[net.micro.apple] Computer

ee163agb@sdccs7.UUCP (02/29/84)

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	There has been some discussion of pricing computer equipment,
both here and in net.legal, especially with regard to student
discount prices on the Apple Mac.  Basically the question is "can a
dealer price a piece of equipment below list?"  This is followed by the
companion question "can a firm (like Apple) make special arrangements
to sell their machines below list to schools/students?"

[The following discussion is based largely upon California law, and
Federal law under the Ninth Circuit.  Most States should have similar
rules.  Words I use below should NOT be understood like lawyer talk
unless specially noted.]

	A wholesaler must give relatively equitable prices to everybody.
Variations in (wholesale) price must be based upon some reasonable
consideration (volume discounts, for example, are okay if available to
all, and not clearly unreasonable), or enjoy some classic exemption,
like student discounts.  Thus (question #2 above) university discounts
on the Mac are okay.

	A list price is a *retail* price, "suggested" by the wholesaler
of a product to the retailers.  In the computer business the wholesaler
is often the original manufacturer.  Due to anti-trust sorts of
legislation, the wholesaler is forbidden to make the retailer sell the
product to the public for a specified price, whether by requiring the
retailer to sign a contract to that effect, or by refusing to sell goods
to retailers that step out of line.  Once a retailer has purchased some
good from a wholesaler, he is free to set whatever price to the public
that he desires.  Thus (question #1 above) selling at less than list is
okay.

	Now, there are lots of reasons why wholesalers/manufacturers
want to force a certain retail price for their equipment.  The classic
one has to do with the pressure from retailers who wish to maintain a
large profit margin--they don't want price competition.  As they can't
lawfully prevent others from entering the retail business, they want the
newcomers forced to adhere to the high price.  This is bad for the
consumer, though, so we get laws like those described above, making such
(bad word here, but convenient) "syndication" unlawful.

	The tactic in vogue lately for computer makers to circumvent the
spirit of the laws and fix prices has been the "authorized dealer"
covenant.  The computer maker announces that "customer service" is an
integral part of his product, and that only retailers who provide the
right kind of service will be authorized dealers, and be eligible to
purchase and resell the product.  Anyone who tries then, to sell the
product for less than list (consistently) is removed from the authorized
dealer list for alleged service incompetence.  This tactic is especially
successful against low-overhead mail-order dealers, who are making
profits from discounted merchandise as big as those that storefront
operators are making from list price.  Mail-order dealers clearly don't
provide the kind of customer service (and education, et cetera) that
walk-in businesses do!

	Lately, I have learned of an even sneakier tactic, which I do
not know whether or not has been tested in court.  The computer maker
requires retailers to sign a contract which explicitly notes that the
maker may not set retail prices (other than *suggesting* a list price),
and then goes on to require, however, that the retailer NOT
**ADVERTISE** any price less than list, under heavy contractual and tort
penalties.  This, clearly, is designed to discourage competition.
First, it discourages a retailer from setting a discount price--he's
free to do so, but since he can't TELL anyone about it, there's no
point.  (This produces some of those "call for price" ads that you see
in the paper, I think.)  Second, it discourages customers from going to
a discount retailer to buy their computer (and thus making other dealers
match that price to retain their clientel), because they won't KNOW
there's a discount dealer in town.  Absent knowing that they can save
two hundred bucks by driving half an hour to wherever, they'll stay with
the nice computer store up the street at list price!

	I don't wish to make it appear that only computer manufacturers
engage in these abusive practices:  all businesses do.  The fact that
these kind of conspiracies are common, though, doesn't make them any
less rotten.