posted on March 12, 2002 08:36:34 PM new
Hello everyone,
I am posting this in hopes that someone could offer advice on how to approach this situation...I'll be as specific as I can without using names and the product involved.
Let me give you a few necessary details before I go on with my question I seek advice on...we have been on Ebay since 1997, 912 feedback, no negatives. We buy our merchandise from different sources in large volume...we are not tied down to a specific item or source for the items...Our philosophy has always been since the beginning to start every auction at $1.00 and never a reserve...we have built a large following of repeat customer who bid on our items because of this...
I received a phone call this evening from the owner of the company for which we buy a particular line of product in large wholesale quantity.
He went on to explain that he has been getting several complaints from other Ebay sellers who sell the same items..the complaints are because of our Ebay practice of listing auctions at $1.00 without a reserve.
Because of this, he went on to say that we will no longer be able to buy the product from his company unless we stop listing the products at a starting bid of $1.00. He went a step further and said that in order to also continue buying the products, we could not list the items for no less than $9.95. If we continued to list for $1.00, he stated we would have to put a reserve amount of $9.95 on the items. He mentioned this would apply to all sellers who purchase the product in the future. Have you ever heard of such a thing??? Other things said was that by starting auctions at $1.00 we were de-valuing his product?? Keep in mind, my sell-thru rate on this line of product is 100% since I began selling it over 2 months ago...my profit margin averages between 100-400%. I consistently sell the item 100-200% more than the other sellers starting bidding at $9.95-$12.95.
The question I have is..."Is this legal for him to do this", isn't this price-fixing? To force me and others to sell an item at a starting price he dictates that will guarantee a lower sell-thru rate and lower profit margin does not sound legal to me... just so he does not lose sellers who won't by his product because these sellers either can't and won't compete...do I have any recourse? Any lawyers out there who can answer this question? I am in dire need of informatin to help me decide what to do...this product is a large part of my business and I really don't want to lose it.
By the way, this company also sells on Ebay and according to the owner, they are a fairly new startup with the product they sell.
Fire away with opinions.....
W.E.J.
[ edited by ilist4u on Mar 12, 2002 08:37 PM ]
[ edited by ilist4u on Mar 12, 2002 08:41 PM ]
posted on March 12, 2002 08:58:37 PM new
I think you need to ask your lawyer BUT
In my opinion - he does not have the right to tell you the starting price of your item unless it is written in the buyer/seller contract you (should) have with him. He called you and spoke rather then writting it so it is your would against his, not good!
Sounds like he is afraid to take the risk of starting auctions at $1.00 no reserve and that you are beating him out. Although, if both of you did it the price would come down. Simple supply and demand!
BUT I would advice you to call you lawyer first thing because if you meet the qualifications to buy from him, I do not think he can tell you how much to sell it for. I have heard of wholesalers that tell you flat out you can not sell the product on ebay and that is written right in the buyer/seller contract.
posted on March 12, 2002 09:11:31 PM new
Thank you Irene for the link...it appears the second paragraph in the document refers to my exact situation..specifically because he told me point blank, if I do not agree to list at the set price he would take coercive action by not allowing me to purchase the product.
"Vertical price-fixing is also known as resale price maintenance. A manufacturer or group of distributors engages in resale price maintenance by fixing the price at which a product will be sold to the public. Resale price maintenance does not occur by simply suggesting list prices and refusing to deal with non-complying retailers. It requires the announcement of a price accompanied by threatening or taking some coercive course of action if the retailer is unwilling to adopt the price [Carlson Mach Tools v. American Tool (1982)]. Whether imposed by horizontal or vertical restraint, price-fixing is per se unreasonable restraint of trade in violation of Section 1 of the Sherman Act."
RichieRich,
I believe a written contract would be an illegal contract or am I wrong...if he proceeds to put his words in writing, seems to me he hurts his case even more.
posted on March 12, 2002 09:13:06 PM new
Some companies don't allow their products to be sold in dollar stores because it devalues them and they will only put them in higher end gift stores that meet approval.
Not sure, but if the company owns the product they may be able to become part of the VERO program and if they become successful selling you may eventually be out of luck altogether.
I agree, keep us posted. I see more and more companies going directly online and cutting out the merchants along the way.
posted on March 12, 2002 09:26:21 PM new
You may or may not have a contractual agreement with him, but that is another matter altogether. When he told you that you had to start listing the product at $9.95 each and ALL THE OTHER SELLERS WOULD DO THE SAME, that my friend is a violation of the Sherman Anti-Trust act. If you agree to this stipulation, you are as guilty as the rest and will be subject to prosecution. Don't have any further discussions with this person until you consult with an attorney.
The light at the end of the tunnel will turn out to be an oncoming train.
posted on March 12, 2002 09:38:13 PM new
"I believe a written contract would be an illegal contract or am I wrong...if he proceeds to put his words in writing, seems to me he hurts his case even more."
My point exactly, he called you so that you did not have that in writting.
A buyer/seller contract can be as simple as an invoice. Lot of different issues can be stated there just like your Term of Sale. I have seen wholesale buyer/seller aggreeements that stated you may qualify to sell certain product lines. For example: Many hair care products you not only need a resale # but also be a licensed cosmotician (spelling?). When I worked in retail furniture not all retail furniture stores could sell Thomasville furniture, you have to qualify.
I am just saying your wholesaler could do something like make you have to qualify to sell the product.
I agree more and more wholesaler are putting limits to online selling of there products. If that is not legal, no one is challenging it yet. (That I have heard on.)
posted on March 12, 2002 10:05:21 PM new
You could ask him to put it on his next invoice so your better half will believe you ...
Or .. you could have someone else buy from him ... and then turn around and sell it to you. They would not be selling on eBay and would not be governed by the rule this supplier is trying to set up, although I do agree that it is probably illegal.
On the other hand, doesn't this supplier realize the amount of product that you are moving? The best revenge would be to find another source for the product
posted on March 13, 2002 03:17:45 AM new
Aren't there many ways around the situation for the manufacturer of the goods to the ebay sellers. If a small ebay seller does not comply with manufacturer then the manufacturer can find another reason to not sell to the seller that does not violate laws. As soon as the seller 'rocks the boat' he is in a position to lose his big selling item.
I use to work with a rather ruthless boss that would take an employee for a little one-on-one walk/talk. It was the old hardball speech 'about this was never said but .... play my way or you will be out of a job'. It was very effective.
Just playing the Devil's Advocate a bit.
posted on March 13, 2002 06:44:31 AM new
I'm sorry to say that I think you didn't fully read the paragraph that you said applies to your situation and then said he was coercing you by refusing to sell to you. The sentence right before that says, "Resale price maintenance does not occur by simply suggesting list prices and refusing to deal with non-complying retailers." That is obviously interpreted that it's okay for him not to sell to you, b/c you won't sell for his price. Perhaps coercive action refers to something like physical threats, picketing or harrassing your business, etc.
posted on March 13, 2002 07:17:04 AM new
Did you ever stop to think, this was another seller on ebay trying to stop you from under selling them. your personal info is avable to anyone that wants it. (You are hurting my sales, i have to stop you). Just my tought.
posted on March 13, 2002 09:13:33 AM new
I was in a B&M retail business for 25+ years and discovered there are many many ways in which manufacturer's conduct their business. Some seem questionable, but they worked. Yes, I am sure if they were challenged they would have been in the wrong by a law somewhere.
One company required we be D&B rated. One required photo's of our storefront outside and inside. One actually sent a manufacturer's rep to inspect our place to make sure we where "worthy" to sell their product line...Sometimes I would be very upset (when we where told NO) and sometimes I would feel quite smug (when we where told YES).
It usually worked out well for both the manufacturer and for us!
Because it was so tough to get certain brands, I ended up with choice merchandise and little competition! I live in a very small town and with time and word of mouth I pulled traffic from as far away as 100 miles! I was even able to start a little mail order business from one product line and sold to customers in several different states. They would find me on their vacations and then continue to order from me after returning home.
I have a friend who sells a line of men's work/specialty boots that he is not allowed to sell outside his "protected" sales area. This means no internet sales!!!! He has a website that does real well, but he cannot offer for sale on that site any of this manufacture's boots. He can display their logo and mention he sells them and offer prices if contacted directly. If a person outside his territory request information or wants to purchase a pair of boots from this manufacturer he is suppose to point them in the direction of the business in their area that sells them! He has been told "point blank" that if the manufacturer received complaints from their other retailers that he is selling outside of his territory, they will stop selling to him.
Is that 100% legal? Most probably not, but will he do anything about it...NO! Why? because he has a steady line of customers who spend hundreds of dollars on these boots and he makes an excellent profit because of the way the line is "protected" by the manufacturer. It really doesn't matter where these people go to get their boots, they will pay the same thing so there is really no reason to "shop around".
He even admits if the brand wasn't protected like that, he would probably be one of those "price cutters" because his overhead is so low, he could cut his profits and underprice all the other retailers. There are also lots of business owners with that business philosophy. Sometimes it works well (Wall*mart) sometimes it doesn't (K*mart).....
Lots of times it's this diligence on the part of the manufacturer (controlling supply and demand and price) that makes their products so sought after and priced so high....Do you really think a "Rolex" is worth what is charged? Is it really that much better than any other quality time piece? If I was Rolex dealer, I would be happy that customer's walk through the door understanding that the watch will cost them thousands! No need to haggle...
posted on March 13, 2002 10:03:47 AM new
I once had a distributor tell me that his other customers/resellers were complaining that I sold my products for TOO low of a price. He was "hinting" that I should raise my prices.
However, I was one of his best customers. My volume was enough that he didn't want to lose me as a customer.
What did I do? I told the distributor that his other customers should LOWER their prices then, as I am not RAISING mine. If he didn't like it, I would source the product someplace else.
He never bothered me about it again, and he DID tell them my response.
posted on March 13, 2002 10:34:14 AM new
I think that type of price-setting is generally legal. Fundamental Supreme Court precedent was set in early 60's Schwinn case.
posted on March 13, 2002 10:41:16 AM new
Id tell him that unless he pit it in writing and then Id refuse and when he refused to sell to you Id consult my attorney about a civil suit. If its not cost effective Id just move on to another product. We carried a British shoe & Boot line once they decided that all their small dealers would have to sell above a set price but allowed Large retailers to discount whenever they wanted - We got creamed on price and just dropped the line. Takes big bucks to afford attorneys .
Good luck
posted on March 15, 2002 05:44:42 PM new
Probably legal he can stop selling to you if he wants. Like someone else said, you could get around by going through a 3rd party, that's the whole "grey-market" thing. This guy can't prevent you from selling stuff that you acquire.
So go ahead and have a friend or relative buy it for you, and keep selling for a dollar. It will drive this guy batty, he'll ask where you got the stuff from, etc. Maybe he'll figure it out and it won't sell.
And, he's probably not worried about losing you as a customer; he figures that he'll just pick up your business if you walk away, since there are many others who sell it on eBay.
I'd say the last thing you'd want to do is get a lawyer involved; too expensive, and it's not at all clear that you'd win. You're much better off negotiating or going behind his back (or just stop doing business with him) than you are butting heads.
posted on March 15, 2002 06:38:08 PM new
then there is always the chance that he is selling the same merchandise on e-bay and he himself is the "other e-bayers" that are complaining. Don't know how Unique your items are but that is just a thought.
posted on March 15, 2002 08:41:43 PM new
Why don't you ask your states Attorney General or Consumer affairs office?
They can really be helpful. I'm sure your
supplier would be interested in this information also )))
)))