BREAKING NEWS - Fender Europe fined £4.5Million for breaking competition law

JayGee

Whitecat said:

Brize said:

Ridiculous. I've haggled on plenty of Fender guitars and I know that most of you on here will have done the same.

Interesting that the musical instrument sector has a total UK turnover of £440M, which is very modest indeed.

Has nothing to do with haggling. The fine is specifically for not allowing retailers to advertise below a certain price online. 

Which is why you used to (and for all I know still do) get pages and pages of adverts in the magazines with “Prices too low to print!” on the headline items and “Call for our best deal” in the price column of the stock listings... 

crunchman

Legionreturns said:

gibsongretschfan said:

To be fair Thomann must have a fair chunk of the UK market

Not after next week...

Nothing changes yet.  We have the transition period.

Strat54

Clecko said:

I'm really intrigued by the maths behind this. The only numbers referenced are the £440m annual retail turnover and the £4.5m fine. I have no idea of retail margins or market shares, but if we made the assumption that Fender have a 20% market share (£88m pa retail sales) and a 60% retail margin, that's £53m UK turnover a year. 

I'm not going to hazard a guess on the operating profit of that £53m, but if retail price maintenance has netted them an extra 10% over and above what most of the guitars would have sold for, that's close to an additional £5m turnover per year - or ~£30m from 2013-18.

Again, I'm completely making the numbers up here, but it's an interesting little exercise to do and, given that there are no costs beyond the court case, this might have been their most successful marketing campaign of the 21st Century to date.     

2018   Fender Europe Ltd  Turnover was £36M......Gross Profit £3.7M......Net Loss of £6.26M    Ouch.

DefaultM

Legionreturns said:

gibsongretschfan said:

To be fair Thomann must have a fair chunk of the UK market

Not after next week...

I get all my news exclusively from whatever Bing decides to put on their homepage when I'm at work, and I'm off at the minute. What have I missed? 

Whitecat

According to the Guardian the fine would have been £14.2m if they didn't cooperate...

Whitecat

Clecko said:

I'm really intrigued by the maths behind this. The only numbers referenced are the £440m annual retail turnover and the £4.5m fine. I have no idea of retail margins or market shares, but if we made the assumption that Fender have a 20% market share (£88m pa retail sales) and a 60% retail margin, that's £53m UK turnover a year. 

I'm not going to hazard a guess on the operating profit of that £53m, but if retail price maintenance has netted them an extra 10% over and above what most of the guitars would have sold for, that's close to an additional £5m turnover per year - or ~£30m from 2013-18.

Again, I'm completely making the numbers up here, but it's an interesting little exercise to do and, given that there are no costs beyond the court case, this might have been their most successful marketing campaign of the 21st Century to date.     

Suspect this is way off based on @Strat54's post below yours, but despite that, it's not Fender pocketing the extra money, it's the dealers. Which is not necessarily a bad thing per se, except for the removal of competition and customer choice which is at least as much of a pillar of capitalism as the right to maximise one's profits... 

DanR

Whitecat said:

Clecko said:

I'm really intrigued by the maths behind this. The only numbers referenced are the £440m annual retail turnover and the £4.5m fine. I have no idea of retail margins or market shares, but if we made the assumption that Fender have a 20% market share (£88m pa retail sales) and a 60% retail margin, that's £53m UK turnover a year. 

I'm not going to hazard a guess on the operating profit of that £53m, but if retail price maintenance has netted them an extra 10% over and above what most of the guitars would have sold for, that's close to an additional £5m turnover per year - or ~£30m from 2013-18.

Again, I'm completely making the numbers up here, but it's an interesting little exercise to do and, given that there are no costs beyond the court case, this might have been their most successful marketing campaign of the 21st Century to date.     

Suspect this is way off based on @Strat54's post below yours, but despite that, it's not Fender pocketing the extra money, it's the dealers. Which is not necessarily a bad thing per se, except for the removal of competition and customer choice which is at least as much of a pillar of capitalism as the right to maximise one's profits... 

Fender will have a price they sell to shops and everything above that is the shops so it doesn’t effect them.

But they need there dealers to be profitable or else they won’t stock there guitars.

So it’s likely the smaller dealers who need the bigger dealers not throw them out of the door.

Roland

Strat54 said:

2018   Fender Europe Ltd  Turnover was £36M......Gross Profit £3.7M......Net Loss of £6.26M    Ouch.

That’s the In Year loss. Over the years they’ve been running the minimum price strategy it’s still a sizeable profit. 

As others have said, taking away minimum price floors plays into the hands of the big retailers. 

clarkefan

I don't get what the bigger picture is here, any time I search for "a thing" the price is always exactly the same across say four sellers, with a couple more being uncompetitive.

Are all the big brands at this?

DefaultM

The meeting for this will have been a guy pointing at a graph, flipping the pad over and pointing at a second graph with a small dip in it. 

"right so any other business? Bob you mentioned something about the template being compromised?"

"yeah, word is they've figured out the relic'ing template. I propose that we invest in a 2nd relic'ing template. That should buy us a few years"

"before what?"

"before we have to invest in a 3rd template"

Legionreturns

crunchman said:

Legionreturns said:

gibsongretschfan said:

To be fair Thomann must have a fair chunk of the UK market

Not after next week...

Nothing changes yet.  We have the transition period.

To allow the pound to adjust to its new level of around about 20 cents? 

RonnieHotdogs

another nail in the coffin of smaller shops. 

ICBM

I certainly think we will see many smaller shops deciding to not stock Fender. It's difficult enough to compete with the box-shifters already, and will become impossible once they're allowed to discount even further.

Even worse, it may then affect the box-shifters as well - sales volume is meaningless if you're not making a profit. The end result will be an industry where there is no money being made and hence no future.

scrumhalf

On the plus side, Saracens may have found a new sponsor.

StuartMac290

What's so bad about price fixing anyway?

symphonytech

clarkefan said:

I don't get what the bigger picture is here, any time I search for "a thing" the price is always exactly the same across say four sellers, with a couple more being uncompetitive.

Are all the big brands at this?

The bigger picture is that you are starting to see the purest of competitive markets emerge. There are fewer and fewer dealers remaining who are able to compete, and the pricing available is the best that bargain-basement retail can offer.

This is the inevitable result of a (imo) misguided law that aims to preserve the freedom of the market for the benefit of consumers. The inevitable end result we are starting to witness is an incredibly small markets operating unsustainably to try to keep the wheels turning.

And fewer operators, in an unsustainable market does not make for a good music industry - one of innovation, choice and experience.

The anti-cartel law is self-defeating in these circumstances, and the proof lies over the water: the bastion of capitalism and the free market still allows a manufacturer some control over how its products are marketed. Alas, the EU remains blinkered with its 'consumer above all' legislation.

And as for greater proof: if big companies such as Casio and Fender (and possibly Roland and Yamaha) are willing to risk such huge fines when they see no direct financial benefit other than the preservation of their indistry, then it suggests there is a structural issue with the legislation rather than just one off chancer trying to gain a buck.

stephen.wood125

Aidanspaghetti said:

If you have a few minutes look into the Irish government and what it does with v.r.t on new cars...

Agreed. makes this seem like a damp fart. VRT is a joke. a 104k Sterling Range Rover becomes 120k Euro, plus 2700 p.a VRT

GuyR

Legionreturns said:

It's entirely customer driven though. 

Whilst Joe Public are happy to sacrifice quality of service for a few quid in savings, nothing will change. 

Absolutely this, which applies in all service industries, not just retail.

Brize

RonnieHotdogs said:

another nail in the coffin of smaller shops. 

Yep. Over-zealous regulation often has unintended consequences.

TimmyO

Don’t a fair few companies effectively do this? 

Talk to any Martin dealer and they are cagey about the “price” on the website.

One well known one looked me in th eyee and said that ‘ Martin don’t like us doing it, and a few of us larger dealers have agreed together that we won’t reduce prices below a certain point... ‘ that’s a bloody cartel!