Guitar Center/NAMM Accused of Price Fixing

[maiki]

I don't know if the following relates to this story or not, but there certainly seems to be massive price-fixing in thr musical instrument industry.

Not so many years ago, when one was looking to purchase a musical instrument or accessory, one could search the web to find the best price, and find significant discounts, major price differences.

Now, with almost any such search, every vendor lists the exact same price for any musical item. No price competition at all. That certainly sounds like price-fixing to me.

It might be a factor that Guitar Center (now owned by Bain Capital) has bought most major online music retailers--"Musician's Friend, Music123, Woodwind and Brasswind, and I forgot who else. They all appear as separate companies online, but all are really Guitar Center. In fact, they also bought up this board--Harmony Central. (What ever happened to anti-trust in this country? I thought the government was supposed to promote competition, and prevent monopolization of an industry, to protect consumers?)

I don't see how the lawsuit discussed in this thread has helped any though. When I look up prices of an instrument online, and every vendor has it listed for the exact same price, sure smells like price-fixing to me! What can be done about this?

[Anderton]

 

Originally Posted by maiki

I don't know if the following relates to this story or not, but there certainly seems to be massive price-fixing in thr musical instrument industry.

Not so many years ago, when one was looking to purchase a musical instrument or accessory, one could search the web to find the best price, and find significant discounts, major price differences.

Now, with almost any such search, every vendor lists the exact same price for any musical item. No price competition at all. That certainly sounds like price-fixing to me.

It might be a factor that Guitar Center (now owned by Bain Capital) has bought most major online music retailers--"Musician's Friend, Music123, Woodwind and Brasswind, and I forgot who else. They all appear as separate companies online, but all are really Guitar Center. In fact, they also bought up this board--Harmony Central. (What ever happened to anti-trust in this country? I thought the government was supposed to promote competition, and prevent monopolization of an industry, to protect consumers?)

I don't see how the lawsuit discussed in this thread has helped any though. When I look up prices of an instrument online, and every vendor has it listed for the exact same price, sure smells like price-fixing to me! What can be done about this?

 

The reason why you're seeing the same price (generally speaking) is a result of MAP (Minimum Advertised Pricing) policies. There's a good article that explains this. Its legal status is a moving target; sometimes it's considered a violation of anti-trust, sometimes not. It depends on a variety of factors, such as whether the company setting the MAP applies coercion.

When you see ads that say "call for price" that's usually a sign that something is being sold for under MAP. In-store sales and specials can also go below MAP, as can online purchases where coupons or discount codes are involved. The resulting prices are not advertised to comply with MAP, but you find the price is the final one listed in your "cart."

I just checked the price of the Snark SN-10s tuner online to see what would shake out. I saw $35, $34.95, $39.98, $41.99, and $30.99. Some stores threw in shipping for free, some didn't.

FWIW Musician's Friend sells it for $59.99 so it doesn't seem like there's much of a conspiracy there. However, this helps explain why prices tend to stabilize. At some point, someone at MF will probably wonder why they're not selling SN-10s tuners. They'll see what the competition is charging, and adjust theirs to $35 or whatever to stay competitive.

The problem with competition in terms of musical products is that the days of doubling dealer cost are over, where a store bought something for $x and charged $2x. Margins are very thin, so there isn't a lot of room to move on prices.

True price fixing requires some sort of conspiracy among sellers, which is a whole different thing than a manufacturer setting a MAP. The classical definition of price fixing is something done in order to keep prices artificially high. In the case of the music business, prices are in general pretty much as low as they can go and still have retailers make some kind of profit (or in the case of Guitar Center, try to minimize their losses).

E-commerce has really changed the landscape, and things like MAP, sales tax, MSRP, and all of those traditional elements of commerce are in a state of flux. Some MAP agreements have been deemed in violation of antitrust because of how they were handled (the Herman Miller chairs case is a good example). Generally, though, MAP is dealt with on a case-by-case basis and at least with respect to the music industry, has not been challenged.