Issue link: https://www.e-digitaleditions.com/i/42495
Industry Insights MRP, Already Part of Our Lives I f you play golf and have a set of Callaway's, you've experienced MRP. How about those Bose headsets? Kimberley Gill Rimsza, President TriMark Gill Marketing, Inc krimsza@gillmarketing.com Yes—MRP.Ever done a little shopping at a store that carries Rolex watches, Brighton product or NineWest shoes? I bet a lot of us have used Garmin tech- nology to get from point A to B. Let's think about our work lives for a moment. Most have had or currently have Citsco technology at your office. Now let's zero in on our industry. Ever buy a piece of Hatco equipment? I could go on but I think I've made my point. We live with MRP pricing EVERY DAY. It's not new but it's controversial. First let's start with between competitors to establish agreed upon pricing structures.The lat- ter is always illegal and carries stiff penalties. MRP really became in vogue in 2007, what MRP, Minimum Resale Price,means.Also referred to as RPM,Resale Pricing Maintenance, it is a vertical pricing restric- tion established by a manufacturer on dealers, retailers and distributors. The manufacturer determines a "minimum" price at which distributors must sell the product. The manufacturer then moni- tors its dealers and distributors to ensure compliance. Most of the agreements spell out the terms if a reseller sells belowthe specified minimum price. MRP has some strong opponents, some of whom attach negative terms, such as antitrust or even price fixing, to the practice.However, this is simply not true. An MRP agreement is an agree- ment between a manufacturer and its distributors (vertical pricing agree- ments). These vertical agreements are not automatically illegal under the fed- eral antitrust laws because they can have either procompetitive or anticom- petitive effects, depending on the cir- cumstances.Horizontal"price fixing,"on the other hand, is an agreement 6 FEDA News & Views MRP has some strong opponents, some of whom attach negative terms, such as antitrust or even price fixing, to the practice. However, this is simply not true. when the U.S. Supreme Court relaxed federal antitrust restrictions on the prac- tice after a controversial ruling in aMRP case (Leegin). Some opponents of MRP continue to lobby to have the legislation for federal antitrust laws amended to restore the rule that MRP agreements violate the ShermanAct,but that legis- lation has yet to happen. States are becoming more aggressive, using state law to attack MRP, but two recent cases in California and NewYork were settled out of our court, leaving the ultimate issue unlitigat- ed. Maryland has actually passed legislation to make MRP illegal in the state. On the federal level (andmost states),MRP agreements are now analyzed under the rule of rea- son;ensuring that this practice, in a spe- cific case, is not prohibiting or imposing an unreasonable restraint of competi- tion. What are the benefits of MRP prac- tices in our industry? They are actually very similar to the benefits experienced in most industries.These policies help prevent customers from "free riding" on dealers that provide high levels of service. Nothing is more frustrating than to work closely with a customer, price your product accordingly (based on your sales and G&A overhead), only to have that customer go out and shop the discounters and Internet dealers that provide little or no service.You did all the leg work for the benefit of a deal- er or an Internet company that has a continued on page 36