the industry if there is no enforcement. For example, manufacturers already dictating advertised minimums often have difficulty enforcing their policies.

That's about to change — at least at Arai. "We're getting a mechanism into place now that will make it easier to police that. It'll take effect slowly over about six months."

When asked for particulars, Weston declines to answer. "I don't want to tell the guys who we're trying to police how we're doing it," he says.

No more free ride. Fixed prices would likely benefit some powersports retailers. Not only would minimums guarantee margins, they could help protect dealers from Internet discounters and "free riding," where a low-overhead store undercuts the shop down the road. At least with a few select brands, stores could compete on service rather than price.

Price fixing, however, also could dissuade manufacturers from offering wholesale discounts, which could never make their way down to consumers anyway. And given the size of the gray market and the aforementioned policing issues, minimums may not hurt Internet discounters that much after all. — Arlo Redwine