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Competition

I'm about to write something that's probably more editorial than usual, and not intended to be a short sound byte, so, be warned. But, if you're interested in the business of business, and how it is impacting us all, it's an important read.

We just received communication from one of our suppliers today. I'm not saying which one. We weren't a target by ourselves. It's not the first of its type we've ever received. In fact, it's getting fairly common. But, getting any such things is troubling, and it seems it's how big business thinks business is done.

Normally, we "only" hear about exclusives or limited supplies or some reason the shipments going out were mishandled or delays.

The latest, though, is about a supplier telling us we're not allowed to sell their products in certain places without their prior approval. Anything. Probably including items we bought and paid for a decade or so ago. Retroactive. It isn't clear, and they don't want to clarify, so, basically, we shouldn't do it. It's a new policy, and we just happen to be one of many hearing about it. Or, so it seems, and I'm not trying to assume a motive that I just don't think is there. For the moment, we don't even sell there on that newly-restricted venue, but to increase sales, we were mulling it over. After all, business is about making money, and we're capitalists here. Just sayin'.

Still, the first thing this does is it limits, in certain venues, YOUR ABILITY AS A CUSTOMER to get a competitive price, maybe even a fair one. Why? If many aren't allowed to sell their wares in certain places, they can't compete against others who do, and that artificially keeps prices higher than they should be, since you can't get their lower prices (when they have them) on those items. If the manufacturer is choosing which sellers can and can't sell on those venues, too, it becomes fairly clear the manufacturer is getting to select whose pricing policies it wants to promote, and is controlling price. Since we pride ourselves on the value (including low prices) we offer, being told items we purchase outright from a supplier can't be sold as we choose not only interferes with how we can do business, but makes business more difficult. Instead of just worrying about selling things, (which, I promise you, is the full time job it seems to be!) we have to worry also about where and how and to whom we sell, and have to take time, energy and effort to verify we're not trampling on someone's "policy"...which, if we're being honest with the situation, is someone's attempt at ginning up higher prices and forgetting to respect the supply chain and retail customers without whom they are nothing. And, those of you who have dealt with us probably are well aware we NEVER forget to be grateful to our customers for their custom. We're nothing without our customers.

In trying to educate ourselves about this further, we found the following at http://legal-dictionary.thefreedictionary.com/Restraint+of+Trade discussing whether such policies are even legal:

"Restraint of Trade

Contracts or combinations that tend, or are designed, to eliminate or stifle competition, create a Monopoly, artificially maintain prices, or otherwise hamper or obstruct the course of trade as it would be carried on if it were left to the control of natural economic forces.

As used in the Sherman Anti-Trust Act (15 U.S.C.A. § 1 et seq.), unreasonable restraints of trade are illegal per se and interfere with free competition in business and commercial transactions. Such restraint tends to restrict production, affect prices, or otherwise control the market to the detriment of purchasers or consumers of goods and services. A restraint of trade that is ordinarily reasonable can be rendered unreasonable if it is accompanied by a Specific Intent to achieve the equivalent of a forbidden restraint.
"

Now, am I saying what is happening here, and in other situations we've had imposed upon us, "illegal"? I'm not a lawyer, and I don't know.

But, what I will say...as the reason for bringing this to an open forum to inform and enlighten those who would come here and read what we write...ANYTHING that restrains retailers from legal competition is likely to limit your supply and increase your price. And, with breathtaking frequency, that seems to be the goal of many manufacturers lately. Beyond that, when a supplier or manufacturer takes the step of controlling WHICH venues are allowed and to WHICH retailers, it becomes hard not to ask how price fixing isn't at play. So, legal or not, it's against our interests and yours. We'll let the lawyers figure out how to parse the exact language.

The counter-argument being used often now is "too many offerings of the same item tend to tarnish the brand." Actually, my first instinct is to think something in such demand shows signs of health, and is first and foremost showing strength, not "tarnish." But, what sometimes happens is manufacturers or suppliers cut special deals to help them sell their products. That can happen in the course of business...you sometimes cut prices or use certain venues in order to sell what you need to sell. (Which, of course, policies restraining trade are stopping the rest of us from doing freely!) Then, the business that got the special deal tries to use its lower costs to its advantage and sell at lower prices than others can...in order simply to sell what it bought and make a profit. So, for a time, price goes down. That's a good thing for retail customers, as a rule. But, if too many deals are constantly being cut, it undermines price, and makes it tough to profitably produce and resell a product line. So, it fails. The answer: stop trying to cut deals that hurt yourself and work with the market to maintain healthy business practices, without artificially suppressing sales. If you have an item people want, sell it in quantity at a value price. That's how American business has succeeded really since the invention of the assembly line, and, certainly, since World War II, through the boom times of the 1950's and beyond. When it's gone away from that, usually for corporate reasons that have nothing to do with sustained success, and everything to do with the short term, business tends to fail and fail badly.

So, why should you care? If those manufacturers fail and fail badly in the long term, the things we sell that you want will no longer be available. Not from us. Not from anyone.

In the same spirit, we've said for years (actually, it's decades), "exclusives exclude." Well, this is one more gimmick. This excludes, too. Making venues available only to a chosen few retailers is just as bad as making product available only to the chosen few, or limiting supplies when demand is there for far more sales.

Ultimately, we need our suppliers to supply products we can sell. How else can one have a business than to have something to sell?

But, what we're seeing more and more in the 21st Century is a corporate attempt to take over anything successful. Ok, I don't mind them making money, either...remember, I'm a capitalist. But, rather than worrying about customers, forcing higher prices that don't offer value seems to be the goal. It's a bad one. Customers tend to walk away at some point. In droves. And, if the manufacturer or supplier are complaining today about tepid sales, maybe, instead of looking at how many are competing, more attention could be paid to whether there have been too many exclusive deals, or policy set by lawyers and MBA's instead of people who have had to deal with other REAL people across a counter and know there's more to it than supply v. demand charts the classrooms tell you are all you need to know.

Now, having said all of this, it's also right and fair to point out, on some venues, there are some retailers selling just about at cost. Or, far below cost. Sometimes many of them trying to unload items they bought beyond their ability to sell profitably. That's not healthy, either. So, they try to cut a deal and sell at a lower price. Just like the manufacturer might do. And, if someone pays their money and buys recklessly, well, as much as I may not like the kind of competition that perpetually sells at unsustainable low prices, they should also have the right to deal in a healthy manner with their merchandise in order to survive. So then they can buy more from the manufacturer later...hopefully learning to moderate their purchases...rather than going bankrupt and imposing that cost on all of us. That's the natural consequence of healthy business in a healthy economy. By stopping these competitors, the manufacturer only hurts itself, even if the short-term result is a market price lower than you might want in a perfect world...as a supplier. (Actually, as a repeat customer, you want a HEALTHY price, always, as it protects you from artificially higher prices in future. You want good value, and that's a partnership between customer and business.)

What we have always tried to do for our customers is provide the best possible value. No scams. No cheats. Partnership. And that's part of our job in serving our customers.

At a point where the corporate policies of many license holders seems to be trying hard to remove the ability of retailers to give you such value, it seemed a good idea to comment, explain what we see, and also explain why we don't dive in to every possible product line anymore. Being told we're not allowed to bring you the value proposition is a bad place to start relationships. We're in our customers' corner. They're the ones we've stayed in business with...nearly 39 years, and counting...and we don't forget who got us here.

Now, having said all of that.... We have an absolute and utter monopoly on OUR web site. Instead of the corporate attitude that foists artificially high prices on customers, we intend still to remain a haven for value and customer service. If you don't see us listing on certain venues, well...visit our site. That's where value prevails. We're still beating prices from anyone dealing fairly on anything except clearances from their inventory. We hope we continue to earn your support, and we value the loyalty so many have shown for so many years. We have no desire to "go exclusive" and ignore those most deserving of our respect.

As always, thank you for your support.

Michael Salvo & Patty Cryan
Mike's Comics
http://www.mikescomics.com

Comments

Trying to skirt around the anti-trust clause will come back to bite them in the end. While my degree is in econ, not law, I can smell a rat when it pops up its beady-eyed little head and twitches its whiskers.
There's a lot we're not saying here. There's more than one supplier doing this, there are more similar issues than this single one, it's been going on a long time...it's just getting worse again suddenly.

In the past, we've had one supplier threaten to close our account if we didn't meet a certain minimum pricing on an exclusive it was running. (They backed off when they called by phone and I explained just how blatant that brand of price fixing really was, not to mention the bad press of trying openly to force their retailers to charge their customers more.) A totally different supplier told us not to go below a certain price point, then when all their other accounts didn't honor the bargain (and we did), we lost business...and the supplier started selling "direct to retail" both below the original price it requested and below the WHOLESALE price its retailers pay.

Someone, somewhere, gets a bonus for coming up with this stuff and seeing how well it will fly. Fact of the matter, to push back properly, with all the layers of static they put up with these schemes, it would cost time, money, and lawyers fees to fight it, and, win or lose in the courts, it's what the Brits might call a "non-starter" as far as a business trying to survive and make money.

I'm a fan of trying to sell my customers what they want. And, frankly, why should someone selling to me even attempt to get in the way of that? The mind boggles....

*APPLAUDS*

While I am no legal expert either, this definitely sounds like "restraint of trade" to me.

The only possible legal/rational defense I can think of for this supplier's new policy is if the venue in question explicitly forbids the specific sort of material that this supplier provides, and the supplier wants to avoid getting dragged into any future legal action that would ensue from someone advertising their product(s) in the venue in question. However, what little you've said on the matter causes me to infer that the venue in question does not have any such restriction against the material this supplier provides...

Re: *APPLAUDS*

I'm not venturing into legal opinion here. Just offering facts that concern me. In the fullness of discussion, if I gave more details, they'd seem leading, and an argument might be made it was misuse of context, even if I thought those other details were just a part of more robust disclosure.

But, to your point...on some items, there are still 20-30 (authorized?) sellers of some items on a third party web venue. The fact that our prices on many items beat all of theirs, all the time, isn't really the point, though I could also say I should be selling much more if I were to compete there at lower price. That said...what "should" be might not happen at all, if nobody is buying from those venues. Therein lies a whole discussion unto itself. Is anyone actually losing anything by not being allowed to sell on a site where those items don't sell? And, is that any part of what is going on? I don't have all the answers, just certain facts and my small window on how things seem to us to work.

We try darned hard to be the best value for every customer on every transaction. And, to act honorably, on a "handshake" as it were, with our suppliers as well as our retail and wholesale customers. But, as the old saying goes, you can't please all of the people all of the time. So, rather than point fingers here, I'm removing this discussion entirely from whether or not we're pleasing people, and putting it into the realm of simply giving information.

We are NOT the only retailers facing these issues.

Neither are we the only ones actually impacted in our resources by them.

There are legions of businesses determined to operate in good faith, in many fields, and more powerful interests appear unconcerned when some decisions are made. At the end of the day, if the same items are sold to the same customers for more money as a consequence of these decisions, and if it can also be factually determined not all actions and policies were implemented in good faith, then the linings of someone's wallet are there for the wrong reasons. I hope that's not so. At the same time, facts tell a story.

Businesses operate more profitably when they have a monopoly and when there is demand for their products. Monopoly power does not necessarily mean there is only one seller. But, it does mean retail customers pay more because someone decrees they must, and they are at the mercy of that edict. That's not me going after anyone...that's Economics 101 (literally, I heard it in such a course in a business school). As a retail customer, though, you vote with your wallets. Take care where today's monies are spent, because it's not just today's purchase, but tomorrow's, that you're voting for. Or against.