 THE LATEST BUZZ
FTC Investigates “Price Fixing”
The U.S. Federal Trade Commission (FTC) has subpoenaed several MI organizations and manufactures regarding price fixing and Minimum Advertised Price (MAP). Among those subpoenaed was NAMM, who in response discouraged people from discussing the topic on its Independent Retailer forum at http://indie.namm.org and said it could not comment about the subpoena for legal reasons. NAMM’s official statement follows: “On Monday, March 12, NAMM received a subpoena from the Federal Trade Commission (FTC) concerning an investigation into MAP pricing policies in the music products industry. NAMM has retained legal counsel and will be acting with their advice. NAMM staff cannot comment on the subpoena or the investigation. If you have questions regarding the subpoena, you may have your legal counsel contact NAMM's counsel: Steven Chidester at Luce, Forward, Hamilton & Scripps LLP at SChidester@Luce.com.”
A search of the FTC’s Web site, www.ftc.gov, made no mention of the investigation as of late March. Generally, when there is no mention of the subpoenas, it means the FTC is undergoing a preliminary fact-finding mission only. At this point, nobody has been charged with any wrong doing. However, the investigation will consume several employee hours, not to mention legal dollars, for several MI trade groups and manufacturers. The FTC has required sales data dating back more than seven years.
It’s unclear why the FTC decided to investigate possible price fixing or why it decided to investigate now. But the investigation has a precedent. The FTC and 28 states investigated MAP policies regarding the prerecorded CD industry in 2000. The results: five record labels who controlled about 85 percent of the industry agreed to “suspend MAP agreements which tied advertising cooperative payments to restrictions on Minimum Advertised Pricing even when the advertising wasn’t paid for by manufacturer coop funds and was strictly in-store.”
Although record labels and MI both involve music, the similarities probably end there. Our industry certainly does not have five companies controlling 85 percent of the market—not even close to that figure. In addition, in MI, MAP prices are set unilaterally by manufacturers. In other words, manufacturers are not collaborating with individual dealers on a minimum price for a product. That practice is forbidden by the 1911 “Dr. Miles rule,” although the Bush administration, the National Association of Manufacturers, and others are reported to be seeking to repeal the rule.
As for the Sherman Antitrust Act of 1890, it only prohibits “agreements in restraint of trade,” and in effect allows manufacturers to dump distributors who don’t adhere to their pricing policies.
Sam Ash Lays Off 180
Sam Ash laid off approximately 180 employees (about three employees at every store and some main office workers), or 10 percent of its staff, on Feb. 6, confirmed President Paul Ash. “We wanted to react to difficult market conditions,” he said. “The numbers were a bit down last year. We wanted to be proactive. We will all work a little harder and we will be leaner. We will continue to pay the bills on time. Rest assured, we will not be going out [of business]. We’re here to stay.”
The industry has seen several high profile bankruptcies and closings in the past year. Most recently, Lentine’s Music in Ohio closed its Strongsville and Fairlawn locations, with word it will perhaps sell two other locations in Akron and Richmond Heights.
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Driving Force
Fender’s new partnership with Ford Motor Company has hit the road with the “Playing Loud and Going Fast” sweepstakes. The contest, which ends Dec. 31, boasts a grand prize pairing of the Shelby GT coupe and a matching Shelby GT Stratocaster. Only one other pair was made, and that was auctioned off for $600,000 at the 2007 Barrett-Jackson Collector Car Event. The money went to the Carroll Shelby Children's Foundation. To enter the sweepstakes, go to www.fender.com/ford. |
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M&SR Special:
Q&A with Michael MacDonald
Earlier this year, Harman Pro Group announced the return of former JBL President Michael MacDonald in a newly-created strategic marketing position focused on integrated systems and coordinating multi-brand communications. The Music & Sound Retailer sat down with MacDonald to find out what brought him back into the Harman fold and what his return means for the company.
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WEB ONLY BUZZ |
Go for a Ride
System of a Down Drummer John Dolmayan has collaborated with Paiste to create the RUDE 24-inch Mega Power Ride Cymbal. A special limited edition of the cymbal is to be issued through the year. It comes with a certificate of authenticity, as well as signatures from John Dolmayan and Erik Paiste. The company says a portion of the proceeds from the product will go to an unnamed charitable cause.
A Pearl of a Deal
The Avedis Zildjian Company has named Pearl Europe the exclusive distributor of all Zildjian products in Germany and Austria. The change took effect on March 1. Speaking about the arrangement, Zildjian CEO Craigie Zildjian said, “Pearl and Zildjian share the same commitment to the percussion community.”
Santa Cruz Turns 30
In celebration of its 30th anniversary, Santa Cruz Guitar Company released its 10,000th guitar. Over the course of two years, three artists worked on the ornate instrument, including Larry Robinson, who designed the “Millionth Martin” guitar; Michael Coy, who designed to “Waiting for Orpheus” scene on the guitar’s top; and David Giulietti, who worked on the engraving. The guitar sports inlay and artwork made with abalone, mother of pearl, precious stones, gold, and silver. It was displayed at the company’s NAMM booth and will be at the Museum of Making Music in June.
New Ownership for Ultimate Support Systems
Colorado-based Ultimate Support Systems sold its music retail and OEM divisions to an investment group in Los Angeles. The new ownership is headed by Michael Belitz who owns Body Glove music cases distributor eBlitz Audio Labs and manufacturers rep firm Sonic Sales, which represented the company for five years in Nevada, Arizona, and Southern California.
Piece by Piece
Mapex dealers now find themselves selling the flagship Orion drum series on a component basis. “We realize when players reach the point where they are considering a true high-end drum set, they are going to want complete freedom of choice,” VP and GM Joe Vasko said of the decision to break up the line, which had been available in five- and six-piece configurations. Mapex has expanded the line to include 43 components, and is offering discounts, Web graphics, in-store point-of-sale support, and more to dealers who stock and display Orion series drums.
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In response to our January story named “VW Sales Down, Despite First Act Promotion,” Jeff Walker, vice president of marketing at First Act Inc. responded “We are very pleased with the outcome of the First Act/Volkswagen co-promotion. According to announcements, Volkswagen of America posted an almost 5 percent increase in overall sales in 2006, versus the previous year. The campaign was never deemed a ‘sales-incentive’ promotion and we’re pleased consumers reacted as favorably as they did—and that Volkswagen of America sold more cars than anticipated. Aside from sales, the buzz from our respective industries was absolutely immeasurable.” |
Yamaha Plants Closing
Two of Yamaha’s musical instrument manufacturing plants are closing, and their operations are being consolidated into Asian operations. Approximately 380 employees are losing their jobs at the Yamaha Music Manufacturing, Inc. plant in Thomaston, Ga., and Yamaha Musical Products, Inc. in Grand Rapids, Mich., which are closing on March 30 and April 27, respectively. These factories handled acoustic pianos, percussion, woodwind, brasswind, and pro audio speakers.
Yamaha’s restructuring efforts also include integrating Yamaha Exporting, Inc. into an exporting department of Yamaha’s Operations Division, while the Band & Orchestral Custom Shop and parts will be relocated to Yamaha Corporation of America headquarters in Buena Park, Calif.
CIMM Cancelled
The China International Music Market (CIMM) show scheduled for May in Beijing has been cancelled. The show was a collaboration between the China Music Instrument Association (CMIA), NAMM, INTEX Shanghai, and Messe Frankfurt. An investigation is currently going on to “[clarify] issues regarding the fair license to operate,” which a press release said is a requirement for all fairs held in mainland China.
“It is an extremely regrettable decision, but one we feel we must make for the benefit of the MI industry in China and abroad,” said Wang Gentian, president of CMIA. The organizers hope to go forward with their plans once the investigation is complete.
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