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In the US at least, MAP (minimum advertised price) policies are not an illegal practice, and speaking from my personal experience, the big box chains will give

by cepth 8y ago

In the US at least, MAP (minimum advertised price) policies are not an illegal practice, and speaking from my personal experience, the big box chains will give you no trouble if you ask for a MAP price. Apple does it (https://www.macworld.com/article/2024257/how-apple-sets-its-prices.html https://www.macworld.com/article/2024257/how-apple-sets-its-...), high end brands like Tiffany or Coach do it, beverage makers like Bai do it. In American physical retail/distribution negotiations, any vendor agreement is going to specify very clearly what kind of markdowns are allowed, whether or not the vendor has to take back unsold inventory ("consignment basis"), and whether the vendor has to provide allowances to dispose of unsold inventory. As I've mentioned in the adjacent comments, the most troubling implication of the EU ruling is that if something like it was adopted in the US, Amazon would have an even greater competitive advantage. If I'm now no longer allowed to set policies that allow my various distribution channels to compete on roughly equal footing, it leads to the party that is willing to accept the least profit taking virtually all market share for a given product.

alkonaut 8y ago
> it leads to the party that is willing to accept the least profit taking virtually all market share for a given product. Apart from fears of oligopoly/monopoly, isn’t that the market working as it should? EU Regulation usually doesn’t allow for predatory pricing to take market share either
- cepth 8y ago
  I would say that the monopoly fear is a pretty significant one? Walmart and Amazon are the largest US retailers in the physical and online retail spaces, respectively. Yes, they have helped reduce prices on goods for the average American consumer. The question is, at what cost? The US taxpayer also picks up the welfare tab for Walmart and Amazon employees, as well as the costs associated with un- or under-insured people getting sick from physically demanding work. The American taxpayer directly subsidizes these companies [1][2]. If you create a system where the lowest cost retailer now has government-backed authority to lower prices to whatever it wants, this means that stores that pay their workers a fair wage are naturally at a disadvantage. Over time, the consumer may benefit from lower prices, but on the supply side (retailer + manufacturer), an increasing share of the profits accrue to the retailer as they are able to negotiate lower and lower prices from the manufacturer due to their increased scale. The kicker is that the enforcement of predatory pricing laws is difficult. Short of selling the goods at a cost below the invoice price paid to the manufacturer, on what basis can the government intervene? Physical retailers generally need to markup goods 50-100% depending on the industry. If Amazon is willing to sell the goods at a 0.5% markup to gain market share, can the government intervene? What's the brightline for markups below which the state can intervene? --- [1] https://www.forbes.com/sites/clareoconnor/2014/04/15/report-walmart-workers-cost-taxpayers-6-2-billion-in-public-assistance/ https://www.forbes.com/sites/clareoconnor/2014/04/15/report-... [2] https://newfoodeconomy.org/amazon-snap-employees-five-states/ https://newfoodeconomy.org/amazon-snap-employees-five-states...
  - alkonaut 8y ago
    I agree there is a risk of monopoly, especially in the US. Also in the US, the fact that employees can be laid off very easily and tax payers pick up the tab adds to the problem. But again, that’s more a problem in the US than in Europe. So perhaps it all hangs together (narrator: it does). Having consumer- rather than business friendly regulation might be intrinsically linked to social safety nets, and so on. It’s possible that just flipping one type of regulation in the US would be disastrous without changing a lot of other things. For example, I’m a big believer in single payer, but I don’t think the US can easily adopt it without also changing a lot of other related things in healthcare production, education and so on. Merely adopting single payer might just mean getting the drawbacks but not the benefits such as smaller overheads. So I think the EU regulations are actually pretty consistent and it’s possible the US framework is too. Re: predatory pricing: I’m no expert but I think “how low can you go” is basically no lower than what any other retailer can go at your scale, without making a loss. Others explained it better elsewhwre in this discussion.
  - baddox 8y ago
    > The question is, at what cost? The US taxpayer also picks up the welfare tab for Walmart and Amazon employees, as well as the costs associated with un- or under-insured people getting sick from physically demanding work. The American taxpayer directly subsidizes these companies [1][2]. But would the American taxpayer subsidize the entire retail market any less if it were the same size but split up among several smaller and less efficient (meaning consumer prices were higher)? I could see that being possible, but I see no reason to assume it would be likely. Yes, one way that Amazon and Walmart reduce their costs (and thus their prices) is by paying certain employees as little as possible, but it seems to me that smaller firms can and probably often do the exact same thing, but are still less efficient than Amazon and Walmart due to economies of scale that are unrelated to labor costs.
    - cepth 8y ago
      I think there's a pretty simple microeconomics framework through which someone could make an argument about how one huge player depresses wages. Just think of Amazon as a monopsony, a single buyer of a good, for labor. The Roosevelt Institute, which is left-leaning, did a project on this recently: http://rooseveltinstitute.org/how-widespread-labor-monopsony-some-new-results-suggest-its-pervasive/ http://rooseveltinstitute.org/how-widespread-labor-monopsony.... Noah Smith summarized the findings of another recent economics research paper, which found that there's a significant difference in wages offered in areas with multiple employers hiring for a similar position (https://www.bloomberg.com/view/articles/2017-12-29/monopolies-may-be-worse-for-workers-than-for-consumers https://www.bloomberg.com/view/articles/2017-12-29/monopolie...).

by cepth 8y ago

alkonaut 8y ago

> it leads to the party that is willing to accept the least profit taking virtually all market share for a given product. Apart from fears of oligopoly/monopoly, isn’t that the market working as it should? EU Regulation usually doesn’t allow for predatory pricing to take market share either

cepth 8y ago
I would say that the monopoly fear is a pretty significant one? Walmart and Amazon are the largest US retailers in the physical and online retail spaces, respectively. Yes, they have helped reduce prices on goods for the average American consumer. The question is, at what cost? The US taxpayer also picks up the welfare tab for Walmart and Amazon employees, as well as the costs associated with un- or under-insured people getting sick from physically demanding work. The American taxpayer directly subsidizes these companies [1][2]. If you create a system where the lowest cost retailer now has government-backed authority to lower prices to whatever it wants, this means that stores that pay their workers a fair wage are naturally at a disadvantage. Over time, the consumer may benefit from lower prices, but on the supply side (retailer + manufacturer), an increasing share of the profits accrue to the retailer as they are able to negotiate lower and lower prices from the manufacturer due to their increased scale. The kicker is that the enforcement of predatory pricing laws is difficult. Short of selling the goods at a cost below the invoice price paid to the manufacturer, on what basis can the government intervene? Physical retailers generally need to markup goods 50-100% depending on the industry. If Amazon is willing to sell the goods at a 0.5% markup to gain market share, can the government intervene? What's the brightline for markups below which the state can intervene? --- [1] https://www.forbes.com/sites/clareoconnor/2014/04/15/report-walmart-workers-cost-taxpayers-6-2-billion-in-public-assistance/ https://www.forbes.com/sites/clareoconnor/2014/04/15/report-... [2] https://newfoodeconomy.org/amazon-snap-employees-five-states/ https://newfoodeconomy.org/amazon-snap-employees-five-states...
- alkonaut 8y ago
  I agree there is a risk of monopoly, especially in the US. Also in the US, the fact that employees can be laid off very easily and tax payers pick up the tab adds to the problem. But again, that’s more a problem in the US than in Europe. So perhaps it all hangs together (narrator: it does). Having consumer- rather than business friendly regulation might be intrinsically linked to social safety nets, and so on. It’s possible that just flipping one type of regulation in the US would be disastrous without changing a lot of other things. For example, I’m a big believer in single payer, but I don’t think the US can easily adopt it without also changing a lot of other related things in healthcare production, education and so on. Merely adopting single payer might just mean getting the drawbacks but not the benefits such as smaller overheads. So I think the EU regulations are actually pretty consistent and it’s possible the US framework is too. Re: predatory pricing: I’m no expert but I think “how low can you go” is basically no lower than what any other retailer can go at your scale, without making a loss. Others explained it better elsewhwre in this discussion.
- baddox 8y ago
  > The question is, at what cost? The US taxpayer also picks up the welfare tab for Walmart and Amazon employees, as well as the costs associated with un- or under-insured people getting sick from physically demanding work. The American taxpayer directly subsidizes these companies [1][2]. But would the American taxpayer subsidize the entire retail market any less if it were the same size but split up among several smaller and less efficient (meaning consumer prices were higher)? I could see that being possible, but I see no reason to assume it would be likely. Yes, one way that Amazon and Walmart reduce their costs (and thus their prices) is by paying certain employees as little as possible, but it seems to me that smaller firms can and probably often do the exact same thing, but are still less efficient than Amazon and Walmart due to economies of scale that are unrelated to labor costs.
  - cepth 8y ago
    I think there's a pretty simple microeconomics framework through which someone could make an argument about how one huge player depresses wages. Just think of Amazon as a monopsony, a single buyer of a good, for labor. The Roosevelt Institute, which is left-leaning, did a project on this recently: http://rooseveltinstitute.org/how-widespread-labor-monopsony-some-new-results-suggest-its-pervasive/ http://rooseveltinstitute.org/how-widespread-labor-monopsony.... Noah Smith summarized the findings of another recent economics research paper, which found that there's a significant difference in wages offered in areas with multiple employers hiring for a similar position (https://www.bloomberg.com/view/articles/2017-12-29/monopolies-may-be-worse-for-workers-than-for-consumers https://www.bloomberg.com/view/articles/2017-12-29/monopolie...).