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

RonnieHotdogs

I notice GAK have removed zero % finance options, actually that's a good thing for me! 

richardhomer

A really tricky area - and certainly not unique to MI - high end hi fi, cameras, etc all seem affected.

There is some merit in price maintenance. The ‘market’ forcing a dealer into selling stock at a loss is a market that will put that dealer out of business. It unfairly advantages businesses with the deepest pockets and ultimately limits choice for the consumer.

It’s evident from loss of the likes of Chandlers and Sounds Great that even once highly successful independents are up against it. If price maintenance helped keep similar businesses going, I’m not sure it’s really a problem.

Its a shame the government doesn’t work harder at dealing with utility and broadband prices, which are costs that disproportionately affect the less well off.

Whitecat

What if a shop needed to raise funds quickly for whatever reason (say, paying a large fine for example) and the most efficient way of doing that was running a quick flash sale on existing inventory? Lack of cash flow can kill a business fast, but if strict RPM “contracts” were legal and enforced they wouldn’t be allowed to set a price they might *want* - or even desperately *need* to set in order to move some stuff on a temporary basis. 

chrishill901

richardhomer said:

A really tricky area - and certainly not unique to MI - high end hi fi, cameras, etc all seem affected.

There is some merit in price maintenance. The ‘market’ forcing a dealer into selling stock at a loss is a market that will put that dealer out of business. It unfairly advantages businesses with the deepest pockets and ultimately limits choice for the consumer.

It’s evident from loss of the likes of Chandlers and Sounds Great that even once highly successful independents are up against it. If price maintenance helped keep similar businesses going, I’m not sure it’s really a problem.

Its a shame the government doesn’t work harder at dealing with utility and broadband prices, which are costs that disproportionately affect the less well off.

These are very good points. I buy a lot of camera gear and discounts are non existent, but the larger retailers can offer cashback on certain stuff... It is a tricky area. But for sure this sale model ensures I only buy from the like of Wex or CVP and never from a smaller shop.

I would agree with the bottom point - utility and broadband and other essentials are where price fixing is an issue. A Fender is a luxury item, it certainly isn't as essential, so if the price is fixed high and you're still willing to pay it then you just justified that markup. If you're not willing to pay it then don't. There is a choice for the consumer that seems to be ignored here - nobody bought a Fender out of necessity (well, on here they probably did). I had been after a Telecaster for a while but refused to pay full price for a Vintera. So I didn't. Then eventually they were discounted so I bought one for about £100 under the usual price. And I got them to throw in a pack of strings as I'd never buy a new guitar without at least that. We have the power in the sense that we can choose not to buy it. Eventually the market will react to that. If we all stopped buying Fender because their price is fixed high then eventually they'd have to change something. And again, an excellent point about the smaller retailers. I would certainly be more inclined to buy a Fender from an independent shop if it was the same price as Andertons - I'd always buy local. But remove the price maintenance and they haven't a hope in hell. I guess I just don't see the issue in it on luxury items. Either pay it or don't. I only buy Ben & Jerry's when its on offer and I'm addicted to that stuff. I simply choose not to pay the high price. We all have that choice.

pmg

@chrishill901 apparently b&m are selling 4.5l tubs of Ben and Jerry’s for £3 at the moment 

chrishill901

@pmg couldn't find any. Just goes to show you that it's overpriced!

rossi

pmg said:

@chrishill901 apparently b&m are selling 4.5l tubs of Ben and Jerry’s for £3 at the moment 

I use the Aldi Joey and Bens .Its 25 p a 5 litre tub

Three-ColourSunburst

chrishill901 said:

 I simply choose not to pay the high price. We all have that choice.

Agreed, with one very big caveat. The customer must be in a position to make an informed decision about whether the thing they are looking to buy offers real value for money. If it does, then knowing this just might make that high price a little more acceptable.

The problem here is that most retail is designed to keep the customer ignorant of the true value / manufacturing cost of the thing they are buying. Be it a 12,000 quid Rolex that costs less than 400 Swiss francs to make or a custom shop Fender, people are encouraged by clever marketing to believe that the thing they are buying is expensive because it is intrinsically expensive to make, even when this simply isn't true. This is often backed up with nonsense claims about 'razor-thin margins' and so on - but of course the true wholesale price will be kept a closely-guarded secret. 

For me, avoiding being taken for a mug is more important than the number on the price ticket.

chrishill901

Three-ColourSunburst said:

chrishill901 said:

 I simply choose not to pay the high price. We all have that choice.

Agreed, with one very big caveat. The customer must be in a position to make an informed decision about whether the thing they are looking to buy offers real value for money. If it does, then knowing this just might make that high price a little more acceptable.

A very good point, and I suppose there is a market I seldom consider, because I'm a gear geek, of less informed people who will buy Fender and Gibson because they know them to be best because of marketing they have received. They won't know the true value of an instrument and will pay the higher price because they know no better. There is a shop near me that sells Hagstrom as an alternative to Gibson and they believe them to be as good but much less in price... but I don't think they sell a crazy amount because of the name on the headstock, and I suppose if you have that kind of market power then your pricing should probably be put under greater scrutiny. I must admit, I own a Gibson Les Paul (bought used), and do enjoy the fact it has Gibson on the headstock, and its a gorgoeus example, plays lovely. But my MIJ Tokai that cost me £350 is every bit as good, if not a little better. I used the Tokai in the studio instead of my Gibson because it sounded a little warmer.

mbe

I was going to have some Yamaha headphones for my birthday and I'm having second thoughts. 

I quite like GAK and I hate to see the conglomerates throw small and medium enterprises under the bus.

Whitecat

mbe said:

I was going to have some Yamaha headphones for my birthday and I'm having second thoughts. 

I quite like GAK and I hate to see the conglomerates throw small and medium enterprises under the bus.

It probably didn’t actually happen that way, it rarely does. 

Odds are they figured out they were about to get caught and Yamaha and GAK probably came to an arrangement. 

Strat54

GAK will be fine. The holding company has £2.5M in the kitty. 

guitars4you

Strat54 said:

GAK will be fine. The holding company has £2.5M in the kitty. 

is that a year end asset value ?

or a year end 'cash in hand' ? - I assume the latter, which will equate to around 4 weeks total takings and will have a host of 'debt' attached that is due in payment within 30/60 days with most suppliers

Strat54

guitars4you said:

Strat54 said:

GAK will be fine. The holding company has £2.5M in the kitty. 

is that a year end asset value ?

or a year end 'cash in hand' ? - I assume the latter, which will equate to around 4 weeks total takings and will have a host of 'debt' attached that is due in payment within 30/60 days with most suppliers

Shareholders' funds £2,445,408

idiotwindow

Strat54 said:

guitars4you said:

Strat54 said:

GAK will be fine. The holding company has £2.5M in the kitty. 

is that a year end asset value ?

or a year end 'cash in hand' ? - I assume the latter, which will equate to around 4 weeks total takings and will have a host of 'debt' attached that is due in payment within 30/60 days with most suppliers

Shareholders' funds £2,445,408

Shareholders funds isn't the same thing as cash in the bank.

NelsonP

chrishill901 said:

Three-ColourSunburst said:

chrishill901 said:

 I simply choose not to pay the high price. We all have that choice.

Agreed, with one very big caveat. The customer must be in a position to make an informed decision about whether the thing they are looking to buy offers real value for money. If it does, then knowing this just might make that high price a little more acceptable.

A very good point, and I suppose there is a market I seldom consider, because I'm a gear geek, of less informed people who will buy Fender and Gibson because they know them to be best because of marketing they have received. They won't know the true value of an instrument and will pay the higher price because they know no better. There is a shop near me that sells Hagstrom as an alternative to Gibson and they believe them to be as good but much less in price... but I don't think they sell a crazy amount because of the name on the headstock, and I suppose if you have that kind of market power then your pricing should probably be put under greater scrutiny. I must admit, I own a Gibson Les Paul (bought used), and do enjoy the fact it has Gibson on the headstock, and its a gorgoeus example, plays lovely. But my MIJ Tokai that cost me £350 is every bit as good, if not a little better. I used the Tokai in the studio instead of my Gibson because it sounded a little warmer.

I just bought a Hagstrom, discounted heavily by a small retailer :-) It's a very nice guitar for much less than the equivalent gibson, but it's still a 'made in China' instrument. Some weirdness from the retailer as they are physically based in the UK, but the guitar came from Germany (!) without explanation.

I also bought a Fender from a large retailer a few years back. Asked for a discount, and was told 'we can't do discounts', but you'll get loyalty points which you can buy a strap with. On reflection that reeks of RPM.

Three-ColourSunburst

NelsonP said:

I just bought a Hagstrom, discounted heavily by a small retailer :-) It's a very nice guitar for much less than the equivalent gibson, but it's still a 'made in China' instrument.

I'm not convinced that 'Made in China' really carries any stigma these days. The MacBook I am typing this on was made in China, as was the Harley Benton 'T' type I have just bought which, despite the low price, is flawless and plays as well as any guitar I have ever had, so it looks like 'Made in China' might well be becoming the new 'Made in Japan'. (It is certainly amusing to see people on the Harley Benton forum worrying whether they will get a 'genuine Made in China' HB and not a Vietnamese made one.)

Now that manufacturing costs in the industrialised areas of China are approaching US levels even the big Brand managers  - such as Yamaha  - are moving to the new low wage economies, especially Indonesia, currently the cheapest of the lot. Unfortunately, they are still charging over-the-top prices for 'their' products. Going by my new HB the Yamaha RS620 I have should really have a RRP of no more than about £500. Thankfully I paid only about £50 more than this for mine which, on reflection, was still over the top, but the current £878 RRP is just nuts for an Indonesian-made instrument!

Devil#20

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. 

But ignorance of the law is no defence. I'm pretty sure they didn't need RPM explaining to them. Everyone knows it's against the law to price fix. Everyone seems to do it though. It's general it's a paper tiger except for when they make and example of a few companies and impose fines; as here. Apple have been doing it for years and seem teflon coated. My issue with Apple is that their manufacturing costs are a very very small % of the retail price. More so than guitars I suspect. Most of the development costs were observed years ago so that's no excuse. You don't pay £800 for a 37inch flat screen LCD tele anymore. If it was available it'd probably knock you back £150 nowadays, if that. It's difficult to see how they turn a profit at all on some of the guitars coming out of the far east to be honest. 

--
Ian

thebreeze

chrishill901 said:

richardhomer said:

A really tricky area - and certainly not unique to MI - high end hi fi, cameras, etc all seem affected.

There is some merit in price maintenance. The ‘market’ forcing a dealer into selling stock at a loss is a market that will put that dealer out of business. It unfairly advantages businesses with the deepest pockets and ultimately limits choice for the consumer.

It’s evident from loss of the likes of Chandlers and Sounds Great that even once highly successful independents are up against it. If price maintenance helped keep similar businesses going, I’m not sure it’s really a problem.

Its a shame the government doesn’t work harder at dealing with utility and broadband prices, which are costs that disproportionately affect the less well off.

These are very good points. I buy a lot of camera gear and discounts are non existent, but the larger retailers can offer cashback on certain stuff... It is a tricky area. But for sure this sale model ensures I only buy from the like of Wex or CVP and never from a smaller shop.

I would agree with the bottom point - utility and broadband and other essentials are where price fixing is an issue. A Fender is a luxury item, it certainly isn't as essential, so if the price is fixed high and you're still willing to pay it then you just justified that markup. If you're not willing to pay it then don't. There is a choice for the consumer that seems to be ignored here - nobody bought a Fender out of necessity (well, on here they probably did). I had been after a Telecaster for a while but refused to pay full price for a Vintera. So I didn't. Then eventually they were discounted so I bought one for about £100 under the usual price. And I got them to throw in a pack of strings as I'd never buy a new guitar without at least that. We have the power in the sense that we can choose not to buy it. Eventually the market will react to that. If we all stopped buying Fender because their price is fixed high then eventually they'd have to change something. And again, an excellent point about the smaller retailers. I would certainly be more inclined to buy a Fender from an independent shop if it was the same price as Andertons - I'd always buy local. But remove the price maintenance and they haven't a hope in hell. I guess I just don't see the issue in it on luxury items. Either pay it or don't. I only buy Ben & Jerry's when its on offer and I'm addicted to that stuff. I simply choose not to pay the high price. We all have that choice.

It's not just a question of pricing by itself though.  There are different factors that the regulators/governments want to keep in mind when they pursue anti-competitive behaviour.  A major consideration is what sort of position does an organisation hold within a market, be it vertical or horizontal.  Would you class Coco-Cola as a luxury?  Presumably not, but neither do you have to buy it.  The authorities watch them closely because they're so dominant in the soft drinks market etc.  

They're also more lenient where the social benefits outweigh the practice e.g. the creation of employment etc. and exemptions are given.  Utilities and broadband might fall more under this although they're still carefully monitored and utilities are often price-capped or asked to divest companies and holdings to lessen their market presence if they want to undertake mergers etc.  Past behaviour will be a factor, I've got a feeling Roland have been fined before.  Cooperation with investigations is another factor.  Who are the complainant's and why is another factor.

In a mixed economy it's a balancing act between free markets and regulation.  I think in this situation a lot will have depended on where the likes of Roland, GAK, other retailers, Fender, Gibson sit in the market and how these markets have been defined.  Luxury markets will be scrutinised as any other market will be, it just depends on the complaint and how it has come to the authority's attention.  Broadband and utilities are heavily regulated but there will be reasons why, for the moment, the competition authorities believe the current pricing systems work as best as possible for consumers.  That's always subject to change though.

symphonytech

Be under no illusion: Its a Phyrric victory for the consumer, and a simple cash grab of low-hanging fruit for the regulator. Big fines, big headlines, easy wins, and they even look like the saviour of the general public.

Any MAP in place (legal in the US) does not preserve bloated profits. It maintains a sustainable market. The brand owners who were engaged it in did not see tangible direct benefits, they just recognised that a marketplace for their goods could only exist if the channel was sustainable.

The end result is a quick win for end users who get to gorge on the single digit (or often negative digit) margins of a market tearing itself apart to remain in business. The end result?...

...a market of significantly less players. Less choice. Less innovation. Less quality.

Because price is the only metric that counts. And there will always be someone else who is willing (or desperate) to undercut and give away any value that may be added. And whilst the consumer is in the position to take the value without paying for it (web videos, reviews, inshore demos), and then buy from the cheapest warehouse, the market will always pull itself apart.

The law and the CMA aren't protecting a free market; they are enforcing an unsustainable position of allowing the market to drain itself of value because no longer can value be monetised as it should be. Instant price comparison has done that, and the inevitable end game is Amazon and about three other stores.

...and once it is down to just a few players, the prices will rocket. But the world will be without anything other than the most popular brands - at higher prices.

Like I say: a Phyrric victory.