Manufacturers Attack Discount Sellers with Cubicle-Dwelling Enforcers, and the Consumer Takes the Hit

The Wall Street Journal investigated the mafia-like tactics of major electronics manufacturers in maintaining higher pricing. Makers like Panasonic, Samsung, and Klipsch hire offices of internet tough guys to track down discount sellers and punish those filthy capitalists for sullying their brand perception with affordable prices.

Manufacturers typically set a minimum advertised price, or MAP, that they require authorized sellers to maintain. But online retailers, including Buy.com and even poor, beleaguered CircuitCity.com, often sell products at a discount, and manufacturers believe that steep discounting hurts their brand integrity. These upset gadgetmakers have begun hiring enforcement agencies, like Phoenix's NetEnforcers, to scour the internet for cheap deals and tattle on authorized dealers. Retribution is usually just a warning letter in this case, asking the seller to bring the prices up to the MAP with the veiled threat that lifting the price is important to maintaining a good relationship. Occasionally, an authorized seller in violation of an MAP will have their contract yanked, stopping them from selling that manufacturer's goods.

Where this story gets dirty is in the unauthorized resellers. I'm not talking about a dude selling Panaphonics car stereos out of his car's trunk on that shady corner in West Philly four years ago (I'm not falling for that again!), I'm talking about eBay and Craigslist. Sellers on these sites are under no legal or business obligation to match any price at all, so NetEnforcers and their ilk are attacking them in the time-honored method favored by such baddies as the RIAA: threaten the sellers with frivolous lawsuits in the hopes that the victims will just give up in the face of legal might.

NetEnforcers favors threats of copyright and trademark infringement for eBay and Craigslist users, but as eBay's Tod Cohen says, this is incredibly transparent: "They take down the Web sites only of the unauthorized resellers that are selling at discounts, but don't bother other unauthorized sellers if they're selling at MAP. This suggests manufacturers are mainly interested in keeping prices up, not preventing trademark violations."

A recent court ruling declared MAPs legal, and not in violation of antitrust laws, but representatives from both eBay and Craigslist note that this aggressive policy is effectively price-fixing, which means more expensive products for consumers. As a lifelong bargain hunter, I'm a bit upset that these internet mercenaries are taking away my deals, and their strong-arm muscling really rubs me the wrong way. [WSJ]