About Price Fixing and Advertising Policies

What is Vertical Pricing?

Sometimes referred to as “resale price maintenance,” the illegal, anti-competitive practice of vertical price fixing is illustrated by the following example:

- Bully’s Tennis, Whiner’s Pro Shop, and Randy’s Rackets are three retailers competing in the same market.

- Giant is a manufacturer who sells frames at wholesale to all three retailers and others.

- Randy works hard and efficiently, and keeps his costs down. He prices his rackets at just above wholesale. He is happy with what he considers a reasonable profit for his effort, he feels he is doing the fair thing, and besides, thanks to his low prices, he’s doing a good business.

- Bully also sells a lot of rackets, but Bully is greedy, and wants a bigger mark-up, and doesn’t want to be competitive with Randy. Bully starts complaining to Giant about Randy, and Giant wants to keep Bully happy, as Bully is one of Giant’s biggest accounts.

- Whiner is one of Giant’s smaller accounts, but boy can Whiner complain, and he calls Giant three times a day to complain about Randy’s prices. Giant is getting sick of listening to Whiner.

- Before long, Randy’s shipments of new product from Giant are getting delayed, then Giant is telling Randy that all of Giant’s new rackets are already on order for Bully and Whiner, and Randy won’t be able to get any for three months, and then one day, Giant just terminates Randy’s account.

- When Randy doesn’t have anymore Giant rackets, consumers wind up paying higher prices to get Giant rackets from Bully and Whiner.

Does this really happen?

Yes, in many industries, and it’s illegal, but for decades the Department of Justice and the Supreme Court have been lax on interpretation and enforcement of the law, even though the basic principals forbidding price fixing have been part of Federal law since the Sherman Anti-Trust Act of 1890. Additionally, manufacturers have become very creative in finding ways to skirt the law. A manufacturer might for instance terminate a retailer’s account and justify it with a claim that the retailer’s store is too small, or doesn’t have proper signage, or the retailer doesn’t order enough product. A common end-run around the law is the use of what are called Minimum Advertised Price (MAP) policies.

What are Minimum Advertised Price (MAP) policies?

Minimum Advertised Price (MAP) policies prevent retailers from advertising products at prices below minimum prices set by the manufacturer. These minimum prices are far above wholesale. Policies vary, but often “no advertising” is interpreted very broadly under these policies. In some cases it means you can’t put a discount price in print or on your website. In other cases, it means you can’t even put it on a sign in your store, or quote a price over the phone. Some manufacturers threaten that they will not sell a retailer any of their products if the retailer advertises a discount price on just one of their products. Some manufacturers even say they will refuse products to retailers who have advertised discount prices on products made by other manufacturers, or who have shown a history or pattern of advertising discount prices.

The result of MAP policies is a chill effect that discourages retailers from competitive pricing—why offer a low price if you can’t tell anyone you’re offering it? And for those who do sell rackets at prices below the price dictated by the manufacturer’s MAP policy, they are forbidden to advertise the price, and in some cases, forbidden to advertise that they even carry the product. And because manufacturers know that MAP policies might not sit well with the consumer, some manufacturers now include a clause that forbids retailers from acknowledging that the policy exists. CLICK HERE to see a current MAP Policy.

At present, nearly every racket and shoe manufacturer in the tennis industry has some sort of MAP policy in effect. Sock, string and clothing manufacturers now are beginning to adopt these policies as well.

Interference in the Free Market, and How You can Help Us!

Because we continue to work harder and smarter in order to offer our customers first-rate products at substantial savings, manufacturers under pressure from other retailers continue to interfere in how we do business. Recently, when we decided to lower prices on a line of rackets, the manufacturer actually filed a lawsuit attempting to block us from selling the rackets. CLICK HERE to learn more!

You can help keep prices low. Buy from us. Take that extra step to contact us if you do not see a product on our site, or if it only has a MAP price listed.

And if someone else has the same quality products at even lower prices, let us know. We like competition.