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  • Guitar Center/NAMM Accused of Price Fixing

    This topic is generating a little buzz in the guitar forum and I though you all might be interested as well. These are quotes from my blog with direct links back to the source material.








    Per a September 23, 2009 press release, Hagens Berman Sobol Shapiro LLP has filed a class action lawsuit on September 22, 2009 in U.S. District Court in California against Guitar Center and the National Association of Music Merchants (NAMM) claiming the two conspired to fix retail pricing on fretted instruments including guitars, allowing national music-retail heavyweight Guitar Center to secure higher profits and stamp out competition at the expense of consumers.



    You can read the press release in it's entirety here including a link for those potentially interested in participating in the lawsuit.



    NAMM's response:








    In a September 24, 2009 press release, NAMM (National Association of Music Merchants) has responded to the Hagens Berman Sobol Shapiro LLP class action lawsuit which has been reprinted in part below.



    "NAMM believes that the recent lawsuits filed by plaintiffs making antitrust claims against the association are without any merit and reflect an incorrect understanding of the consent agreement that NAMM entered into with the FTC in March of this year...These types of legal actions based on misinformation...are a detriment to the music industry, to music makers and to music lovers everywhere. While NAMM is understandably disappointed that these groundless lawsuits have been filed, the association does have a legal strategy in place to defend and protect itself against these claims."



    The consent agreement referred to is the March 4th, 2009 cease and desist order prohibiting NAMM from



    "...acting directly or indirectly, or through any corporate or other device, in or affecting commerce, as
    Will Chen Trio | FrugalGuitarist.com | FG on Facebook | Forum

  • #2
    I signed up! Maybe I can get 50 cents back on what I paid for my EJ Strat while the attorneys get rich!



    Terry D.
    Telling Stories releases 2nd CD, see our WEBSITE! Please check out my GROUPIE STORY and Tales from the Road.

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    • #3
      Here's a perspective courtesy of Music Trades Magazine that may give you some insight...



      ===



      MONTHS AFTER THE FTC CAME UP EMPTY-HANDED in its investigation into alleged industry price fixing, a civil suit has been filed making similar allegations. Guitar Center, Fender Musical Instruments, and NAMM stand accused in a class action suit of working in concert to "artificially inflate" the price of guitars and deprive consumers of choice. David Giambusso, a Brooklyn resident who bought an instrument from Guitar Center in September 2007, says he paid too much, and the suit seeks $5 million in damages for him and everyone else who purchased a fretted instrument or accessory between January 1, 2005, and December 31, 2007. Giambusso is represented by Mark Tamblyn of Wexler & Wallace. A lead attorney for the full class of plaintiffs has yet to be announced.



      Although Guitar Center, Fender, and NAMM are the only parties named in the suit, the complaint alleges that other "unnamed" enterprises were likely to have participated in the conspiracy. Lawyers say they will uncover these other parties through the discovery process and take appropriate action.



      In an error-filled complaint, filed in Sacramento, California on September 11, 2009, attorneys paint a picture of three immensely powerful entities--NAMM, Guitar Center, and Fender--working closely together to force up prices and exclude low-priced products from the marketplace. Fender, as the "largest guitar company" in the United States, is said to have used its market clout in unspecified ways to prevent potential competitors from "competing effectively against the defendants." Guitar Center, by virtue of its size and national reach, is said to have achieved near "monopoly power," which it has used to keep lower-priced products out of the marketplace. NAMM, which includes most of the industry's suppliers and retailers as members, stands accused of urging its membership to raise prices to fatten the bottom lines at Fender and Guitar Center. To bolster this claim, the complaint cites the recently concluded FTC investigation, which expressed concern that certain NAMM-sponsored meetings could encourage price fixing.



      As proof of this alleged conspiracy, lawyers cite average selling prices from The Music Trades Industry Census. However, the numbers cited bear no relation to the actual published data. The complaint states, "According to The Music Trades Annual Census of the Music Industry, published in 2009, in 2006 the average price of a guitar was $309, by 2007 the average price was $350, and by 2008 the average price was $372." The actual numbers published in The Music Trades show no such increases. We reported that the average selling price of a guitar in 2006 was $372; it increased to $389 in 2007 and then retreated to $375 in 2008.



      In other notable errors, the complaint references 80,000-square-foot Guitar Center stores stocking 4,500 SKUs, when the company reports store sizes of between 15,000 and 25,000 square feet, and an average 11,000 SKU count. The complaint also claims that Best Buy is opening 91,250-square-foot music stores, when the actual size is approximately 2,000 square feet.
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      • #4






        Quote Originally Posted by Jeff da Weasel
        View Post



        Guitar Center, by virtue of its size and national reach, is said to have achieved near "monopoly power" ...




        Just curious. Does anyone disagree with that?

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        • #5






          Quote Originally Posted by Jon Gnash
          View Post

          Just curious. Does anyone disagree with that?




          I'm not sure what "near monopoly power" means, legally. I have a lot of different music stores to choose from around here, including GC as well as Sam Ash, a good number of smaller one-location shops, and the real giant of the business, mail order and e-commerce places like Sweetwater and Musicians Friend. So I'm not even sure what a "near monopoly" is or how it applies to this suit.
          Music, thoughts, stuff, and... I guess that's all

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          • #6
            Wouldn't "price-fixing" have to be done in such a way as to be anti-competitive? I think that gear prices are excessively manipulated, but there are so many choices in the market among manufacturers, retail outlets, mail order houses - where is the anti-competitive damage?
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            • #7
              If they really wanted to do something useful they should go after the practice of MAP (Minimum Advertised Pricing) which doesn't allow pricing competion in any published prices. This is why when you do an Internet search for a product everyone has the same price listed (usually). The typical consumer thinks he is getting a "deal" by ordering over the Internet, when, in fact a better deal can be had by calling those same dealers directly and asking for a better price. So long as they don't print the price that they will sell at in an advertisement all is well with them and their suppliers. If they print a price in an ad lower than MAP then they will potentially be in trouble with their supplier. Many years ago "Fair Trade" pricing was standard with many manufacturers in the home electronics industry. This is similar to MAP and was done away with in the mid '80's.
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              • #8






                Quote Originally Posted by Jeff da Weasel
                View Post

                I'm not sure what "near monopoly power" means, legally. I have a lot of different music stores to choose from around here, including GC as well as Sam Ash, a good number of smaller one-location shops, and the real giant of the business, mail order and e-commerce places like Sweetwater and Musicians Friend. So I'm not even sure what a "near monopoly" is or how it applies to this suit.




                The fact that you mentioned GC and Musicians Friend as competitors when they are in fact arms of the same conglomerate kinda proves the point. GC, Musicians Friend, Music123, Musician, Woodwind Brasswind, Music & Arts, and I'm sure a few more I've forgotten are all part of the same company. Around DFW, they probably have more than 50% of the brick and mortar market share.









                Quote Originally Posted by Billster
                View Post

                Wouldn't "price-fixing" have to be done in such a way as to be anti-competitive? I think that gear prices are excessively manipulated, but there are so many choices in the market among manufacturers, retail outlets, mail order houses - where is the anti-competitive damage?




                That is what the MAP, minimum advertised price, argument is all about. If the retailers and distributors all agree to a specific price point then the industry is controlling the price rather than the open market. So I as the consumer suffer as I'm paying an artificially inflated price for goods/services. Combine this with the volume discounts afforded to GC which they then turn around and sell at "prices too low to print" even undercutting the independent's wholesale price and you have an extremely uncompetitive marketplace.
                Will Chen Trio | FrugalGuitarist.com | FG on Facebook | Forum

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                • #9
                  I don't know about being anti-competitive, but I no longer shop at Guitar Center since they abandoned the practice of wheeling and dealing. I used to be able to go to a GC and get a lower price than elsewhere through negotiation, but no more.

                  Now, GC sells stuff only at the MAP unless you bring in evidence of a lower price elsewhere, which doesn't really exist because everyone uses the MAP. So, now it doesn't even matter much where I buy stuff, so GC loses my business.

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                  • #10
                    WOW, this is extremely ironic. Because, if you know anything about the history of NAMM (the organization), it started in 1901 to rectify unfair price fixing going on in the piano industry.
                    Elson TrinidadSinger, Songwriter, Keyboardist, BassistElson and the Soul BarkadaWeb: www.elsongs.comMySpace: www.myspace.com/elsongsFacebook: Facebook PageTwitter: twitter.com/elsongs

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                    • #11






                      Quote Originally Posted by Billster
                      View Post

                      Wouldn't "price-fixing" have to be done in such a way as to be anti-competitive? I think that gear prices are excessively manipulated, but there are so many choices in the market among manufacturers, retail outlets, mail order houses - where is the anti-competitive damage?




                      Note that the lawsuit concerns fretted instruments. And most people want to play a fretted instrument before they buy it.



                      Do

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                      • #12






                        Quote Originally Posted by Will Chen
                        View Post



                        The fact that you mentioned GC and Musicians Friend as competitors when they are in fact arms of the same conglomerate kinda proves the point. GC, Musicians Friend, Music123, Musician, Woodwind Brasswind, Music & Arts, and I'm sure a few more I've forgotten are all part of the same company. Around DFW, they probably have more than 50% of the brick and mortar market share.




                        Bingo. We have a winner.



                        Also - how many brand names (of gear) are actually owned by GC?



                        Obviously they don

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                        • #13






                          Quote Originally Posted by Will Chen
                          View Post

                          The fact that you mentioned GC and Musicians Friend as competitors when they are in fact arms of the same conglomerate kinda proves the point. GC, Musicians Friend, Music123, Musician, Woodwind Brasswind, Music & Arts, and I'm sure a few more I've forgotten are all part of the same company. Around DFW, they probably have more than 50% of the brick and mortar market share.




                          Zowie -- is that true? I had no idea these were under one ownership. Who is the parent company that owns all of these?
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                          • #14
                            Bain Capital bought Guitar Center, and all it brands in 2007.

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                            • #15






                              Quote Originally Posted by Will Chen
                              View Post

                              That is what the MAP, minimum advertised price, argument is all about. If the retailers and distributors all agree to a specific price point then the industry is controlling the price rather than the open market. So I as the consumer suffer as I'm paying an artificially inflated price for goods/services. Combine this with the volume discounts afforded to GC which they then turn around and sell at "prices too low to print" even undercutting the independent's wholesale price and you have an extremely uncompetitive marketplace.




                              Even with the MAP, my point is that there are many choices. If you feel like the Fender stuff is overpriced, there are plenty of other manufacturers at various price points, plus the used market. It's similar to the car selling business in that way. I don't like the list price/MAP deal because it's inherently silly. They don't sell refrigerators that way.
                              Music for your busy day.

                              All the info you need.

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