Yamaha, Fender, Gibson, Guitar Center, Others Probed By FTC For Price Fixing
The Federal Trade Commission is formally investigating several major music manufacturers including Yamaha, Fender, Gibson, Tascam and Guitar Center for what amounts to price fixing.
The investigation focuses on MAP (Minimum Advertised Price), a tactic used by manufacturers that mandates a specific price that retailers can charge customer. The investigation has garnered the interest of the entire retail industry since a decision will have a far reaching impact.
Online retailers feel that MAP is discriminatory to their business, since their storefront is their website, and they is no real way for them to successfully negotiate with their potential customers. Terrestrial retailers feel that if they are not protected in some fashion, then customers will merely use them for a knowledge suck, as well as to get their grubby fingers all over the floor product to determine if they are willing to commit to a purchase. If the decision is positive, the the customer will most likely purchase the product online at a lower price, without having to pay state sales tax. However, the reality is that this practice has been going on from the inception of mail order.
Minimal Advertised Price is nothing new in the music industry, however specifying the exact price that a product can be sold for is not kosher. This means that a retailer is not allowed to discount, creating a anti-competitive marketplace, which the government doesn’t condone, except…
A Supreme Court ruling last year made the concept of discount blocking acceptable. The court ruled it wasn’t illegal for manufacturers and retailers to agree on minimum prices, as long as the deals were examined case by case for possible antitrust violations. This essentially gave the music manufacturers a “get out of jail free card.” However, the FTC is re-examining the practices in their investigation.
According to reports, several states are also looking into MAP tactics including California and the District of Columbia, which has resulted in subpoenas and multiple depositions of executives.