I believe no one is exempt from market forces. Not even powerful Microsoft. If Microsoft overpriced its products, there would be mass migration. So here's a company with great market power that teethers on the edge. In fact it prides itself in selling cheaper, in volume, adding more and more features to keep competition out.

Just a scenario here, if a Yamaha increased prices 30% (sorry for using Yamaha as example here...just an example), this could be an incentive for some European manufacturer, let's say Petrof to lower their price a little and use that as an opening. Now they can sell in volume, or at the expense of Yamaha. Then Estonia sees this and doubles their factory size. And these two more aggressive companies then don't have MAP prices. Yamaha then gives up and lowers their MAP. In the meantime they've already lost some market share and maybe consumers lose goodwill.

As an actual example, I've bought several keyboards from Yamaha. They have MAP prices. I got a good price, enough to keep me from jumping to Roland which is very close price wise.

I'm curious though if these price contracts affect things like Showroom models and such. Maybe sellers will skirt the issue by claiming some minor defect like open box.

I'm also curious about a store going out of business. So they sell their inventory at lower then wholesale. What's the manufacturer going to do, sue them? They're already going out of business.

What do you expect? Its GWB's court. Like his father before him, he signs, supports, and backs anything/everything pro-big business and anti-consumer.

Personally, I'm not a big fan of the Bush court appointments; but to state that this decision proves a pro-business anti-consumer bias is more than a tad unfair.

The court is not saying that manufacturing companies must adopt MSRP prices, only that they can do so at their own peril. Retailers do not have to carry MSRP product lines. If they feel that it is in their best interests to do so, for the reasons that Keith Kerman outlines, they are free to do so, but again at their peril. Consumers do not have to buy products from manufacturers that enforce an MSRP. They may do so if they wish. There is enough freedom for all concerned IMHO.

The situation might be different if one company had a near monopoly on the production of a particular product, but this is hardly the case with pianos.

If a piano manufacturer decides to raise prices 30% and enforce its will with an MSRP, all the while realizing that the customer base is already shrinking and the international competition in the marketplace is keen, then the phrase "at their own peril" would certainly apply.

What is apparent is that the piano retailer who wishes to survive and prosper must choose his product lines carefully.

Hey, back in the 70s I lived only four or five blocks from GWB. I resent you guys picking on my ex-neighbor.

As a conservative I do not believe that his Court appointees will "cause great harm", but I do think this ruling is in error. Of course, as I have already said, I believe its real impact will be negligible. George ran for Congress from our area about the time I became eligible to vote. He lost badly to the Democratic incumbent for whom our local Federal building is named (and for whom I voted until he retired.) I didn't vote for George then, but I did vote for him for president twice. Would I do so again? While he has made a number of errors as president, I still can't believe Al Gore or John Kerry would have done any better. Given the same choices I would (reluctantly) cast the same ballot.

I have always been a conservative. I once considered myself a Democrat. Heck, in my younger days Democrats in my area were more conservative than most Republicans. Things have changed quite a bit in the intervening years, and I find myself voting for Democrats only very rarely. As Reagan once said, "I didn't leave the Democratic party; it left me." I still refuse to call myself a Republican, though. I consider myself a conservative independent.

Just to be clear, we are not talking about MAP or MSRP here. We are talking about RPM.

MAP = minimum advertised price: mftr dictates the prices at which products may be advertised, but does not control actual sale prices

MSRP = mftr suggested retail price: a meaningless number sometimes called "list price", with no legal effect

RPM = resale price maintenance: the mftr actually dictates the minimum price, below which a retailer may not sell that mftr's products.

Is the Supreme Court's decision "pro-business" or "anti-consumer"? Certainly, such suggestions are usually facile and overly simplistic. And antitrust law is one area where facile and simplistic just won't work. Nonetheless, there is really no question that many manufacturing companies have long wanted to dictate resale pricing, which can fit into a larger picture of controlling the markets (coupled with other restraints, like geographic market allocation, tying arrangements, etc). For some time, many companies have dabbled in this area, dancing around the law in the expectation that enforcement would be unlikely, and/or that the law would change (as it now has). In my own opinion, yes, this decision, together with others and taken in context, is "anti-consumer." It allows those who control the distribution of products to exercise greater control over pricing, and defers what should be a market determination to the relative powers of retailers and their suppliers. It will make it difficult for some (many) retailers to compete, and it will increase prices in some sectors. As much as I dislike the term, that is "pro-big business."

Turandot said:

The piano market is served by a small number of large but differentiated suppliers. There are a handful of major brands, and dozens of "stencil" names provided by these same companies' second-tier operations.

It takes a large capital investment to open up a piano factory. Aside from the Chinese factories, there are very few new entrants in the piano-building business. The few piano-making start-ups I've read about are high-end / low-volume producers competing with Bosendorfer, Fazioli, etc.

These characteristics define an oligopolistic market - a few producers, significant barriers to entry, some competition via pricing and product differentiation.

Oligopolists have a natural incentive to collude or manipulate markets to turn their bloc of companies into an effective monopoly. This increases profits for all of them. Many of the laws in the US enforcing fair trade and competition were intended as a check against this type of market power.

So now manufacturers and distributors are legally permitted to enforce a minimum selling price at the retail level. But it won't be trivial for new start-ups to come into the piano business and undercut the prices of Yamaha, Steinway, Kawai, etc.

Only the Chinese companies are equipped to do so right now, but the consensus here is that the pianos just aren't as good. So now someone who may have bargained hard for a new Yamaha C7 may have to settle for a Suzuki, because the Yamaha retailer just won't be allowed to deal beyond a certain level.

If a piano company sets a "floor" for it's dealers and the dealers can't sell the pianos because the piano is priced too high relative to other brands of pianos, the subject piano price will have to be lowered by the piano company, or the piano company will go out of business. Couple that with the fact that digital pianos are selling in higher numbers than acoustic pianos.....plus the fact that if the retailer can't sell the piano company's pianos, the retailer is either going to go out of business, or they can switch to selling another piano company's pianos where the price is more suited to the market!!

...except that Pianos are not some necesssity, (Forum piano fantatics like us aside).

I've always wondered about this: everyone in the industry says piano sales are going down. But examine this other element: prices are always going up.

Computer prices have gone done. Now multiple computers in a household are extremely common.

Obviously labor cost is the big issue with piano manufacture, but consumers only react to the final price. They don't need to or want to know what all the costs are.

You don't think the Nature Conservancy or the teachers unions are oligarchies?

It's difficult to believe that price fixing schemes - J. Marks's RPMs - promote competition or are pro consumer.

Is the market malleable? Yes. Are producers and consumers on an equal footing? No. That's why anti-trust laws were written.

Our responses to price inquiries should become more interesting;-)

KarenABCDE said:

Labor unions are not oligopolists. Employees have a right to collective bargaining. (At least for now, though the fat-cats and the judges / congresspeople they have bought threaten that as well.)

The Nature Conservancy would be a non-profit corporation and/or lobbying group. They are comparable to one piano manufacturer, not to the aggregate of all suppliers in the piano market.

A major flaw in treating a corporation as a "person" is that a large corporation commands financial resources far more vast than all but the richest handful of people in the country.

It is impossible, as a private individual, to get equal legal representation and government attention as a multi-billion-dollar corporation.

Why, then, should the law treat private citizens and corporations the same, especially in cases dealing with the relative negotiating power between the two?

from Colin Dunn
"A small number" and "a handful" are relative terms. Some might say that the number of suppliers is in balance with or even too high for the existing demand. If no one produced pianos in Asia, then European and/or North American manufacturers might cut their individual or collective throats by enforcing prices that the customer base would not support. But that is not the case. Fortunately, there is enough demand in the domestic Chinese consumer market to make the high startup costs worthwhile, and enough ready-to-learn and relatively low-cost laborers to sustain the effort. If Chinese manufacturing interests had no domestic market to sell into, I think the meager demand elsewhere in the world would make them think twice before entering the piano market.

If Japanese, Korean and other piano makers decide to manufacture in Indonesia, they face the startup costs you mention, and Indonesia doesn't offer a large domestic market. But Japanese and Korean companies are going there anyway. They cannot be feeling very secure in any oligopoly.

There's no doubt that the Chinese pianos are putting price pressure on piano makers in countries with vastly different labor costs and currency valuations. If piano makers in those countries react by crying foul and demanding import tariffs and quotas, that would be definitely anti-consumer. If they simply raise their own prices and say to the consumer "Take it or leave it", it's just collective suicide.

The interest shown by European and American piano companies in outsourcing parts orders to China and elsewhere and in partnering with Chinese factories to build pianos proves that these companies have some sensitivity to price and are not feeling secure in any oligopoly.

There are (I believe) three or four European low-volume piano makers who have (from appearances at least) shunned any manufacturing connection to Asia. But even if their prices continue to rise steadily, I would guess if would be a reflection of their philosophy of hand-building and the exorbitantly high cost of skilled labor in their countries, not a reflection of a perceived ogigopoly.

So if Steinway or Yamaha wish to stretch their name recognition to demand higher prices and offer no elasticity in pricing, they may well reach the breaking point. That's what I mean by "at their own peril".

J. Mark,

Thanks for your gracious correction of my blunder confusing MSRP, MAP, and RPM.

The Nature Conservancy is like one piano company. There are other groups on the order of The Nature Conservancy which form the "aggregate" as Colin Dunn has mentioned....I submit to you that the sum total of funds controlled by the Nature Conservancy and The Sierra Club and others like them rivals funds controlled by many corporations.

I believe that this ruling will have ZERO affect on the piano business. As I have seen dealers do to satisfy such requirements before, either for the manufacturer or for minimum down payments to satisfy the bank, trade values will be inflated to compensate. In such cases as a trade-in is not available, they can make one up and tell anyone concerned upon investigation that the trade was a junker and was tossed. I am sure there are other creative was to get around any MRP's if one was so inclined. After all, this is not a highly regulated industry and most manufacturers are happy to sell what they can at what ever it can be sold for.

Fear not...

from Dino Flacco
I'll take that to mean that the price of a Steigerman premium is still negotiable.



Dino,

It's good to see a person in your position posting on this topic. I'm hoping that others like Ron Gardini from Pearl River and John Elliot from Geneva will weigh in as well.

Relax friends. Pianos are not like buying gasoline. You have a lot of influence on Piano manufacturers. They screw with the pricing? DON'T BUY.

You cannot have a monopoly of significance on an optional luxury item. You can live without a new piano. You can buy a used piano even of the same brand, even just a few years old. You can buy a digital. A few years of non-purchase and the manufacturer will be out cold.

Now if gasoline stations did the same thing we'd have more if a problem but nowadays there are few things in life without an alternative.

When I was telling my husband about the court decision and how it affected piano sales, the first thing he said was "all a salesperson has to do is take a screwdriver and put a ding into a rear leg of a piano and then offer a discount for damage."

In the long run, I agree with the others who predict it won't make much of a difference to the piano industry. I suspect the major manufacturers will be eyeing each other and seeing who steps up to raise prices... a manufacturer would be taking some risks to be the first one to do so.

Besides, the decision didn't say that manufacturers HAD to establish minimum selling prices, only that they were entitled to.

from Monica Kern's husband
I thought that what was a customer did to bring down the price.

Note to self: Bring screw driver piano shopping...

There you go! That'll be your price insurance! Now if you get caught on video, you're on your own

All that has really changed here is the shift in the burden of proof.

Sure there have been examples from the 1970's where prices went way up but that was in a pre-internet, pre NAFTA, pre global economy era. If the world is indeed flat, what power do manufacturers really have?

Many respected economists believe the change can be pro competition, what's wrong with testing this given how much has changed since 1911 and even the 70's?

I think some brands that CAN do this might, but I think those will be few and far between.

Somehow though, I welcome the idea that one can compete on something other than price. That is how I am building my business - providing a far superior service to my only national competitor.

What? What in the world are you talking about?

This is not a change in the "burden of proof." It is a complete shift in the required analysis. Previously, RPM was considered unlawful per se: a manufacturer could not dictate the price at which a retailer sold its products to a consumer. Now, a manufacturer *can* do that.

There are two categories of antitrust analysis: Per Se violations, and Rule of Reason issues. RPM has now been moved to the Rule of Reason. It's a completely different kind of analysis.

And I have no idea what you are referring to with this "pre-NAFTA" stuff. What happened this week has never happened before. There is nothing to compare it to.

And yeah, I'm sure there are "respected economists" who will say anything. In my profession, we call them "expert witnesses." Once you tell them how much you pay expert witnesses, they ask you what conclusions you would like them to reach.

In fairness, sure, there are arguments that (as noted above) competition will take place on non-price issues. But that is *always* a manufacturer's argument: it is related to branding, trademark-building, and marketing generally. Consumers almost always put price as the first item of "competition" that they care about.

Again, it's largely a matter of whose "perspective" you take, whether you will try to rationalize the Court's decision, or whether you will criticize it.

from Mikhailoh
Does the lack of a price floor mean you cannot compete on the basis of quality? Do you mean that your national competitor is selling the exact same product as you, but offering it at a lower price due to economy of scale and less attention to service? If that's the case, can't you sell at a slightly higher price based on the perceived value of your attention to service?

Consumers generally like choices.

I just had a thought (rare). .... Maybe this is a perfect opportunity for Kawai to step in and push Yamaha aside.

I would guess most Yamaha dealers are a little upset about this development. I mean, if I understand it correctly, in the past Yamaha has tried to dictate resale prices to its dealers, but the whole thing has been kind of fuzzy. Because the law didn't really support this practice, the dealers could play around with it a bit. If Yamaha terminated a dealer for selling below their "preferred" price point, the dealer *might* just sue them.... Now, a Yamaha dealership will be dependent on the dealer towing the line.

This can't be fun for the dealers.

So sure, the Yamaha name is worth a lot in the retail market. But consumers are now able to educate themselves better (Internet), and Kawai has always had a pretty good rep, too.

So if Kawai is smart, they will capitalize on this situation and offer existing Yamaha dealers an attractive alternative.... A nice way to cap off years of R&D that have arguably produced a better product anyway.

...just my ramblings...

J. Mark,

I was not trying to get into a rhetorical debate with you. My shift in burden of proof comment references the fact that there is no longer a per se rule, that the plaintiff must prove the RPM is anti-competitive.

On the second point I was referring to experiments in the 1970's with state law that allowed for RPM but then was addressed by Congress in 1975 under the Consumer Goods Pricing Act of 1975.

Anyway, the Supreme Court says its time to address the issue so I guess they know what they are talking about even if I don't.

Oh, ok, sorry, ftp. I see your point. I think the phrase "burden of proof" has such specific meaning to me, I probably over-read it, so to speak.

But yes, before, theoretically, a plaintiff only had to prove that an RPM agreement existed. Now, that same plaintiff would have to also prove that it has an anti-competitive effect. Not so much a burden of proof question, but a question of the kind of proof that has to be offered. I think the reality is that the burden of proof will be on the defendant to prove that it does not have an anti-competitive effect, but overall has other positive effects.

Anyway, sorry, I didn't mean to jump down your throat, it just struck me as an odd comment.

No, but generally speaking offering higher quality service adds substantial dollars to the bottom line. In the case of pianos this is expecially true.


In fact, competing in the piano industry solely on price, ala Costco or a price-only brick and mortar, is a false economy false economy because of the non-recoverable dollars the consumer will have to invest in prepping the product before they even know for sure what it is or can be. If you are the type that won't do that anyway, that's fine. But not everyone is like that. I still believe the discriminating piano consumer will go for value over price.

As far as my business, my only national direct competitor's offering is similarly priced, actually a little higher, but my service model offers customers a lot more benefit. You can pay x+10% dollars and have to do a lot of the work and coordination yourself, or you can pay me x dollars and my company will do it all for you, including coordination. This is also very convenient for and appreciated by the vendor, who refers customers to my company or theirs. So I am lucky enough to be able to offer both price and quality.

Once this has been firmly established I could probably raise prices, but the truth here is that by the time that happens All the software and procedures my company will ever need will have been developed, at which point my overhead drops dramatically and I can lower my prices enough to drive my competitor out of this particular niche market.

Next the real challenge will be to expand the service model offering to other vendors.

..."Anyway, the Supreme Court says its time to address the issue..."

This is an important take-away here: the court interprets existing law, for better or worse (at the least that's the idea). What this may indicate is that it's time for Congress to revise legislation in this area, if there is any momentum to do so--it's anti-trust and related legislation the Supreme Court is interpreting here, not basic constitutional issues, so Congress can change it!

Hi J. Mark,

A question. Wouldn't the manufacturer have the burdon of proving that its RPM was "reasonably" aiding in competition? Or, that "by reason" it was not violating the Sherman ATA?