SPECIAL: PRO AUDIO
May 15 2007
VOLUME 24 NO.5

THE MAGAZINE FOR MUSICAL INSTRUMENT AND SOUND PRODUCT MERCHANDISERS

 

   
 

VIDEO WEBCAST
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-Guitar Hero is all the rage for consumers.

-Need to take a break from searching for the latest gear during The NAMM Show? Here are some celebrity appearances and parties to check out.

-Attendance increased at Music China and Prolight + Sound, and Kenny G made a big splash.

-Improving next month's NAMM Show is like making the 1972 Miami Dolphins better. But NAMM is certainly not resting on its laurels.

-We reveal all of the manufacturer nominees for Music & Sound Awards to be handed out next month at The NAMM Show.

-Counterfeiting on MI products, particularly guitars, may have received minimal national press, but the problem is real and not going away.

-Find out how to sell products your customers are probably not looking to buy.

-M&SR features its second annual independent retailer roundtable. What's on dealer's mind's this year. Are things better than last year?

-Females playing musical instruments now outnumber males, according to a NAMM/Gallup survey.

-Industry leaders paved the way for the next 10 years.

-The Latest, Industry, Dealers, People and Product Buzz and Showcases.
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-Dan Vedda shares every thought not appearing in his monthly column right here.
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COLUMNS
-Robert Gault, president of Eminence Speaker, knows a massive amount about China and the pro audio industry. Enough said.

-To say Kurt Ballou, Converge's guitarist, doesn't treat guitars well is like saying the New England Patriots are a decent football team. Ballou had to find a guitar to take a pounding. Here's why he chose First Act's Sheena.

-The amazing story of how Gear Source Music reopened days after a flood took it apart. Spy ventured to the Pacific Northwest to the great city of Seattle. Five minutes with a great wealth of knowledge in the percussion industry, Remo Belli.

CURTAIN CALL
-John Flansburgh, They Might Be Giants' John Flansburgh is a big fan of several independent dealers as well as a host of manufacturers.
-Matt Rubano, the bass player for the red-hot band Taking Back Sunday. Even better, he likes to shop for MI gear.
-Paul English, Willie Nelson has had four wives in 40 years, but only one drummer in that same time frame.
-John 5, When your name is a number, you must be cool. John 5, who played with Marilyn Manson and Rob Zombie, says idolizing Eddie Van Halen was a big mistake. How is that possible?
-Luke Pritchard
may be “all together Kook-y,” but he has cool memories from the days he visited retail stores.
-Eddie Ojeda; Lead guitarist for Twisted Sister.
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Will Lee; Getting that gig isn’t easy and took a lot of blood, sweat, and tears.
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Imogen Heap writes songs, plays piano and the nail violin,Does she plan to design her own instrument?
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DJ TIMES / DJ EXPO
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CLUB SYSTEMS INT'L
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Leather Case Holds the Key for FTC

[May 2007 - Page 1]

An ongoing U.S. Supreme Court case seemingly unrelated to MI could be a major determining factor regarding the FTC’s investigation of minimum advertised price. The case of Leegin Creative Leather Products, Inc. v. PSKS, Inc. is being followed closely by attorneys representing MI, because the verdict is sure to help strengthen or weaken any potential FTC investigation. In fact, it could be the key component and is likely to have a major ripple affect on MI in general. The FTC investigation of MI is only in a preliminary fact-finding phase at this time.

Leegin, a small California-based leather manufacturer known for its Brighton line, instituted a minimum retail price in 1997. The minimum retail price was intended to help Leegin compete against larger manufacturers. However, Texas-based PSKS, dba Kay’s Kloset, refused to adhere to the policies and often priced Brighton products below the minimum retail price set by Leegin.
Leegin responded by canceling all Brighton shipments to PSKS in 2002. PSKS sued Leegin, claiming its bottom line suffered greatly. The U.S. District Court, Eastern District of Texas, agreed with PSKS by saying Leegin violated the Sherman Antitrust Act of 1890, and awarded damages of $3.6 million.

Leegin has filed appeals since, and the U.S. Supreme Court agreed to hear the case on Dec. 7. The case was heard on March 27. Thomas B. Olsen, Leegin’s attorney, argued illegality rules regarding resale price are “widely recognized to be outdated, misguided, and anticompetitive. It should be replaced with the same rule of reason standard that applies to other forms of vertically-imposed marketing restrictions. The Sherman Act bars only unreasonable restraints of trade and the court presumptively applies a rule of reason analysis to determine whether a restraint is unreasonable.”

Olsen later added, “I think if the manufacturer makes a decision, whether it’s because dealers would like to see that happen or not, …there’s of course relationships between the dealers and the manufacturers, that the dealers may have an interest in doing this, because they may find for the same reason that the manufacturer does that it promotes the sales of products. The record is clear in this case that this was an effective strategy for the Brighton company—the Brighton Leegin company that’s manufacturing the Brighton products—to enter a very difficult and highly competitive marketplace, and it was successful.”

Based on the testimony, Supreme Court justices may be hesitant to change a nearly century-old rule called Dr. Miles, forbidding manufacturers from collaborating with individual dealers on a minimum price for a product. Said Justice Stephen Breyer, “Professor [Carl] Sherer, [an economist at the University of Chicago] [w]orked at the FTC for a long time. A good expert in the field. He points out the drug industry after you got rid of resale price maintenance; the margins fell 40 percent. The drug stores [said] it went down 20 percent. He says alone it saved American consumers $200 million to get rid of it. And his conclusion is, as in the uniform enforcement of resale price maintenance, the restraints can impose massive anti-consumer benefits. Massive.

“What that sounds like is that if at least he, who is an economist, thinks if you get rid of Dr. Miles, every American will pay far more for the goods they buy at retail. Now that’s one economist, of course. There are others who think differently. So how should we decide this?”

Breyer later added, “There are good arguments on both sides. [But] [w]hy should we overrule a case that’s 96 years old, in the absence of congressional indication that’s a good idea…?”

Justice David Souter realized the Supreme Court’s decision will be humungous for all retail industries, which of course includes MI. Said Souter, “We do have empirical evidence, though, don’t we, that the decision of this case is going to be very significant in the sort of battle between Wal-Mart and the Main Street stores; and why should this court in effect take a shot in the dark at resolving that, as distinct from leaving it to Congress, which is in a position to know more about where the shot is going to land than we are?”

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