Is it price fixing? if so why is it allowed ?

[Dave7]

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1073792322&type=RESOURCES

If you supply goods for resale, for example to a wholesaler, distributor or shop, it will also generally be illegal for you to agree a minimum price at which those goods may be resold.
The law doesn't just cover formal agreements. It can also apply to other activities such as gentleman's agreements and even informal discussions where confidential commercially sensitive information is exchanged. For example, you shouldn't discuss your pricing plans with your competitors.
That is a section from the link you provided (thanks).......am I reading it correctly as it does seem to condemn that practice???

 

[mickle]

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1073792322&type=RESOURCES

OK. It is price fixing then. Though quite how they'd actually prove that a shared desire not to discount is in breach of the legislation I don't know. And it seems more than a little unfair to me. If I decide that I don't want to discount a bike and the bloke who runs a shop in the next town comes to the same conclusion are we both breaking the law?

 

[snailracer]

There is usually a weaselly-get-out-clause. How about this bit:

"Some agreements are not prohibited by competition legislation - eg non-cartel agreements between businesses with insignificant market shares."

Specialized may have a significant market share of the fancy-bike market, but in the context of the whole bike market (£60 BSO's included), their sales are a drop in the ocean. The legality of it would seem to depend on how a "market" is defined.

 

[RecordAceFromNew]

OK. It is price fixing then. Though quite how they'd actually prove that a shared desire not to discount is in breach of the legislation I don't know.

As an upstanding citizen it seems to me you could have, since you said you knew:

It's an unspoken agreement between all of the dealers.

or stu1903 could also have, since he knows about the rather less gentlemanly coercion exercised by the brands:

I work in a bike shop and we are told by the brands that no discouning is permitted until a certain date which is usually just before the new models come out. When the green light is given for discounting, a max discount limit is usually set.

Failing to comply and they threaten to stop supplying you that brand as you are damaging the brand.

 

[SpokeyDokey]

If you supply goods for resale, for example to a wholesaler, distributor or shop, it will also generally be illegal for you to agree a minimum price at which those goods may be resold.
The law doesn't just cover formal agreements. It can also apply to other activities such as gentleman's agreements and even informal discussions where confidential commercially sensitive information is exchanged. For example, you shouldn't discuss your pricing plans with your competitors.
That is a section from the link you provided (thanks).......am I reading it correctly as it does seem to condemn that practice???

I too think that what goes on (same with watches etc) is price fixing. Clearly if all the shops are selling the same bike at the same price then something must have 'fixed' that price - either that or it is all an amazing co-incidence.

I think some industries have been exempted from price fixing - books spring to mind.

***

I've been looking at bikes for a couple of months now (sorry to go OT) and I am not enamoured by some of the selling practices such as:

• Price fixing as discussed.
• Bait and Switch tactics. One shop refused to sell me a bike as advertised as it was not in stock! But said that I was welcome to buy something else. Reported this to trading standards who dealt with the offence.
• Component groups used in bike names when the group is not 100% complete or there is only a smattering of the group present.
• Mega sales on non-existent bikes or bikes only available in one very obscure size.
• Bikes advertised as in stock but when you enquire they are not available at all.

Not a great way to do business imo.

 

[dellzeqq]

the reason the Competition Commission has not gone for the bike trade is this

- no one retailer has a significant share other than Halfords, who are in cahoots with absolutely nobody.
- no one manufacturer or importer has a significant share.
- the price (as he says, wearily, and for the fourth time) includes the service offered by the shop, which may be perfunctory, or it may be extensive, and, indeed, is an essential element of competition between shops.

So......while Specialized may lean on its dealers, the shops still compete on the basis of service. And Specialized are not big enough to damage competition - if somebody thinks a Spesh is too expensive they can go for a Trek or a Boardman, or, even, if they are that desperate, a Bianchi.

The Net Book Agreement was an industry wide agreement deemed to be acceptable by the the UK government and the EU because it would, allegedly, keep small bookshops in business. Of course it didn't - Amazon, Waterstones and the book clubs saw to that. If the Competition Commission went after the bike trade (which they won't) the ACT would bring out precisely the same argument, and they would prevail. Bike shops start up and go under at a rate of knots, with minimal entry costs. But - here's the rub - where I think Madison, Specialized, Dahon and the rest might be vulnerable is in their carve-up of territory. You cannot start up a Madison store in South London (other than in Kennington) because established retailers have their 'areas'. Indeed, one shop not too far from me has token lines of bikes in stock simply to block other retailers getting their hands on the product (note Evans seems to get around this by having their own distribution network based at Gatwick). Whether we think this is a good thing or not, I've no idea.

 

[MacB]

It's the problem with any form of protectionism the benefits tend to accrue in places we'd rather they didn't. I'm not sure how we get around that.

 

[RecordAceFromNew]

the reason the Competition Commission has not gone for the bike trade is this

- no one retailer has a significant share other than Halfords, who are in cahoots with absolutely nobody.
- no one manufacturer or importer has a significant share.
- the price (as he says, wearily, and for the fourth time) includes the service offered by the shop, which may be perfunctory, or it may be extensive, and, indeed, is an essential element of competition between shops.

So......while Specialized may lean on its dealers, the shops still compete on the basis of service. And Specialized are not big enough to damage competition - if somebody thinks a Spesh is too expensive they can go for a Trek or a Boardman, or, even, if they are that desperate, a Bianchi.

Sorry Dell but your service argument x 4 became invisible to me after noting services are covered by the Competition Act according to the gov.uk link in post #15.

I would be surprised if individual marques could say their market share is small so the Act does not apply to them. If that was the case most goods and services would be exempt. It is specifically stated here that "There are very few occasions, however, where a price-fixing or market-sharing agreement would be allowed."

 

[dellzeqq]

the point is - there is clearly competition between different providers of services

as for individual marques etc..........the Competition Commission has cleared supermarkets. Compare and contrast...

 

[RecordAceFromNew]

as for individual marques etc..........the Competition Commission has cleared supermarkets. Compare and contrast...

I don't know what price fixing charges against the supermarkets were cleared, but weren't they fined nearly £50 millions for colluding on milk products as recent as last August?

 

[youngoldbloke]

I find it suspicious that the particular brand of muesli that I prefer is consistently priced at exactly £2.69, in all the major supermarkets. (And not sold in smaller chains). Coincidence or price fixing? No competition there.

 

[MacB]

They do do price matching. Quite how that differs from price fixing though isn't clear.

 

[dellzeqq]

I don't know what price fixing charges against the supermarkets were cleared, but weren't they fined nearly £50 millions for colluding on milk products as recent as last August?

they were, but for years sensible people have been saying that the big four supermarkets have a monopoly (see price matching below) and that this is a bar to competition. If this were the United States they'd probably break up Tesco (it's not gone un-noticed that Walmart are asking the UK government to break up Tesco, which is kind of sweet). Now, if I go to Brixton Cycles I see eight or nine brands of bikes, one of which they import themselves, and if I go to Evans down the road I see twelve or more brands, and, apart from a Madison range, they are different from the brands over the way at Apex Cycles. Equally, you have (I'm guessing here) thirty independent bike shops, plus two chains, plus Halfords within ten miles of my front door. I would say that is competition of a high order, and that, even if two shops were selling Specialized bikes, a person would distinguish between the shop that offered them one years free servicing and the shop that simply took the bike out of the box.

 

[accountantpete]

I first noticed this with Specialized s-works shoes which are usually all the same price to within a penny (currently £199.99) and have been for years.

Here's a breakaway! Note the bit in red

http://www.cyclestore.co.uk/productDetails.asp?productID=24864

 

[RecordAceFromNew]

they were, but for years sensible people have been saying that the big four supermarkets have a monopoly (see price matching below) and that this is a bar to competition. If this were the United States they'd probably break up Tesco (it's not gone un-noticed that Walmart are asking the UK government to break up Tesco, which is kind of sweet). Now, if I go to Brixton Cycles I see eight or nine brands of bikes, one of which they import themselves, and if I go to Evans down the road I see twelve or more brands, and, apart from a Madison range, they are different from the brands over the way at Apex Cycles. Equally, you have (I'm guessing here) thirty independent bike shops, plus two chains, plus Halfords within ten miles of my front door. I would say that is competition of a high order, and that, even if two shops were selling Specialized bikes, a person would distinguish between the shop that offered them one years free servicing and the shop that simply took the bike out of the box.

IF all those shops from the 30 which sell Specialized all charge the same £1799 for the same model you wanted, I suspect most people wouldn't call that competition of a high order. Why? Because in the absence of collusion Mickle and Stu illuminated, the sum of the components they take from each of their rather different rent, rate, staff fixed overhead, depreciation, utility costs, consumables, "free" servicing time/variable cost allocated, cost from wholesaler, profit expectation etc. will all have to happen to add up to the same number, by chance?

Regarding competition between the big supermarkets, I am slightly surprised it is used as a current example black sheep in comparison in the present context. After all, with over 500 branches nationwide (damn I hope I don't sound like a bloody advert no I have NO connection), most people who want to buy their £2.69 branded muesli (or pretty much branded anything actually, plus some unbranded groceries where comparison is possible) could just go to Asda, and get it for £2.42 or less making use of their 10% minimum saving guarantee, which afaik has been operated for over a year, with a dedicated website that tells you the relative prices in relation to all the other major outfits, item by item, by just entering a single code from your receipt.