Price Fixing Specialized - query

TowerRider

Hi, I have been looking at spending between £300 - £500 on a hardtail MTB. There is clearly a price fixing agreement between Specialized and all the dealers. Does anyone know if the Office of Fair Trading are looking into this illegal practice?

The dealers must be desperate to stock Specialized as I see no incentive to purchase from an online seller.

Is it just Specialized or other manufactuers?

supersonic

I have seen many reduced Specialized bikes, so not sure on this. Check out Edinburgh Bike Coop, thay have the 09 Rockhopper Disc at £399.99.

alfablue

I don't know about Specialized, but my LBS unwittingly admitted to me that a certain North American brand did operate such a policy, whereby dealers might have trouble accessing stock if prices were cut below certain limits. I remember several years ago Volvo got in big trouble by operating a similar unwritten policy.

On another note, I notice that Trek bikes are generally unavailable online for courier delivery, they may be purchased but require collection, or in the case of All Terrain Cycles for example, they deliver with a mechanic to set it up for you, of course at extra cost. This may have the side effect of maintaining prices as there is less online competition. Of course, they can probably defend this policy along the lines of safety or quality issues.

If you think Specialized are doing something like this then you could complain, I don't think much would happen without complaints or evidence from consumers.

damo2576

That isn't price fixing just retail price control. A lot of big brands do it.

Price fixing is if two manufacturers were colluding to fix the price of something. i.e. if Specialized and Giant spoke to agree prices of bikes. That's illegal since it erodes competition.

JohnMartin

Must admit I thought Trek were at it as all the retailers prices are the same.
Bought a Cube LTD Race instead of a Trek. 8)

alfablue

damo2576 wrote:

That isn't price fixing just retail price control. A lot of big brands do it.

Price fixing is if two manufacturers were colluding to fix the price of something. i.e. if Specialized and Giant spoke to agree prices of bikes. That's illegal since it erodes competition.

It is price fixing, it is illegal, if there are a lot of big brands at it, then a lot of big brands should be prosecuted!

The example you give is a cartel, which is one type of price fixing. There are others, such as imposing minimum selling prices on shops a brand supplies.

Price fixing, cartels and monopolies

Price fixing and the law

Competition law prohibits almost any attempt to fix prices - for example, you cannot:

agree prices with your competitors, eg you can't agree to work from a shared minimum price list

share markets or limit production to raise prices, eg if two contracts are put out to tender you can't agree that you'll bid for one and let your competitor bid for the other

impose minimum prices on different distributors such as shops

agree with your competitors what purchase price you will offer your suppliers

cut prices below cost in order to force a smaller or weaker competitor out of the market

The law doesn't just cover formal agreements. It also includes other activities with a price-fixing effect. For example, you shouldn't discuss your pricing plans with your competitors. If you then all 'happen' to raise your prices, you are fixing prices.

Source: Businesslink

Here is an OFT press release concerning Lladro which illustrates how such practices infringe the 1998 Competition Act

alfablue

JohnMartin wrote:

Must admit I thought Trek were at it as all the retailers prices are the same.

Yes, can they argue this is just coincidence???? :evil: :?

damo2576

alfablue wrote:

It is price fixing, it is illegal, if there are a lot of big brands at it, then a lot of big brands should be prosecuted!

How do you explain the big branded items you see for the same price in every shop? Eg. Nike or Specialized as per OP?

And despite what Business Link may say, Price Fixing in strict definition is an agreement between competitors.

fletch8928

Tesco, Asda and was it walmartisons had a price fix on milk last year and they got stung.

I was looking at getting a new bike just 3 weeks ago and i got a big fat no from 4 retailers when i tied to get discount on this/last years models(09), 1 even quoted that giant wont let them!! hmmm.
I chose a different bike at a better price (haggled) with better spec so it worked out ok for me.

alfablue

damo2576 wrote:

alfablue wrote:

It is price fixing, it is illegal, if there are a lot of big brands at it, then a lot of big brands should be prosecuted!

How do you explain the big branded items you see for the same price in every shop? Eg. Nike or Specialized as per OP?

It is not for me to explain, maybe the brands and sellers need to explain. Because the law also covers informal and unwritten agreements, price fixing can go on without leaving much, if any evidence that it is occurring, other than the coincidence of similar prices at various retailers. On the one hand, there is nothing to stop a retailer shadowing the prices of a competitor, after all, that is the essence of competition. The big supermarkets make a big play of this in their marketing. If, on the other hand, two or more retailers met, discussed and informally agreed pricing, that would be illegal price fixing (in the form of a cartel). Similarly, In the case of the big brands cited, if they have agreements/policies/rules/penalties or sanctions that in any way have the effect of controlling the minimum price that their retail partners sell at, this is also illegal price fixing. With the OP's example, I do not know if retailers are acting individually (and therefore legally) in setting their prices; whether they are colluding to agree prices (illegal price fixing), or whether the brands are imposing some policy that artificially controls prices (illegal price fixing).

And despite what Business Link may say, Price Fixing in strict definition is an agreement between competitors.

Well, this could be a matter of semantics (or pedantry). Who is doing this "strict definition"? In the Competition Act it refers to agreements that: " . . . directly or indirectly fix purchase or selling prices or any other trading conditions". This includes all agreements, whether between different retailers or different manufacturers (cartels) or agreements between manufacturers and retailers they supply. They are all forms of price fixing under the law.

damo2576

fletch8928 wrote:

Tesco, Asda and was it walmartisons had a price fix on milk last year and they got stung.

Exactly. That is price fixing, competitors (Tesco/Asda) colluding to fix the price of milk.

Thats diff to Specialized telling your LBS they have to sell a Stumpjumper for £x and Nike telling the sport shop Air Max must be sold for £y.

alfablue

fletch8928 wrote:

Tesco, Asda and was it walmartisons had a price fix on milk last year and they got stung.

I was looking at getting a new bike just 3 weeks ago and i got a big fat no from 4 retailers when i tied to get discount on this/last years models(09), 1 even quoted that giant wont let them!! hmmm.
I chose a different bike at a better price (haggled) with better spec so it worked out ok for me.

Yes, this is very revealing! It suggests that there may be price fixing going on, and it also suggests that the retailers are blissfully ignorant that it is illegal (otherwise they surely wouldn't make such comments). Of course, this proves nothing, and there is unlikely to be a paper trail, but hard pressed retailers may understandably be very nervous of damaging their security of supply.

An LBS told me something similar when I asked for a discount on a leading brand of sunglasses - "if we discount, ************ will stop supplying us".

alfablue

damo2576 wrote:

fletch8928 wrote:

Tesco, Asda and was it walmartisons had a price fix on milk last year and they got stung.

Exactly. That is price fixing, competitors (Tesco/Asda) colluding to fix the price of milk.

Thats diff to Specialized telling your LBS they have to sell a Stumpjumper for £x and Nike telling the sport shop Air Max must be sold for £y.

Its all price fixing, and its all illegal. I don't quite understand your point. Is there a term you would prefer for the second form of illegal price fixing you mention?

damo2576

Retail Price Control was how I remember it.

alfablue

Ah, okay

alfablue

I think the term "retail price control" is now usually referring to the regulation of retail prices by the regulators of the utility industries (eg; Ofcom and telecoms providers; Ofgem, electricity and gas etc).

fletch8928

Many many moons ago i looked into setting up a bike shop. how i wish i had but then again i may have failed. but the brands i approached to sell all had a different way of marketing, X said i had to sell so may units per year, Y said it would only supply if i was making ? profit margins and so on and so forth.

I dont think its really that wrong for a supplier to expect a shop to sell at a certain price, Brand strengths are not built on cheap prices.

In reality how much difference is there between equivalent bikes from Giant, Spesh, Trek, Scott. GT, Cannondale, Kona ect ect . So why cant they sell at roughly the same price?

I was just surprised that at the "end of year stock" wasnt being offered at some sort of discount. Confidence in their product no doubt.

TowerRider

Thought so and interesting replies.

I actually emailed 2 asking why the fixed rrp prices and asked them to tell me why I should buy from them but not even a polite reply. I rang up one supplier who has many branches and they said they were not allowed to sell them below rrp and I went into look Bike shop who sells Raleigh and he said they can't sell spec because dealer within 10 miles.

Slightly off topic but as mentioned above (thanks) the sale starts tomorrow and is this a silly question?
Which would be the best buy if both are £400, Hardrock Pro Disc 09 or Rockhopper Disc 09? I thought (little knowledge) the Rockhopper.

Hougham

Worst thing that could happen would be having one or two giant mail order companies shelling out bikes for next to no profit and bankrupting all the smaller distributors. I am glad there are local bike shops all over the UK. I love going in to a shop and trying out new bikes. To see first hand what your looking at getting is unbeatable. I am also glad there are local events sponsored by local shops. I am also glad that if my bike brakes I know just about every town in the UK will have a shop contacted to do warranty work on it. I am happy to pay a fair price for a bike. Its not as if bike shop even make that much money on a bike after tax to start with.

supersonic

TowerRider wrote:

Thought so and interesting replies.

I actually emailed 2 asking why the fixed rrp prices and asked them to tell me why I should buy from them but not even a polite reply. I rang up one supplier who has many branches and they said they were not allowed to sell them below rrp and I went into look Bike shop who sells Raleigh and he said they can't sell spec because dealer within 10 miles.

Slightly off topic but as mentioned above (thanks) the sale starts tomorrow and is this a silly question?
Which would be the best buy if both are £400, Hardrock Pro Disc 09 or Rockhopper Disc 09? I thought (little knowledge) the Rockhopper.

The Rockhopper.

Isn't RRP just that though? Spesh sell very well - shops may have no reason to sell at any less!

bol

I don't think it is ilegal or wrong for manufactuers to look to protect their brand value or frankly their small LBS retailers by controlling the prices their products are sold at. Otherwise we'd all be tempted to buy from the online retailer who piles them high and sells them cheap and there'd be no LBS to turn to when we need them.

alfablue

bol wrote:

I don't think it is ilegal or wrong for manufactuers to look to protect their brand value or frankly their small LBS retailers by controlling the prices their products are sold at. Otherwise we'd all be tempted to buy from the online retailer who piles them high and sells them cheap and there'd be no LBS to turn to when we need them.

It is clearly illegal to engage in price fixing, the law is quite plain, just read it (Competition Act 1998).

Whether it is right is another issue, however the law currently prohibits price fixing, yet business is booming at the LBS, so I don't believe your apocolyptic view that there would be no LBS, on the contrary, widespread price fixing would hurt the LBS as online retailers could source bikes and components through unofficial sources at advantageous prices that the LBS could not compete with (grey imports, for example). Indeed, as price fixing is illegal in all sectors of the market, the logic of your argument would suggest that there would only be online shops for anything (not just bikes), this is clearly not the case.

supersonic

Just because shops are selling at RRP is not conclusive evidence of price fixing. I think the reason of this thread is that the OP wants a deal and can't find one ;-) Many seem to think RRP is always more than we should pay.

Given the enormous popluarity of the Spesh Hardrock and Rockhopper, there is no way I would sell for any less if I had a bike shop! Because I know I will sell them

spin_to_win

There can be no price fixing agreement, as is in all retail a supplier/distributer/manufacturer can suggest a SRP this is a broad evaluation of a products worth within the market place and retailers are free to sell at what they like, however if a product sells and or if stocks are limited then why discount, discounting only hurts the retailer as they have already purchased the item at an agreed trade price thus are only giving profit away and any decent business does not want to do this.
It seems to me that the cycle industry is becoming more professional and small one man bands are disappearing thus more business minded people filter in. Just look at what happened to camera shops ( Jessops dont discount.) and white goods ( comet stick to marked prices.) What then tends to happen is set times of sales drive in bargain hunters as retailers look to clear old stock.

smegurmum

alfablue wrote:

On another note, I notice that Trek bikes are generally unavailable online for courier delivery, they may be purchased but require collection, or in the case of All Terrain Cycles for example, they deliver with a mechanic to set it up for you, of course at extra cost. This may have the side effect of maintaining prices as there is less online competition. Of course, they can probably defend this policy along the lines of safety or quality issues.

the reason why trek (and gary fisher also) has something to do with validating there warrenty, or so im told by the powers above

djames77

I think it is likely to be a gentlemens agreement between certain lbs. I have been looking for a couple of weeks now and have been able to negotiate the following discounts so far

cannondale f4 2009 £650
trek 6000 2010 £590
rockhopper expert 09 £640
trek 4300 2010 £360
orange (G3 I think it was- something 3 comesonly in red) £640

going out again today for spesh and gt 2010 models

alfablue

djames77 wrote:

I think it is likely to be a gentlemens agreement between certain lbs

This too, would be illegal, as would any form of agreement. A trading standards person told me (when I was concerned with car price fixing) that even if two car dealers had a chat over a game of golf regarding price it could constitute a breach of the law (assuming they acted on the "chat"). Very difficult to get evidence of this though. I have much sympathy for difficult trading conditions that LBS's might suffer (though business is booming at the moment, at least at the good ones), but I see no reason why any sector should consider the law needn't apply to them.

I don't believe my local LBS's are in cahoots with each other (one won't move on price at all, the other is always ready to deal), but I have my suspicions about pressure brought to bear by manufacturers/distributors.

Anyway, good luck with the bargain hunting, I am sure there are still some out there.

bomberesque

OTOH, say you're piling the pressure on a shop assistant to give you a discount. How about he tells you "look, I'd like to give you a discount personally speaking but the supplier just won't let me" It takes the decision out of their hands and is one of the oldest tools in the box; blame the guy who isn't there.

That's not to say that suppliers and distributors don't put pressure on retailers not to discount, only that that is not the only explanation for a salesman saying such a thing

btw Alfablue, the alfa dealer out here told me last month that "alfa Romeo don't discount their cars as it would adversely effect the 2nd hand value" this just after he's told me that my 156SW isn't worth effall in PX. I nearly fell down laughing!

there will always be bargains out there, you just need to be after the stuff that there's more of than there are buyers. Just remember that the reason there are less buyers than product could just be because it's sh**

guilliano

There is no price fixing by the manufacturers when it comes to bikes/parts/accessories. There is a SRP which is there to offer the seller a sensible margin to allow them to continue to exist by paying rates, VAT (twice), proprty costs, bills and wages. If the seller drops below this price they are cutting off their own income, not the suppliers and as such would be silly to do so. If you were running a business would you give your profit margins (and therefore your OWN money) to the first person to show interest? Or would you stick to your guns and say "no, this is the price. If you don't buy it someone else will"?

alfablue

bomberesque wrote:

btw Alfablue, the alfa dealer out here told me last month that "alfa Romeo don't discount their cars as it would adversely effect the 2nd hand value" this just after he's told me that my 156SW isn't worth effall in PX. I nearly fell down laughing!

Alfa's do very poorly on s/h values (I imagine I would have to pay a dealer to take my 17mpg dinosaur off my hands), but this just shows what s*it some salesmen will say! It is really heart warming to know they care about s/h values!

Of course, you are right, blaming the distributor/manufacturer may just be an excuse, and hold no sinister connotations. The conversation I had with my LBS was about prices on certain brands, after I had got a great discount on and paid for a bike, so his unwitting admittance was not quite so BS driven as our kindly Alfa dealer's!

alfablue

guilliano wrote:

There is no price fixing by the manufacturers when it comes to bikes/parts/accessories.

Maybe there is not, but on what basis can you say this so categorically?

I can see that LBS's that sell in sufficient volume could afford to cut prices and margins, I mean, this sales model has been going on for years (centuries), and is the whole basis of why supermarkets work.

I can also see that the manufacturer may want to preserve prices so that smaller dealers across a wider geographic area can afford to sell their bikes, with some protection from the competition that large sellers would cause. In some ways this seems almost altruistic, but I suspect altruism is not a relevant motive.

I can also see that there is a balance of power to be maintained by the manufacturers, once they are beholden to the large sellers who sell at lower prices, these sellers will be able to drive down trade prices, the manufacturer makes less money. Maybe not so altruistic.

I can also see that between manufacturers, there may be some interest in keeping prices between manufacturers fairly stable, as they may fear bloody price war.

Now, none of the above may be desirable, and there could be effects of preventing the above that are not always for the greater good (like the threat to the corner shop from the supermarkets), but I think 1) any such pressures or agreements are illegal; 2) it is simply naive to say it does not occur; and 3) if we don't like our competition laws we should change them via the ballot box, not condone offences against them if they exist.