RPM becomes MAP and consumer loses

Wall Street Journal:

A group of major discounters, including eBay Inc. and Costco Wholesale Corp., is expected Thursday to call for new laws blocking manufacturers from setting minimum prices on everything from flat-screen TVs to power drills. That move could ratchet up a battle between retailers and a little-known but powerful industry that's taken off in just the past year.

Tiny firms like NetEnforcers Inc. -- with only 56 staffers jammed into a dim, spare cubicle farm here in Arizona -- wield economic power far beyond their size. These companies scour hundreds of thousands of Web sites daily, looking for retailers offering bargains below the "minimum advertised price," or MAP, set by manufacturers on an array of consumer goods.

When NetEnforcers finds goods like cameras, handbags or ovens for sale at too-low prices, as it claims to do 5,000 to 10,000 times a day, it alerts its clients, including Sony Corp., Black & Decker Corp., Cisco Systems Inc., JVC Kenwood Holdings Inc. and Samsung Inc.

For discounters, the consequences of not respecting MAP are usually speedy and decisive. If the seller is an authorized dealer of the product in question (which means it is bound to honor a MAP agreement), it gets a notice from the manufacturer or NetEnforcers and typically brings its price into line within hours, the company says.

In October, for instance, NetEnforcers found that discounter Buy.com Inc. and AceToolonline.com Inc. a seller of power tools, were offering goods at below the MAP. Both sites said they raised their prices to MAP levels.

If the seller isn't an authorized dealer -- for instance, a discounter that acquired the goods via a distributor -- NetEnforcers says other tactics are used to try to force a lowball price off the Internet. In these cases, they can allege that the discounter's use of the product's name or image constitutes trademark or copyright infringement, in an effort to force the seller to stop listing the discount.

Manufacturers have been racing to enforce minimum-pricing policies since last year, when the Supreme Court ruled them to be legal, and not a violation of antitrust law. EBay and a group of other retailers and antitrust advocates are meeting Thursday in Washington to craft a strategy to overturn that ruling.

Manufacturers say minimum-pricing requirements are good because they protect a brand's image from being tarnished by discounting, while helping retailers make enough profit to pay for customer service. Consumer advocates argue that minimum-pricing deals hurt shoppers by keeping prices high and diminishing consumer choice.

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MAP used to be called Retail Price Maintenance. For a long time the anti trust laws made it illegal. Congress should amend the law to make it illegal again.

I have never told a manufacturer or a retailer to charge me more for a product. I don't know anyone who has either. Retailers like RPM because it means they do not have to be competitive on price. For some it may mean they become more competitive on service, but the fact is if the manufacturer makes a quality product service becomes relatively unimportant.

For Example Honda has great service on their cars, but people buy their cars because they don't need as much service. Would you rather have a car that did not need service or one that requires a lot of "free" maintenance?

The fact is that neither the consumer or the manufacturer receive tangible benefits from RPM. The only beneficiary is the retailer who no longer has to compete on price. It is clear that Netenforcer is not doing customers a service.