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Thursday, March 24, 2011

Not a Rant.........Raging against the machine - Work in Progress

This is going to rub some people the wrong way.  Ready? Panini and their price fixing. Let me break this down for you former lawyer style.  I am not saying Panini is guilty of anything, merely my opinion of what they are doing.  Regardless of if what they are doing is legal or not, they are still taking a steamy dump on consumers.  This is merely an analysis of why I think they might be in violation.  I am also no longer a licensed attorney.  I went inactive for my current job.

By now, everyone has heard of Panini and their MAPP pricing.  Right when I heard about this issue, an alert went off....Price Fixing at its worst.  Here are the Panini postings from their blog here and here.

First, Price Fixing is defined as: An Agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand. (Wiki).

Make no mistake, that's what Panini is doing here.  Panini is entering into agreements with Card Shops to only advertise products at a minimum price, controlling supply and fabricating market conditions.  Now that in and of itself may or may not be a violation, but check out some quotes from the video:

Transcribed by One Bad Day from FCB
"The difference between one internet seller and another internet seller is price, and if you get into a price war nobody in this room wins."

"Rodney's done a fantastic job of allocating product, he knows where almost every case goes...he knows how much product is going to where, and by controlling the flow he's kept prices high."

"We can't necessarily tell you what you're going to sell it to your customers for, we can't tell the distributors what they're going to sell for, but we can certainly control how much we see our products advertised for. So we're going to monitor all of the resources that are out there, whether it be b2b, eBay, you name it, we're going to be watching carefully to make sure that nobody breaks MAPP pricing."

"Rodney will, as we solicit product, identify what the wholesale price is, we'll identify what the suggested retail is, we'll identify the margins that we expect to be maintained. We don't want to see anything advertised below those price points."

"We would expect, obviously, for you to support the MAPP pricing... for 30 days. We recognize... not every thing we do is a homerun. So we recognize that after a certain period of time, prices start to wane a bit, you need to get out from under existing inventory so you can buy future inventory. After 30 days your free to move about and 'business as usual" if you will.'"

"Rodney's going to have to be diligent about market price value... So if we feel like we have to adjust, Rodney can go on, announce to the world that we're reducing our MAPP pricing, and that will go into effect immediately."

"No wholesale distribution by stores for 30 days."

"We want to drive consumers into brick and mortar stores. These people that have been sitting back and ordering online, and then coming to you complaining about the prices that your charging, will now have to go into your stores to buy the latest and greatest product. *applause* "

"We want you to be able to pre-book product at wholesale prices from the distributors... We hear all the time, distributors are taking the opportunity and running prices up when something gets hot. For a limited period of time we want you to be able to buy from your distributors at established wholesale pricing. *applause* "

No one is happier about this than card shops.  Here is a link to the blowout discussion.  See the user Kajshack?  He is no other than @victory_sports from twitter.  Basically the way that Panini and Kaj are trying to skirt the rules and excuse their conduct is by saying that we aren't setting a minimum price, just what the prices can be advertised at.  The problem with this is that the entire scheme as well as the intent is to increase the price that wax is being sold and thus profit. A defense that Panini would try to put up is that they didn't actually tell the retailers what to sell for.  This is akin to a john telling the police that he was simply making a donation to the prostitute after they had sex. Or someone saying I didn't rob the guy, I just told him it was in his best interest to give me all of his money.

From those quotes, one can infer that even though Panini says "we can't tell you what price to charge", the intent is to increase prices through requiring certain prices to be advertised, restricting distribution channels, and their statement regarding allocations to dealers that play nice.  Additionally, the stated purpose is to increase margins and protect sales for Card Shops. For example "and by controlling the flow he's kept prices high."

On Twitter and such I have seen references to Leegin which is a price fixing case decided by the Supreme Court.  Hold on, we are about to separate the men from the boys.  The references on Twitter and such have relied upon Leegin to say that this is not illegal.  First, Leegin only states that price fixing in the fashion that is potentially occuring here is not a per se violation of federal law.  In other words, instead of essentially being found guilty before a defendant can present evidence as to why they fix prices, the government has to actually present evidence as to how competition and the consumer is harmed. Here is where it gets more interesting.

What many people forget is that states have their own anti trust laws.  Remember when Upper Deck was whining that some states consider redemptions to be sweepstakes and thus they must expire?  Well states have laws that govern trade practices.  It gets even better. According to this paper, 37 states disagree strongly with the holding that these actions are not per se violations.  In other words, states do not look kindly on these types of acts, so even if the feds don't think this is a violation, there are at least 37 states that are strongly against these kinds of actvities.  See further discussion here.

Basically shops are happy as pigs is slop because they know that these actions will make them money.  Why? Simple, Panini and the shops are agreeing to maintain the market conditions such that the price is maintained at a given level by controlling supply and demand.   When reading comments about this situation be very careful about false analogies.  Such as "Sony uses MAPP. U can't go to Walmart and demand to pay factory cost."  That isn't what is going on here.  Blowout, DA, Atlanta, Big T and many many others want to be able to buy and sell a product for what the market will handle and what they can afford to sell it for.  We don't go to them and demand a certain price, we pay what they are offering the product for and Panini is trying to keep those retailers from offering those prices.

The other example is McDonalds.  If I have to explain why McDonalds is not violating rules by setting the double cheese price at $1, you need to shut off your tv and the internet and read a damn book.

Where this gets interesting is if a state or the feds say that Panini is not the exclusive provider of cards.  Well they are one of two hockey and football producers and the only basketball producer.

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