GAK fined more than a quarter of a million pounds by price-fixing watchdog

Snags

Agreed @crunchman, although the natural development then is that rather than doing it on the sale price, various partner schemes get introduced where there are rewards for shifting volume, in the form of rebates etc. That's essentially how Apple do it - there's absolutely no money in straight mark-up on Apple devices, even buying from an Authorised Distributor/Reseller, but if you shift enough units, you get rebates which make it worthwhile. If you don't ...

skunkwerx

When I asked for a discount on my Fender professional the arse end of last year in Pmt, I got told no, Fender set the prices and the retailer cant go below it. They added that the margins were so slim discounts werent possible anyway. 

I said for my troubles the store can afford a few quid loss to retain a customer.  

I asked fender Uk if this was true. They said no.

I’ve asked on loads of different products, over all the main stores, never been given so much as a pack of strings yet! Lol

fretmeister

gusman2x said:

Seems like there's better industries and sectors to go after. Like car insurance and energy tariffs? I always thought that MRP was legal? And I must admit, I don;t really know why it shouldn't be legal.

Hopefully GAK have an insurance policy that covers this.

You can't have an insurance policy that covers illegal acts!

Whitecat

fretmeister said:

gusman2x said:

Seems like there's better industries and sectors to go after. Like car insurance and energy tariffs? I always thought that MRP was legal? And I must admit, I don;t really know why it shouldn't be legal.

Hopefully GAK have an insurance policy that covers this.

You can't have an insurance policy that covers illegal acts!

... although theoretically if they took bad legal advice on the whole scenario they could sue against their law firm’s indemnity insurance. That’s about the only circumstance I can think of where they could chase someone else for the money, but from reading the PR in more detail it sounds like they’ve already accepted the fine and will be paying it somehow so t’is moot. 

mcsdan

skunkwerx said:

When I asked for a discount on my Fender professional the arse end of last year in Pmt, I got told no, Fender set the prices and the retailer cant go below it. They added that the margins were so slim discounts werent possible anyway. 

I said for my troubles the store can afford a few quid loss to retain a customer.  

I asked fender Uk if this was true. They said no.

I’ve asked on loads of different products, over all the main stores, never been given so much as a pack of strings yet! Lol

I’ve got a PMT local to me and always been hard to get a discount out of them.  Ive had it a couple of times over many years and last t I’ve I looked at an amp in there I was given the same line you got and I decided not to buy from them. I tend to not bother with them any more and go slightly further to a much better music shop where I’ve purchased 3 fenders in the last 2 years (2 American originals and 1 custom shop) and each time I’ve been given a discount when asked. 

I always thought that they had to display MRP to satisfy the suppliers and keep consistent prices across the country but could negotiate a discount when doing a deal. 

fretmeister

Whitecat said:

fretmeister said:

gusman2x said:

Seems like there's better industries and sectors to go after. Like car insurance and energy tariffs? I always thought that MRP was legal? And I must admit, I don;t really know why it shouldn't be legal.

Hopefully GAK have an insurance policy that covers this.

You can't have an insurance policy that covers illegal acts!

... although theoretically if they took bad legal advice on the whole scenario they could sue against their law firm’s indemnity insurance. That’s about the only circumstance I can think of where they could chase someone else for the money, but from reading the PR in more detail it sounds like they’ve already accepted the fine and will be paying it somehow so t’is moot. 

I cannot see any law firm giving advice that didn't make it clear the practice is illegal. It's not like it's an unclear bit of legislation.
It will be the usual "Our advice is that the practice is illegal, whether you accept the advice or not is up to you, Mr Client."

Jez6345789

I sort of get the idea the agency is following but the law, in this case, is doing far more harm to an already struggling niche market than it is helping consumers. All the large fines go back to running and expanding the scope of the department. No 50 squids back to the consumers just a bigger department budget to run amok UK business with. 

As a non-music industry distributor in a niche market. I for one as much as we do not enforce it I think that some retail price maintenance is a sensible sane approach and having seen the various price wars between stores over the years the stupid hubris and race to the bottom mentality of some retailers and the problems it causes an industry making every industry effectively the wild west does not encourage competition it just lowers retail standards makes business less viable and ultimately favours the last man standing mentality. The UK retail sector is simply not big enough to work this outside of large markets. 

So from the manufacture and distributor point of view. 

I sell to BJ's Guitars he is a new business wanting to make a name for himself so he sells all my product at cost to get his name out there, for a little while he sells a good bit of product. I then look at sales and see they are declining across the country I speak to some my other stores, oh we are not bothering stocking the line as BJ'S are selling out at cost and X store is also selling at cost as they price match and giving away a case and their online store is giving away triple loyalty points. Very quickly your product is totally devalued nobody wants to stock it and BJ's Guitars is now onto brand X. As a manufacturer, you have nobody developing your sales channel and the few big names milk a brand till its dry and move on. 

Now you multiply that up across the country and for a moderate-sized niche product market such as musical instruments they are a niche, there will be at least 5-10 BJ's guitars all gung ho and trying to play the high stakes game of buying a market almost all of them fail most have a 1-3 year life cycle what I call this years peoples champion.

But yes the consumer is getting a better deal in the shortest of time periods yes but the consumer loses his local store very quickly as loss-making retail can not sustain has to now order online, all the good things the local store did for the local music community goes with it. Having local music or any sort of local store that's still where most people start or start their kids.

In the end, the only thing that is left is probably a few large online stores and Amazon. 

There is plenty of pricing injustice in the UK but hey go after Apple, Samsung, big insurance car retailers but the problem, is they have big lawyers this department is hitting medium-soft targets that are unlikely to bring on a 100 horse team of legal advisors and accountants that will bury them or make their life super hard to work in. They want big fines and easy results not the cost of fighting through injunctions and all the high power stuff the really big boys can bring to bear.

YMMV

guitars4you

More to come --------------------------

29 June 2020: The CMA issued a decision finding that Roland (U.K.) Limited (Roland UK) infringed competition law by engaging in resale price maintenance (RPM). The CMA imposed a fine of just over £4 million. As the ultimate parent company of Roland UK, Roland Corporation is jointly and severally liable for Roland UK’s fine. 
https://www.gov.uk/cma-cases/musical-instruments-and-equipment-suspected-anti-competitive-agreements-50565-5?utm_source=f814aae3-4a4b-4eda-b060-32d462f5ed4f&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

AND ----------------------------------------

29 June 2020: The CMA issued a decision finding that Korg (UK) Limited (Korg UK) infringed competition law by engaging in resale price maintenance (RPM). The CMA imposed a fine of around £1.5 million. As the ultimate parent company of Korg UK, Korg Inc. is jointly and severally liable for Korg UK’s fine.
https://www.gov.uk/cma-cases/musical-instruments-and-equipment-suspected-anti-competitive-agreements-50565-4?utm_source=7b698e9e-616a-4af9-8b0b-81cd0179938f&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

MORE ------------------------------------------------
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/896119/Musical_instruments_open_letter_290620.pdf

KEY POINTS ---------------------------------

It is illegal for a supplier to prevent a retailer from discounting prices. •
Both the supplier and the retailer are potentially breaking the law if they agree that the retailer will not price below a minimum level. •
An agreement does not have to be explicit – it can be achieved by threats or financial incentives not to sell below a particular price. •
Cheating on an agreement – by a retailer sometimes reducing prices – does not prevent such arrangements being illegal.

guitars4you

^^^^^^^^^^^^^^^^^^^^^^^SEE ABOVE - ALL I CAN SAY IS IF GAK ARE GUILTY THEN WATCH THE LIST OF OTHER 'GUILTY' DEALERS EXPAND ACROSS THE UK AND EU

especially when you look at the following key points that have been released within trade press

KEY POINTS ---------------------------------

It is illegal for a supplier to prevent a retailer from discounting prices. •
Both the supplier and the retailer are potentially breaking the law if they agree that the retailer will not price below a minimum level. •
An agreement does not have to be explicit – it can be achieved by threats or financial incentives not to sell below a particular price. •
Cheating on an agreement – by a retailer sometimes reducing prices – does not prevent such arrangements being illegal.

fretmeister

There will now be a rush by all parties to such agreements to inform the CMA first and seek immunity.

BUT....

If a retailer informs on a supplier then that supplies is likely to never supply them again. But the retailer might not stay in business with a big fine.


Give it 2 years and the first "I'm a retailer. The supplier told me that I couldn't inform the CMA about the deal other wise I'd be blacklisted by everybody, so the supplier informed instead and said I had no choice, but if I stayed quiet they'd cover 5% of the fine..."

RaymondLin

I remember buying my Bogner with a cab from GuitarGuitar, total was over £2k, I asked if I could get any sort of discount getting it together…absolutely nothing but he could throw in a speaker cable….woooohooo?

Buying stuff from Thomann’s I have got discounts from getting a pedal, all it took was an email.

Three-ColourSunburst

Funkfingers said:

Without the rigged system, small shops in small towns would wither and die. A punter in the South Wales valleys would be obliged to travel to Swansea, Cardiff or Bristol to obtain supplies.

I really don't see this as a problem. One, your punter in South Wales can always buy on-line. Secondly, why should every buyer be fleeced simply so that some small shopkeeper who sells two guitars and half a dozen packets of strings a week can still make enough profit from his meagre sales to earn a living income? In turn this creates a situation where the big, high volume, high efficiency sellers are making money hand over fist at their customers expense.

Consumers have to make a stand and refuse to pay anything like the RRP unless there is a very good reason to do so.

fretmeister

I might buy strings and plectrums and even pedals on price alone, but never instruments.

I wonder what the split between instruments / pedals / amps is for sales totals in the average shop.
Have to sell a load of Boss SD-1 to get close to the value of a USA strat, but there has to be more impulse purchases of pedals than guitars.

crunchman

Three-ColourSunburst said:

Funkfingers said:

Without the rigged system, small shops in small towns would wither and die. A punter in the South Wales valleys would be obliged to travel to Swansea, Cardiff or Bristol to obtain supplies.

I really don't see this as a problem. One, your punter in South Wales can always buy on-line. Secondly, why should every buyer be fleeced simply so that some small shopkeeper who sells two guitars and half a dozen packets of strings a week can still make enough profit from his meagre sales to earn a living income? In turn this creates a situation where the big, high volume, high efficiency sellers are making money hand over fist at their customers expense.

Consumers have to make a stand and refuse to pay anything like the RRP unless there is a very good reason to do so.

We've been over this before, but whatever you think about the effect of wood on tone, it does have an effect, and I wouldn't want to drop £2k on a guitar without trying it first - which will be very hard if all the shops go out of business.

The other danger is that once 90% of the shops are driven out of business, the remaining online shops jack up their prices.

  We've seen it with Amazon in other markets.  They used to undercut everybody else, but now they are everyone's default online shopping site, they have jacked up their prices.   It's often cheaper to buy elsewhere now.

Jason

ICBM said:

Has someone in government got it in for the musical instrument trade? First Fender are fined a record amount, now this...

An easy target? A business without the resources to fight the cases?

It also seems a bit unjust when some of the most heinous culprits are Westside and Mesa/Boogie, too.

It all came from a complaint to them by a retailer, then a few more retailers, they are therfore legally obliged to investigate. It was mainly down to keyboards in the first instance, hence Yamaha, Roland, Korg and Casio, I think the Fender stuff was just discovered in those investigations.

bbill335

it's ok if they shut all the music shops. they're shutting all the venues through weaponised noise complaints, so there'd be nowhere for me to play my new guitar anyway.

Three-ColourSunburst

crunchman said:

 

I wouldn't want to drop £2k on a guitar without trying it first - which will be very hard if all the shops go out of business.

Why should they all go out of business? The low sales volume, local shops maybe, but who is to say that they would even have that 'special' mojo-laden guitar everyone seems to be looking for? If anything, the only sensible thing to do if one is in the market for an expensive guitar is to go to the largest store one can find and try every guitar in the shop until one finds the elusive 'right' one. (Especially, according to folk wisdom, if one is looking for a Gibson...) If anything, making a special trip would add to the buying experience.

crunchman

Three-ColourSunburst said:

crunchman said:

 

I wouldn't want to drop £2k on a guitar without trying it first - which will be very hard if all the shops go out of business.

Why should they all go out of business? The low sales volume, local shops maybe, but who is to say that they would even have that 'special' mojo-laden guitar everyone seems to be looking for? If anything, the only sensible thing to do if one is in the market for an expensive guitar is to go to the largest store one can find and try every guitar in the shop until one finds the elusive 'right' one. (Especially, according to folk wisdom, if one is looking for a Gibson...) If anything, making a special trip would add to the buying experience.

If you drive all the other shops out of business, then the prices in the big shop will go up.  In the end, we all lose out.

I can understand where the government is coming from, but there is a good chance it will backfire, and do more harm than good.  It would help if they fixed the ridiculous business rate system that penalises small shops.

Three-ColourSunburst

crunchman said:

If you drive all the other shops out of business, then the prices in the big shop will go up.  In the end, we all lose out.

Only if there is a monopoly.

What is more likely is that, in a market dominated by a few major sellers all chasing customers in a European - if not Global - market, prices are likely to come down as there will be still be big profits to made for those able to attract the most customers - and to get those customers they will have to offer competitive prices. After all, why buy from, say GAK (Ha Ha!) , when in a truly free market, Thomann or Bax are also keen to have your hard-earned in their tills?  What's more, for the big volume, efficient sellers their costs will be low enough to enable them to offer deep discounts and still make a tasty profit.

In a way Thomann are already pointing the way with their in-house Harley Benton instruments. I have just bought a HB 'T type' and am shocked by the build quality, sound and playability - so much so that I feel almost embarressed at how much I have paid for 'big brand' name instruments in the past. These go just over 140 quid including delivery, and you can bet they are still making a profit on them. Proof that this price-led approach works is further evidenced by the fact that, of the top ten selling 'T' type guitars Thomman sell, eight are Harley Bentons.

The market is changing, and I think many people are waking up to the fact that the big brands are simply taking the mickey, not just with RPM scams, but their basic pricing strategies. For some myth and mojo will still dominate their purchasing decisions, but I think many more will look at the quality of modern cheap instruments and realise that guitars are essentially just a few cheap bits of CNC'd wood fitted with some rudimentary electronics that really shouldn't cost that much to buy.

fretmeister

Three-ColourSunburst said:

crunchman said:

If you drive all the other shops out of business, then the prices in the big shop will go up.  In the end, we all lose out.

Only if there is a monopoly.

What is more likely is that, in a market dominated by a few major sellers all chasing customers in a European - if not Global - market, prices are likely to come down as there will be still be big profits to made for those able to attract the most customers - and to get those customers they will have to offer competitive prices. After all, why buy from, say GAK (Ha Ha!) , when in a truly free market, Thomann or Bax are also keen to have your hard-earned in their tills?  What's more, for the big volume, efficient sellers their costs will be low enough to enable them to offer deep discounts and still make a tasty profit.

In a way Thomann are already pointing the way with their in-house Harley Benton instruments. I have just bought a HB 'T type' and am shocked by the build quality, sound and playability - so much so that I feel almost embarressed at how much I have paid for 'big brand' name instruments in the past. These go just over 140 quid including delivery, and you can bet they are still making a profit on them. Proof that this price-led approach works is further evidenced by the fact that, of the top ten selling 'T' type guitars Thomman sell, eight are Harley Bentons.

The market is changing, and I think many people are waking up to the fact that the big brands are simply taking the mickey, not just with RPM scams, but their basic pricing strategies. For some myth and mojo will still dominate their purchasing decisions, but I think many more will look at the quality of modern cheap instruments and realise that guitars are essentially just a few cheap bits of CNC'd wood fitted with some rudimentary electronics that really shouldn't cost that much to buy.

And Fender went the other way with the Lynott P bass at £13,000

The only instrument more simple than a telecaster.