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MAP pricing: a modern-day Pandora's Box.

In recent months, the discussion on minimum advertised price (MAP) programs has gathered momentum in the industry. A number of dealers, who are NSSF members, have called on the industry's trade association to use its influence to compel manufacturers to introduce MAP programs. The dealers' concern: Online retailers are pricing them out of business.

In a special email release titled "Setting Prices--A Pandora's Box," NSSF responded to these requests through an article by attorney David L. Cahn of Whiteford, Taylor & Preston LLP. NSSF says its purpose was "to help our retailers better understand these very serious issues and their ramifications...."

In his essay "Minimum Resale Price Maintenance--Retailers Can Advocate, But Not Coerce," Cahn identifies that while dealers may be tempted to jointly pressure gun manufacturers and importers to create and enforce resale price maintenance (RPM) policies or MAP programs, it would likely prompt legal action to be taken against them and NSSF.

"While retailers' desires in this regard are understandable, banding together to force manufacturers to utilize such pricing policies would most likely be a violation of U.S. antitrust laws that could expose the participating retailers and their trade association to serious legal liability," he said.

Cahn notes certain antitrust laws, such as the U.S. Sherman Act and Federal Trade Commission Act, were enacted to ensure free and open competition and they "prohibit contracts, combinations, conspiracies and other agreements that 'unreasonably restrain' competition." These laws are most concerned with "horizontal agreements"--which Cahn defined as agreements made by businesses that operate at the same level of distribution, i.e., firearms retailers.

U.S. Supreme Court cases, such as Leegin Creative Leather Products Inc. v. PSKS (2007), provide precedent on how these agreements to reduce competition--and thus increase prices--are unlawful.

However, Cahn states RPM or MAP policies are legal when the manufacturer acts unilaterally and doesn't have a monopoly on market share to increase prices of its products for end-users.

"A single manufacturer's use of RPM methods is generally not an antitrust concern unless the manufacturer has 'market power,' meaning a market share sufficient to cause an increase (or decrease) in overall consumer prices by changing its pricing practices," he said.

In addition, Cahn said the use of collective action to force an industry to adopt RPM policies is "very risky" to the retailers involved and their trade association.

"Those actions, whether taken through a trade association or through a looser confederation of gun dealers, would be per se violations of U.S. antitrust laws and could result in criminal actions against the participants in such a conspiracy," he said.

Legal Collective Responses

How can a group of dealers respond to the threat of online retailers without violating antitrust laws? Cahn outlined three responses dealers can collectively take to avoid the risk of antitrust liability:

1. Legislative Action: Cahn says Congress has the "power to change antitrust laws to allow traditional retailers to engage in collective action, and it can alter market conditions by taxing the shipping of packages from businesses to residents in such a manner as to raise Internet sellers' cost structures." Therefore, dealers can join groups such as the National Retail Federation and the National Federation of Independent Businesses to lobby Congress to pass pro-retailer legislation.

2. Education: There are many avenues dealers can use to publicize how online retailers have negatively impacted their businesses. Cahn recommends forums with manufacturers' representatives and other industry participants, along with articles or advertisements in consumer-facing media to explain how online pricing has decreased profit margins. Published articles in industry-focused publications is another avenue for dealers to have their voice heard.

3. Individual Action: Dealers can talk to each other about whether a particular manufacturer is enforcing an RPM policy and can issue a group complaint to a manufacturer about lack of enforcement. In addition, dealers can prominently display products that are RPM-protected and choose to no longer stock products from manufacturers that refuse to issue or enforce price protection programs. If enough dealers boycott products from manufacturers they may persuade them to adopt and enforce RPM.

To read Cahn's entire article, visit www.nssfblog.com.

Editor's Note: Dealers, how do online sales impact the performance of your stores? Send an email to editor@shootingindustry. com to make your views known.
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Title Annotation:INDUSTRY NEWS
Comment:MAP pricing: a modern-day Pandora's Box.(INDUSTRY NEWS)
Author:Molde, Jade
Publication:Shooting Industry
Date:May 1, 2015
Words:711
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