Steve-don't know if this answers your question but 2 points, I believe a plaintiff would have to allege anti-trust first and second if you read the summary of the ruling of which I extracted a part you see that the Supreme Court suggests that RPM could be pro-competitive...

Below is from http://www.supremecourtus.gov/opinions/06pdf/06-480.pdf
(1)
Economics literature is replete with procompetitive justifications for a manufacturer’s use of resale price maintenance, and the few recent studies on the subject also cast doubt on the conclusionthat the practice meets the criteria for a per se rule. The justifications for vertical price restraints are similar to those for other vertical restraints. Minimum resale price maintenance can stimulate interbrand competition among manufacturers selling different brands of the same type of product by reducing intrabrand competitionamong retailers selling the same brand. This is important becausethe antitrust laws’ “primary purpose . . . is to protect interbrand competition,” Khan, supra, at 15. A single manufacturer’s use of vertical price restraints tends to eliminate intrabrand price competition;this in turn encourages retailers to invest in services or promotional efforts that aid the manufacturer’s position as against rival manufacturers. Resale price maintenance may also give consumers more options to choose among low-price, low-service brands; high-price, high-service brands; and brands falling in between. Absent vertical pricerestraints, retail services that enhance interbrand competition might be underprovided because discounting retailers can free ride on retailers who furnish services and then capture some of the demand those services generate. Retail price maintenance can also increaseinterbrand competition by facilitating market entry for new firmsand brands and by encouraging retailer services that would not beprovided even absent free riding. Pp. 9–12.
(2) Setting minimum resale prices may also have anticompetitive
Cite as: 551 U. S. ____ (2007) 3
Syllabus
effects; and unlawful price fixing, designed solely to obtain monopolyprofits, is an ever present temptation. Resale price maintenancemay, for example, facilitate a manufacturer cartel or be used to organize retail cartels. It can also be abused by a powerful manufacturer or retailer. Thus, the potential anticompetitive consequences of vertical price restraints must not be ignored or underestimated. Pp. 12–14.
(3)
Notwithstanding the risks of unlawful conduct, it cannot bestated with any degree of confidence that retail price maintenance “always or almost always tend[s] to restrict competition and decreaseoutput,” Business Electronics, supra, at 723. Vertical retail-priceagreements have either procompetitive or anticompetitive effects, depending on the circumstances in which they were formed; and the limited empirical evidence available does not suggest efficient uses of the agreements are infrequent or hypothetical. A per se rule should not be adopted for administrative convenience alone. Such rules can be counterproductive, increasing the antitrust system’s total cost byprohibiting procompetitive conduct the antitrust laws should encourage. And a per se rule cannot be justified by the possibility of higherprices absent a further showing of anticompetitive conduct. The antitrust laws primarily are designed to protect interbrand competitionfrom which lower prices can later result. Respondent’s argumentoverlooks that, in general, the interests of manufacturers and consumers are aligned with respect to retailer profit margins. Resale price maintenance has economic dangers. If the rule of reason were to apply, courts would have to be diligent in eliminating their anti-competitive uses from the market. Factors relevant to the inquiry are the number of manufacturers using the practice, the restraint’s source, and a manufacturer’s market power. The rule of reason is designed and used to ascertain whether transactions are anticompetitive or procompetitive. This standard principle applies to vertical price restraints. As courts gain experience with these restraints byapplying the rule of reason over the course of decisions, they can establish the litigation structure to ensure the rule operates to eliminate anticompetitive restraints from the market and to provide moreguidance to businesses. Pp. 14–19.

I just got in and I have to run back out, but a quick response here.

FTP, that excerpt really doesn't address Steve's question -- if that's what you were trying to do.

To be clear, the "burden of proof" is a term that lawyers use to designate which side of a case has the responsibility for putting up convincing evidence on the particular question at hand. The burden of proof can shift back and forth between the parties, depending on many things, both in terms of the issue being decided, and also in terms of the stage of the proceedings.

Proof, by the way, is also a term of art. There is really no such thing as "proof": you have "proved" something if the finder of fact (jury, or in some cases, the judge) thinks you are right.

Anyway, in an antitrust case that is being decided under the Rule of Reason, it will usually work like this: the plaintiff has to come forward and "prove" that a facial violation occurred: that is, he has to prove that there is, in fact (in this case), a vertical agreement to fix prices at the retail level. He will generally also be required to submit some evidence that this is likely to have an anti-competitive effect.

The burden of proof will then "shift" to the defendant, to establish that there are countervailing pro-competitive, or pro-consumer, factors that justify the restraint, and that those factors outweigh the anti-competitive effects of the vertical restraint.

Trust me (or antitrust me ), this stuff ain't simple, and the kinds of evidence and proof involved can be very complex, very costly to marshall, and very difficult to present. The analysis itself requires quite a high level of knowledge and understanding, which is one reason why only federal courts can decide antitrust cases (no slight to the state courts, but that's the law).

Sorry, gotta run. Hope this helped.

J Mark,

That explanation was exactly what I was looking for. Simply put and easy to understand. (Are you sure you are a lawyer?)

Thanks!

I'm still considering what effect, if any, this will have on the piano industry. So far, I see little effect on the piano industry but possibly a major impact on the guitar and sound reinforcement industry.

Nicest thing you could possibly say, thanks!

:)

This ruling seem more akin to socialism and less akin to capitalism. Doesn't sound like a good idea to me.

To me, it sounds like one of the mechanisms wereby the poor get poorer while the rich get richer. In the end, a certain segment of the population will be able to afford LESS than they could before; while those who CAN afford more things will become even further separated from the rest of the population...causing them to become the 'elite'. In the long run, it sounds dangerous to me.

Um, well, yeah...the Supreme Court are secretly working for the Communists, and they will soon Take Over the World. Don't tell anyone, but Paris Hilton is also working for them.

To Totallyforzen-

But studies been done and the poor are not getting poorer. Countries are moving forward to tradiing with others ....good examples are the former soviet block countries..eastern europe, vietnam, China, India, and more. Africa is behind crowd....but really...check it out. The world as a whole is moving toward prosperity. The beauty of capitalism is that there is plenty to go around. It is taking some in the US a while to see it because they feel somehow guilty...but really...not to worry....

Here are 3 thoughts, based on years of direct experience:

1. piano manufacturers are (generally) not stupid. No one is going to raise prices 30%

2. piano manufacturers (generally) are genuinely concerned about the overall industry and the total consumer experience, pre, during and post sale

3. To understand why this ruling, applied in the piano industry, can be consumer-positive, one must accept the concept that some products should NOT be sold at the lowest possible price.

Said another way, price alone doth not a good deal make(th?) The reason is that everything has a cost and often, something of value is left out as the price goes lower, and that is not always in the consumers best interest.

If one does not accept that concept, then one will never understand why this ruling can be considered a positive, pro-consumer, pro industry TOOL, to be used or not.

Ahh...but who gets to decide that, Eric? I would respectfully submit that telling consumers they don't get to make that decision is not a particularly wise way to approach a market driven by...consumers.

I certainly understand your point. It has been the justification for vertical restraints for a long time. But as I suggested above, it's always a *justification* and it always comes from "above" -- the manufacturers trying to dictate to the markets below what they should be "buying" (or buying into).

I would also submit that a better way to attempt to influence "what consumers should buy" would be the old-fashioned way -- advertising (and similar marketing methods). Vertical price restraints remain an artificial and forced way of doing it, and I tend to think therefore doomed from the outset.

Boseric right on! Any dealer that doesnt like this, should get on the bobsled to "Out Of Business Land." I need to make PROFIT!!!!! not alot, but enough to pay everyone and grow my business. Lets be real, the Walmartizization of the industry is/was, almost killing it. (But now, even Walmart doesnt sell everything at the lowest possible price.) This ruling will sort the market out so that, folks that want to buy cheap will buy from dealers that have cheap. Folks that want quality, will buy from quality dealers, I'll bet within a year, Pearl River and Mason will have MSP's. Wait, maybe "betting" here on PW isnt a good idea ... JMark I respect your opinion, but disagree with it.
Happy 4th!

J Mark,

Actually there are 2 different subjects.

Advertising is what we use to get a customer to consider one vs another manufacturer. No price setting can ensure customer awareness. Nor, and experience has proven this, will customers always buy from "quality" dealers, mainly because they often don't realize the difference between a high quality and low quality dealer until it is too late. By then they have made a cost/benefit trade off that they might not have made had they really known the details. This is almost verbatum what a customer has told me in one of the situations I am trying to clean up. "If I had known then what I know now..."

Since it seems nobody else is paying attention to this thread anymore, I can speak in a little more detail.

The issue is that manufacturers often know how to ensure a good customer experience and, sometimes, buying a high quality, expensive item from the organization offering the lowest price is not in the customers best interest. Nor is it in the manufacturers interest, even though what we get paid for the piano is not impacted by the final retail selling price.

I am not making a statement regarding Bosendorfer policy nor any other mfg policy, but my experience says these pricing tools might be used to "influence" dealers who "rape" the market. Many many dealers in the US realize the importance of market development and spend great amounts of money developing that market, advertising, promotions, having space set aside for teacher recitals, providing pianos for charity benefits etc. They do this to establish their name and presence in a market and believe that when combined with good product, good service and a reasonable price, they will sell enough to make a profit and survive.

There are other dealers who knowingly seek out opportunities to undercut these quality dealers, shipping long distances, providing limited service (sometimes) through technicians culled out of the yellow pages. With low cost products, this might be considered acceptable. With high cost, high prestige products with brand reputations that are vulnerable to immediate post-sale customer experience, this can be devistating.

There are any number of issues that come up post sale with pianos, most of which are not manufacturers warranty issues. Take a sticking key, for example. In a high quality piano this is expected due to close manufacturing tolerances and humidity changes. This is not a "defect in material or workmanship" that a manufacturer would be responsible for. In the best scenario, the selling dealer has built into the price of the piano a couple of courtesy service calls to take care of these issues. That dealer knows that referrals are the most valuable source of new business and they have a vested direct interest in keeping their customers very happy, especially in the early stages of ownership.

This is the kind of support that often disappears when sold by a "low quality" dealer. Customers get frustrated with the brand because of what they see as quality issues. Any reputable manufacturer will stand behind their warranty , but that warranty does not cover the basic call needed to diagnose a problem and determine if it is remotely a warranty issue or not.

These are real issues that affect piano manufacturers and purchasers in a real way. I'm involved in trying to recover from 2 such deals right now.

Since you understand law, you know that it is not so easy for a manufacturer to simply "cancel" the offending dealer. Nor, in this increasingly competive market, is that always the best answer. Sometimes another tool of encouragement is needed and these kind of tools can be just that.

Great post Eric.

Ditto,
"There are other dealers who knowingly seek out opportunities to undercut these quality dealers, shipping long distances, providing limited service (sometimes) through technicians culled out of the yellow pages. With low cost products, this might be considered acceptable. With high cost, high prestige products with brand reputations that are vulnerable to immediate post-sale customer experience, this can be devistating. "
This has been Yamahas tack all along, and why the techs here are always talkin trash about it...

I agree, nice post, Eric. However, it really doesn't answer my question.

So, assume (for the sake of argument) that I am a knowledgeable, educated consumer -- or at least capable of becoming one. Assume that I am made aware of the "sticking key issue," and perhaps of a dozen or more other "issues" that can relate to post-purchase satisfaction with the product. Assume that I understand that some dealers have, built in to the cost of the instrument, a couple of service calls and otherwise enough profit to cover post-purchase involvement with the customer, to ensure proper product and relationship "tweaking."

Now, assume that I am "the gambling type," and with enough information, I prefer to go for the price point and buy the same product from some "lesser quality" retailer who does not provide those "extras," and whose price reflects that fact. Let's say, I decide to save $1,000 on the purhcase price, and gamble I can get any little problems fixed by a local tech for less than that....

Why should I, the consumer, the reason all this exists, why should I not be the one to make that decision? Who gets to tell me that I can't do that?

And more to the point, how is vertical price fixing going to take me out of the picture? Won't I...just go to another brand?

Yes, you will go to another "cheaper" brand, The quality brand will remain so as its "packaged with" sellers that support the manufactures standards for product support and standards. (They have shed those dealers that ride the coattails) You still have your choice, you just choose a cheaper piano...
Gees, I could sel Steinways....

J Mark,

What about Eric's point that:

"Many many dealers in the US realize the importance of market development and spend great amounts of money developing that market, advertising, promotions, having space set aside for teacher recitals, providing pianos for charity benefits etc. They do this to establish their name and presence in a market and believe that when combined with good product, good service and a reasonable price, they will sell enough to make a profit and survive."

Many dealerships spend a great deal of monay donating the use of high-quality pianos to different non-profits. They do so to expose their high-end instruments to the marketplace. They would not be able to afford to do this without protection from other dealerships carrying the same brand who just wanted to skim a distant market.

Kenny -- Possibly you are right, that only the "cheap" brands will compete on price points intrabrand, and all the "quality" pianos will be subject to intrabrand vertical price restraints and only available through retailers that comply with mftr standards that would (supposedly) form the justification for such restraints. Possibly. But I doubt it.

Steve -- Yes, that point wasn't lost on me. It's a great thing, how that marketing need dovetails with other community needs. However, I'm not sure such needs could only be met by traditional dealers with fixed profit margins or price points. It could also be met, possibly, by non-traditional dealers who sell volume, with little overhead, and have a comparable marketing objective. ... It could also be met by grants, private fundraising and many other avenues (all currently used by educational institutions and non-profit organizations). This hardly seems a valid market justification for resale price maintenance. With all due respect.

J Mark

Please excuse me if I don't follow you down the endless hole of hypothetical possibilities. I'm not trying to debate theory, I'm merely suggesting why MRP could be considered a positive thing for the consumer.

Again, I'm not making any kind of policy statement for Bosendorfer or any one else.

I'm also not a lawyer, but I have followed this subject, and it seems like the Supreme Court is saying price competition may not be the only way consumers can benefit.

If one is brand insensitive, then lots of choices exist. A consumer today can find a piano to buy at any price they wish to pay. That doesn't mean they have to be able to find one particular brand at any price they want to pay.

That a manufacturer decides their product should be represented and supported in a certain way does not strike me as harmful to the consumer. The manufacturer of course takes the risk that certain consumers will avoid that brand because of this approach. Hopefully the manufacturer has also decided that exerting control over the way the brand is presented will outweigh the loss of these highly price sensitive, brand insensitive consumers. That manufacturer may be seeking a different market segment, one that puts more importance on what a brand means, including the concept and expectation of service.

It seems like manufacturers may have a right to have some say in how their products are represented and sold to the consumer.

I still feel the consumer has the final leverage because of supply and demand. The usual examples of the pricing restraints are Yamaha and Steinway. They are not price comparable and do not have a monopoly, either individually or collectively, on any price point. What they do have in common is aggressive marketing tendencies and ownership by entities that are making most of their profits in other areas.

A Steinway shopper can consider other choices at the pricepoint where there may be more pricing flexibility. A Yamaha shopper has an even wider range of possibilities. Apparently, there is enough revenue from customers at the moment to keep the respective ownerships at bay. But if the ownerships of these makers feel in the future that their piano units are underperforming they will make adjustments.

The adjustments may not be an elimination of price floors. They could simply be lowered price floors. New models could be introduced at lower pricepoints to avoid the embarrassment of a price rollback on existing models. There could be more outsourcing of components, or more contracting of pianos to countries with lower labor costs. Community programs that are not seen as cost-effective could be eliminated or curtailed. But in the final analysis, if inventory is backed up and product is not selling, some sort of adjustments will be made. I'm not saying they will necessarily be to the consumer's benefit, simply that they will be made.

I think there can be little doubt that the court decision is pro-big-business and ultimately a blow against innovation within the dealer network and against providing consumer choice (including the valid consumer choice of lower price for higher risk).

Ultimately this decision will favor the larger manufactuers with premium brands or wide product lines that have clear distribution strategies expecially those with smart sales channel management and those who invest in marketing to build their brands and drive traffic.

The losers? those (smaller, newer) dealers whose strategies depend on low service, low overhead and competing on price (and who traditionally keep the other dealers 'honest'). So, that means less competition for the traditional, toe-the-mfg-line dealer.

On the other hand, the result might be more and more dealers selling the manufacturer brand...look at what John Deere has been quietly putting into place the last few years seemingly in anticipation of this court ruling. John Deere mowers were only sold by authorized, exclusive dealers who also are closely controlled that they sell no lower than the mfg. sugg. retail = the floor price. However, in the last years mass retailers such as Home Depot have been added as authorized (non-exclusive) retailers for the lower-end models and have also agreed to the floor prices. All service and parts requests got to the local John Deere dealer.

So, maybe the future will be to really go for volume with for example lower-end Yamaha pianos being offered at a number of mass retailers right next to the Casio keyboards and service referred to the dealer (potentially along with a district unit-contribution-check) The dealer of today becomes more a service center and niche product outlet. And, a manufacturer like Yamaha might not need as many traditional dealers anymore; why not keep just the big ones?

Just jumping in at the end and may be repeating others. Sorry.

There should be no instantaneous changes in pricing or marketing practices. The Supreme Court did not throw out any existing contracts between manufacturers/distributors and retailers. It's new rule will be applied in the future by courts "on a case-by-case basis."

That means somebody has to be sued and the proceeding mature enough to get before a judge for argument. Months, maybe years before we'll see any legitimate reasons for change.

Excuse me. I'm going to rush out and buy a new piano.

I think you're missing something here. No, the Court did not strike down or invalidate any existing contracts or arrangements in the case. But the Court did hold that a certain kind of contract that was previously unlawful can now be entered into lawfully. That will mean that any manufacturers who have wanted to control sale prices at the retail level, but felt constrained to obey the law, can now do so lawfully. So I would expect there to be a pretty fast process here, where those manufacturers quickly set new terms for their retailers, and fix prices at the retail level. It is, no doubt, already under way.

Mark,

You are certainly correct here. I have already "heard the buzz" among my manufacturer clients/contacts. It is a topic being discussed at the highest levels of the piano industry.

J Mark, not sure if it's been mentioned but one interesting thing to consider is that the euro zone, Asia and many other developed states continue to rigorously enforce consumer protection and other anti-trust measures; ironically enough modeled after US laws post WW2.

Not sure how this will play out, what the impact of regulatory competition will be. It'll be interesting to see what sort of pricing power can actually be realized (in this case for the piano industry) given the increasing flow of goods via indirect channels such as the grey market from these outside regions. Good thesis paper here somewhere.

Yeah, there's a lot of good thesis papers here. I have been fascinated to learn about this industry, which in many ways is a microcosm of what's happening to the entire global economy.

I'm not really very familiar with European antitrust laws, but I do know that they have been enforced fairly well in some countries. I'm not aware of any international antitrust treaties, although there may be some, I don't know. Given the relatively well-developed situation with the intellectual property treaties, one might expect some developments in this area. On the other hand, the US (at least recent administrations) may have little real interest in participating.

I wish I could watch it all in a dispassionate way, but I have children. It changes one's perspective....