Murphy's Magic "new advertising policy" or how to encourage price fixing

[CraigMitchell]

Came across this little update ...

"Please note that effective immediately and until further notice on Paul Harris's True Astonishment Collector's Set, the producer has asked that Murphy's Magic Supplies, Inc. request all dealers who elect to offer this item and/or purchase it only ADVERTISE it at the full suggested Manufacturer's Suggested Retail Price (MSRP) of $300 (or equivalent currency conversion NOT including taxes).



Advertising includes any written and electronic media including but not limited to web sites, e-mails, magazine ads, auctions, flyers, catalogs, postcards, or other medium that is distributed outside of the retail location of the dealer or is designed or intended to be removed from the dealer location by the customer. No advertising of any kind may state or otherwise indicate that the customer may call for a price, or e-mail for a price, or use phrases such as lowest price possible. This also includes any special offers that effectively lower the MSRP of this product (i.e. member discounts, two for one sales, etc.). This advertising policy pertains ONLY to this item. This advertising policy is in no way designed to restrict dealers ability to establish their own resale prices in person to person negotiations. For those that elect to purchase this item and/or advertise it, you are acknowledging and agreeing with this request to maintain the full MSRP in your ADVERTISING as outlined above. Failure to abide by this or failure to immediately correct any infractions of this would mean that Murphy's Magic Supplies, Inc. would not be able to sell you units of this DVD set per the request of the producer."

The net impact of a minimum advertising policy is to prevent advertised competition for a product. Not good for the consumer ... and interestingly Canadian competition law frowns very heavily on these practices - while the issue is very much in flux in current US anti-trust legislation.

[edit update - In 2007, the US Supreme Court overruled a previous judgement which barred Minimum Advertised Pricing ... instead declaring that they are not per se unlawful but, rather, must be judged under the "rule of reason." Cases are currently ongoing though on a case by case basis where it is being argued that MAP has overstepped the mark]

[Richard Kaufman]

Craig, you are incorrect and your statements are potentially libelous because you are accusing a company of an illegal activity.

It is not against the law in the United States to sell only to dealers who agree to sell at a fixed price (Apple does this consistently, and has done it for years).

It is also not against the law to refuse to sell products to some dealers and not others.

This was decided in a US court decision within the past two years and is not "in flux."

[CraigMitchell]

Hi Richard

I've updated the post to include the 2007 Supreme Court decision - other cases though are still pending.

Note though - Murphys aren't forcing dealers to sell at a certain price - they are forcing dealers to advertise at a certain price ... which has become the current method amongst US distributors of circumventing as best is possible US price fixing legislation.

The practice is frowned upon in the EU, Canada & Japan from what I've come across thus far.

[Richard Kaufman]

But it's not frowned upon in the US, where Murphy's is located.
I'll refer again to Apple: you can't buy Apple products in the US at a discount. That's one of the reasons Mackintosh computers hold such a small share of the US market.

Murphy's is doing nothing illegal in the United States--so what's the point of your post?

[CraigMitchell]

1 - As far as I'm aware, this is the first time Murphys are allowing a producer to introduce this policy. It clearly could become the norm in the magic industry if allowed to spread. Net result - it's not good for the consumer. Murphy's is in a position to resist this as they have the bulk of the distribution business.

2 - Murphy's operate internationally. Engaging with foreign dealers and enforcing minimum advertising price ( MAP ) policy to them is dangerous ground & potentially exposes both Murphys & the foreign dealer in jurisdictions where it is not permitted.

3 - Awareness of anti-consumer policies is always valuable.

Out of interest, Amazon circumvent this by only revealing the 'lower than MAP price' when you add a product to your shopping cart as this is not considered 'advertising'

[Kevin Connolly]

You can throw perfume in the mix as fixed price too.

[Kamal]

I thought it was hilarious that within 10 minutes of receiving the email from Murphy's, I got an email from Hocus Pocus advertising some amazing deals if you bought the Paul Harris set from them.

It's with great excitement that we announce Paul Harris' True Astonishment project! The buzz around this release has been huge, and we've created a very special page with all the information for this product along with 3 SPECIAL OFFERS OF FREE PRODUCTS AND FREE SHIPPING TO ONLINE MEMBERS ONLY.

Check it out right here:

http://hocus-pocus.com/static/trueastonishment.html

Although technically selling at the $300 price point, I would have thought that the free extra props and free shipping would *effectively* lower the set's price to the consumer - making it contrary to the explicit instructions in the Murphy's email:

This also includes any special offers that effectively lower the MSRP of this product

Of course, Hocus Pocus is probably not sourcing it through Murphy's and have struck some other deal with Paul Harris.

[JordanB]

Whether that effectively lowers the MSRP would probably be up for debate.

[Ray T. Stott]

15 U.S.C. 17 - The Sherman Antitrust Act

"Per se" Illegality versus the [color:#FF0000]Rule of Reason[/color] under this act is the operational test which is the underpinning of Apple's "retail price maintenance."

Monopolistic and oligopolistic activities require conspiracy or collusion between [color:#FF0000]two or more[/color] sellers to be affected by this act.

The Robinson-Patman Act of 1936 - Anti-Price Discrimination Act, 15 U.S.C. 13

"Price fixing is an agreement between business competitors to sell the same product or service at the same price. In general, it is an agreement intended to ultimately push the price of a product as high as possible, leading to profits for all the sellers. Price-fixing can also involve any agreement to fix, peg, discount or stabilize prices."

Price fixing requires a conspiracy between [color:#FF0000]two or more[/color] sellers; the purpose of which is to coordinate pricing for mutual benefit at the expense of buyers. Sellers might agree to sell at a common target price; set a common "minimum" price; buy the product from a supplier at a specified "maximum" price; adhere to a price book or list price; [color:#FF0000]engage in cooperative price advertising[/color]; standardize financial credit terms offered to purchasers; use uniform trade-in allowances; limit discounts; discontinue a free service or fix the price of one component of an overall service; adhere uniformly to previously-announced prices and terms of sale; establish uniform costs and markups; impose mandatory surcharges; purposefully reduce output or sales in order to charge higher prices; or purposefully share or "pool" markets, territories, or customers.

The answer lies within...Are their two or more sellers conspiring?
If yes = illegal = treble damages awarded in adjudication.
If no = legal = zip
Ten large magic manufacturers meet in a hotel room in Chicago.
They all agree on line by line retail pricing that would guarantee the smallest or most inefficient manufacturer an acceptable gross margin.
Violation of the Sherman Act = Jail + Substantial fines + Treble damages

Purchasers of these price fixed finger choppers and egg bags are entitled to pursue the offending sellers at law under the provisions of The Clayton Act

No conclusions drawn as I am not in possession of the complete facts in this particular case.

[Magic Newswire]

Approximately, one third of the money spent on computers through US retail (31.3% if you want to be precise) is for Macs. In terms of units that only amounts to 17.5% because when people buy Macs they buy higher end models and spend more.

The Hocus Pocus model is similar to that of Apple retailers which commonly offers such "special deals" as free printers and/or software with each purchase.

If the Harris work is of higher quality, then people will pay. I know that I'll be queued up.. then again, I am typing this on a Mac.

[JordanB]

I agree. Many electronics retailers offer incentives that "sweeten" the deal.

Usually prohibited are such things as issuing coupons such as "40% off next purchase". Department stores usually have a host of things that their coupons/discounts do not apply to due to such pricing arrangements.

There are a few (possibly several) Murphy's resellers who only sell their items via ebay below MSRP. A better question might be does a listing on ebay constitute advertising. My guess would be that legally it doesn't.

[magicbar]

interesting discussion...related to this are the many magic shop chats I've had regarding the 1 or 2 big magic media dealers that offer discounts on their products if the customer bought directly via the producer which beat the prices by the magic shops to which they sell. It seems unfair that the producer would be competing with the shops.

[Terrence]

Can't a product be advertised at one price, then actually sold at a different one? (As opposed to "this has to be the price -- period.)

It's a different can of fish maybe when one checks off an item on a website, but what prevents a phone or email exchange to negotiate?

[Richard Kaufman]

Terrence, are you suggesting that people who want to buy my books call me on the phone and start haggling about the price? I hope not.

[Harry Lorayne]

I have no concept of the legalities here, but I do wish Murphy's had stipulated that dealers DO NOT UNDERCUT MY RETAIL PRICE for LORAYNE: THE CLASSIC COLLECTION, Volume 2. If I had my "druthers" I "druther" not sell to those dealers. That's why I've noted, here and elsewhere - wherever I could - that I will MEET ANY DEALER'S PRICE. Still will. I don't know how other writers/publishers feel about it, but I don't want dealers setting a price for MY work. HARRY LORAYNE.

[Richard Kaufman]

I don't know that Murphy's has ever had a "do not discount" policy on an item before the True Astonishments DVD set.

[JordanB]

I wouldn't haggle over the price of book....why should I when Richard has such great prices. To be honest, certain industries invite "hagglers" (real estate, auto, etc) and some people will haggle over anything.

My legal understanding is that an advertisement is an "invitation to accept offers" rather than an offer. If an advertisement were an offer then any buyer who accepted would constitute a contract. At least that is my understanding of the basics.

I agree with magicbar....I don't understand why some of the bigger companies who sell to magic dealers also sell directly to the consumers at a discount. It seems odd for the producer to compete with the magic shops.

Harry...good for you for offering to meet the dealer's price. You will be getting an order for Classic Collection 2 as soon as I get my tax refund in about 6 weeks.

[Harry Lorayne]

Good for you, JordanB a)for ordering a terrific book (modesty is becoming a drag!) and b) if everyone did it, we'd teach the "discount" dealers a lesson. And, try to get one of my books autographed (for what it's worth)from a dealer. HL.

[Edward]

autographed? not much.

[Ray T. Stott]

[font:Arial Black]

My legal understanding is that an advertisement is an "invitation to accept offers" rather than an offer.

An advertisement is an offer based upon a promise.[/font]

[Harry Lorayne]

There are, every so often, posts here, and on other forums, that I just don't understand. My fault, I'm sure. For example,I can't fathom what Edward means by his post - two above -"autographed? not much." Perhaps he'll take a moment to explain. HL. (With or without capital letters.)

[Terrence]

Terrence, are you suggesting that people who want to buy my books call me on the phone and start haggling about the price? I hope not.

Hee hee...Well we could try!

And I don't see this as a problem for limited edition magic books (and quite good ones too).

But the price of flash paper dammit...

[Richard Kaufman]

You will be met with stoney silence. My books are already far too low in price for the amount of work involved.

[David Alexander]

A few friends know that some years back I owned a niche publishing company. I was, for several years, the largest publisher of books on the Alexander Technique in the world.

You will note that I did not publish any magic books. I explored the thought at one point and decided that to making a living publishing magic books was massively labor-intensive.

You have to gather the material - and in Richard's case understand it sufficiently to write about it intelligibly - then you have to decide which points need illustrations and then do the illustrations or pay for them to be done. Then theres the design of the book PLUS fronting the money for the printing and advertising, followed by distribution plus collection of accounts payable for wholesale accounts, presuming no one goes BK owing you money and that wholesalers pay on time so you have a decent cash flow.

Most of the work is done and paid for before you collect a dime in sales on titles you think and hope will sell. Getting your money back and earning a profit on a title might takes months or years. You can never be sure.

A few publishers have taken the route I learned: offering a pre-publishing discount to get the money to print, but those offers are relatively rare and all the prep work still has to be done and paid for in advance, regardless.

All of this is for editions of 1,000 to 5,000 which in the real world of publishing is peanuts.

Most magic books are dirt cheap and I see that Richard is discounting his already inexpensive books to ridiculous prices.

[Jim Riser]

Allow me to relay a scenario ...
A very talented traditional wooden toy maker in Minnesota says to his wife, "Dear, if I spend X amount of dollars for some equipment, we could vastly increase our production." After her initial reaction, she reluctantly agrees.

This toy maker had been selling his wonderful wooden toys through a number of small mom and pop speciality toy stores in select cities around the country up until acquisition of the new equipment. He had been kept very busy supplying these toy stores.

With the increase in capacity, the toy maker sought out additional outlets for his toys as the small shops only ordered a few at a time. Suddenly he was receiving huge orders from Toys'R'Us and KB. They ordered large quantities but demanded prices lower than the mom and pop stores had been paying. The toy maker thought he could still make some profit with these discounted orders after paying off the expensive equipment. When the mom and pop speciality toy stores discovered that customers could buy the toy maker's toys from the big discounters for less that they could buy the toys themselves, they quit ordering the toys. The toy maker lost his full price (more profitable) customers.

Since other toy makers were doing the same thing, the mom and pop (brick and mortar) speciality stores ended up with nothing to sell and eventually went out of business.

In the meantime the toy maker had hired extra help to keep up with the orders (additional expenses) and shipped items as promised. Then came the day when the big toy discount stores fell onto hard times (partly due to CEOs who ran them into the ground). The big discounters fell behind on their payments and often did not pay at all. Eventually the big discounters went out of business and orders ceased. Since the mom and pop stores had already gone under, there was no place for the toy maker to sell his toys and he now had employees and big equipment expenses. The talented wooden toy maker had to close his doors due to the lack of customers.

This same situation could well happen in magic. It behooves the maker to be selective to whom he sells his labor intensive items or the whole industry could come crashing down.

In my case, I only selectively wholesale to one respected dealer who will sell for the same price that I do. Who to buy from is the customer's choice - cost will be the same. His brick and mortar store lives on as does my business.

HL is correct in not wanting dealers to set the prices for his items.

RK is correct in feeling his books are too cheap for the work involved. Those of us who actually do the work and get our hands dirty should be the ones determining what our time is worth.

If potential customers feel the cost is too high, production will cease rather than prices coming down to unprofitable levels. After all, it is the life of the creater being invested in the items and there comes a point where creators will decide that it is not worth it.

So, buy from RK during his big sale and if you are young enough to live to see the value in a lifetime subscription, get it while you can.
Jim

[Magic Randy]

You will be met with stoney silence. My books are already far too low in price for the amount of work involved.

I agree.

[Magic Randy]

The practice is neither illegal or price fixing. It is also a regular practice of many major brands, not only Apple (already mentioned here), but others including Bose & Monster Cables.

[Terrence]

You will be met with stoney silence. My books are already far too low in price for the amount of work involved.

I agree.

Of course I agree too -- there's no way I would ask Richard for a discount. Or any other publisher/author.

I might from a general magic seller that retails items from Murphy's et al.

My real point is that maybe we're in too niche of a market to worry about price fixing notions anyway...?

[Harry Lorayne]

I guess Edward himself had no idea what he meant by that remark. Incidentally, can someone explain why I have to do "search" in order to get to this thread? Why isn't it on the basic contents? HL

[the Larry]

What Jim Riser tells reminds of the "Walmart trap". Walmart offers to take a huge amount to some manufacturer. Manufacturer is lured by the huge amount and total profit he can make. He agrees on the deal. Manufacturer changes his business to essentially serve only Walmart because Walmart generates 80% or more of his profit.

Then after a while Walmart demands a lower price. In some cases Walmart demands to know the exact profit margin to set their price. Essentially Walmart slowly squeezes the manufacturer to lower and lower profit margins with the bait of higher and higher volume until at some point the manufacturer has to close because he can't make enough profit.

Walmart simply moves to the next manufacturer for the same or similar item and the cycle begins.

However, in the end at least for me, the real culprits are all the ones who buy at Walmart.

[Lee Almond]

My uncle worked for Sam Walton. Let's just say Sam drived the nail into many businesses that did not deserve his ego. Murry Lawnmower Company is a prime example of WalMarts wrath. I spend my money elsewhere. End of main street killing rant. Peace all.

[David Alexander]

Larry,
The business model you describe was perfected by Sears decades before WalMart existed. It nearly happened to a friend of mine when he was a young man just after WW II. He started a business with several partners. Sears came along and after a few years he saw the writing on the wall and knew what was going to happen.

He had his partners buy him out. Shortly thereafter his old company became a captive vendor of Sears. His former partners were told how much their profit margin would be, what their discounts to Sears would be, etc. WalMart just copied a previous success.

[Jim Riser]

Another tactic told to me by several machinist types who provided hand tools to Sears and whose businesses went under due to such practices was for the purchasing agent to call the vendor and clain that the shipment was "short" - therefore payment would be reduced accordingly.
One these guys caught on to this scheme when he got the call and the shipment was still on his warehouse floor!

I prefer to remain small with my very limited production. Lean and little are fine by me.

One of the worst sales tactics in magic has become the drop shipping of items for so-called internet magic dealers. These fake dealer guys will do anything to skim off a "profit" from someone else's hard work and investments. These jerks do not have a single cent invested in the transaction and care not about the damage that they cause. These guys could not operate if magic fans would avoid them. Often the ones who cry the loudest about the closing of brick and mortar magic shops are the ones who buy from and support the phantom internet magic "dealers". Guess who sells rip off apparatus? Such sellers and their buyers are nothing but leeches on society.

My observations are that most of the younger new-to-magic types do not care about anything but the apparent price. The real price is never understood by these people. Ignorance is destroying magic as it was.
Jim

[David Alexander]

Back in the 1970s, an artist friend sold to the Broadway department stores in California. They were late paying him (no surprise there) and when payment arrived it was $600 short. He called and was told that they automatically deducted 10% for "breakage."

Ha! My friend sold them small bronze art pieces. There was nothing to break. He raised hell and got his money, but it took him months. He told Broadway to screw themselves when they wanted to re-order.

[Dustin Stinett]

I could tell you horror stories about "deductions" from invoices in my business. We have entire departments of people in all our offices across the country dedicated to getting the monies due back to our clients from the various types of "deductions" chains can come up with. They have departments, and some even hire third-party vendors, who work on coming up with them (some going back months and even years). And the beat goes on...

Dustin

[Ray T. Stott]

[font:Arial Black]

My uncle worked for Sam Walton. Let's just say Sam drived the nail into many businesses that did not deserve his ego. Murry Lawnmower Company is a prime example of WalMarts wrath. I spend my money elsewhere. End of main street killing rant. Peace all.

Murray-Ohio was a whore manufacturer that early on leaped into bed with discount stores in the 60's with lolling tongues.

They blew their existing service dealer base and wound up with heavily discounted, razor thin gross margins that reduced their power equipment to junk and finally ended up on financial life support because their decision to become industrial giants by doing business with Walton who didn't give a damn if a major supplier went down the tube as there were many other power equipment manufacturing whores who were standing in line, salivating like Pavlov's dog, to get a bite of Walton's profitless dollars.

At the end Murray Ohio was selling to Walton for a wholesale price that failed to cover hard costs and shipping. Sam Walton's wrath didn't kill them, they died of long term stupidity.

If Upton Sinclair and Frank Norris were alive today they would have made a collaborative effort to write a sequel to The Jungle and The Octopus, A California Story based on Walton and his operation.

The Walton organization from top to bottom is a cancerous carbuncle on the arse of free enterprise and the founder is likely roasting in hell enveloped by diabolic boa constrictors and leeches that tighten their hold on him a very small amount at a time while the leeches eternally work to bleed him white.

All the while being screamed at by the harpies of tens of thousands of small retailers that he put out of business and the millions of employees and undocumented flunkies that he and his corporate posterity have inflicted the death of a thousand cuts upon with their low paying but slave driving personnel management "model."

For every old lady in Arkansas that banked a million on Walmart stock there are millions of people who were driven to despair by their predatory competition practices and peon wages.

May the great God be merciful to that ever increasing flood of poor individuals that are told that their career lies as a greeter in one of their stores.

If facing that same prospect I would immediately hang myself with barbed wire and laugh while I kicked over the chair.

Please, no offers to pull out the chair yourself. :)

"America, America, God shed his grace on thee"...we got Walmart and others of its ilk instead.

The American dream systematically deconstructed in order to provide cheap Sri Lanka flip-flops and Korean color television sets to the mob.


The horror, the horror

Happy New Year America.

The above is a personal opinion, to which I am entitled.[/font]

[Ray T. Stott]

[font:Arial Black]I agree with you about the 0 inventory, drop shipping internet sellers.

The amazing thing to me is that we are heading into 2009 and the Colon, Michigan Chamber of Commerce is not providing guided tours through Abbotts Magic responding to the frequently asked question, "I wonder what they used to do here?"[/font]

[Dustin Stinett]

The Walton organization from top to bottom is a cancerous carbuncle on the arse of free enterprise and the founder is likely roasting in hell enveloped by diabolic boa constrictors and leeches that tighten their hold on him a very small amount at a time while the leeches eternally work to bleed him white.

All the while being screamed at by the harpies of tens of thousands of small retailers that he put out of business and the millions of employees and undocumented flunkies that he and his corporate posterity have inflicted the death of a thousand cuts upon with their low paying but slave driving personnel management "model."

Ray,

Please stop pulling your punches: Just tell us how you really feel.

Dustin

[The Magic Apple]

If anyone visits www.EarthsLargestMagicShop.com or the Magic Apple in Studio City, you can pre-order the Paul Harris 9 DVD for $300 out the door...no taxes AND I'll ship it to you for FREE. I will be getting them in the MINUTE that they are avaialble so you will be one of the first to get it. If you are in the U.S., I will have the distributor drop ship it RIGHT to your door...no extra fees!

Give the magic apple a call or visit the website!!

[000]

Im touched Magic Apple..........lets see: you pre order, drop ship, make well over $100 on the deal, and free asvertising to boot..........wow, and NO EXTRA FEES...feels like Christmas again