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.
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