Festool UK TTS fined 8.2 million Euros for price fixing in Europe!

rxe said:
This judgement is a good thing, anti competitive pricing is illegal in the EU and for good reason.   If Festool appeal, hopefully they will lose, and then get a load of costs handed to them.  IMO, the penalties for a company wantonly breaking the law should be much bigger.

I think many people here are confusing two issues.

Firstly, there is the price that Festool charge the dealer for the tool.   The judgement has no effect on that at all, Festool can charge whatever they want.  So the idea that this will mean that Festool start having to make rubbish is misguided.  DeWalt make rubbish because they choose to, not because they have to.   

Secondly, there is the margin that the dealer makes on the sale.    This judgement prevents Festool from mandating the margin.   A dealer will be free to sell at whatever price they want to - full margin, razor thin margins, or even negative margins if they are doing promotions.  If a dealer is efficient, and moves a lot of stock, they can choose to run thin margins.    This is good for the dealer and good for the customer - and presumably good for Festool as they will sell more tools. 

The people who will suffer under this regime are the small dealers, who don't shift much stock, and have to charge full margins to cover their costs.   So it is down to a trade off: do I (who orders online, and has never set foot in a dealer) have to pay inflated prices to support a dealer service that I don't want?   I think not.   In the 21st century, why should I pay a middle man to have a shop, run a warehouse, pay staff ... so that I can physically go and fetch some goods?   That's a bit 18th century.   

Now, there is nothing stopping the majority of Festool users saying "I'd rather pay full margin for my tools in order to support my dealer".  If they do that, all is good, and they have the choice to do that.    However, I would imagine that many people, when they actually have to "pay" for the service, will choose not to.

This isn't just Festool, the same thing seems to be happening to Stihl, which again is a good thing.

I disagree, this is not anti-competative at all. If there was collusion between multiple vendors to say that no drill will be sold in the UK under a certain price, then that would be anti-competative. If anything, from what I can tell this is competitive all around. No one is stopping anyone from buying a $20 drill if they want one so the consumer is good, and since all the dealers were charging the same they have to compete on service not price which means Festool consumers win.

If they have to compete on price you will end up with less dealers since the only ones that will be selling will be those on the lowest margins which means that many dealers will drop the line since they won't be able to make the profit they need to carrying them. Eventually that leaves only the big volume dealers who will start putting price pressure on Festool who then can't just say no because they will have a greatly reduced dealer base to sell to. Rather then taking the hit to their profit margin Festool will be forced to reduce the quality of product to maintain their margins.

This is exactly what happened to DeWalt, Stanley and Porter Cable with Home Depot and Lowes here in the US and has proven to be horrible for everyone involved, ironically including Home Depot and Lowes whose power tool sales have been hurting for years because of quality issues...

I just don't see this being a good thing for anyone in the long term. In the short term you'll get some deals but give it a year or two for the repercussions to hit...
-Jim
 
I disagree, this is not anti-competative at all. If there was collusion between multiple vendors to say that no drill will be sold in the UK under a certain price, then that would be anti-competative. If anything, from what I can tell this is competitive all around. No one is stopping anyone from buying a $20 drill if they want one so the consumer is good, and since all the dealers were charging the same they have to compete on service not price which means Festool consumers win. 

It is entirely anti-competitive - the dealers cannot compete to offer the best price.  At end end of the day it doesn't matter what you or I think, Articles 81 and 82 of the EU Treaty rule that it anti-competitive and illegal.

You raise the point of what will happen as dealers consolidate and possibly exert more power in the relationship.  That is down to Festool to manage.  Given the strength of the brand, I would imagine their response to Axminster threatening to drop them will be a casual shrug.  There will presumably be loads of other dealers happy to take on the business.
 
rxe said:
I disagree, this is not anti-competative at all. If there was collusion between multiple vendors to say that no drill will be sold in the UK under a certain price, then that would be anti-competative. If anything, from what I can tell this is competitive all around. No one is stopping anyone from buying a $20 drill if they want one so the consumer is good, and since all the dealers were charging the same they have to compete on service not price which means Festool consumers win.   

It is entirely anti-competitive - the dealers cannot compete to offer the best price.  At end end of the day it doesn't matter what you or I think, Articles 81 and 82 of the EU Treaty rule that it anti-competitive and illegal.

You raise the point of what will happen as dealers consolidate and possibly exert more power in the relationship.  That is down to Festool to manage.  Given the strength of the brand, I would imagine their response to Axminster threatening to drop them will be a casual shrug.   There will presumably be loads of other dealers happy to take on the business.

I highly doubt there will "loads" of other dealers happy to take on the business at reduced margins.  I think Festool's current system works quite well. If it didn't, neither the dealers or Festool would still be in business. govenrment should only be involved in dealing with true anti competitive practices such as price collusion between manufacturers. You need to remember that no one forces Festool dealers to carry their products, they choose to do so. taking this type of govenrment interference to the ultimte level, we'll all be buying tools from Walmart Global corp. They'll all be priced at $49.99 and work accordingly.
 
TTS here actually almost blew its whole reseller chain away by previously requiring strict no discounting of tools and happily giving discounts to whoever came to purchase their tools direct from TTS. Because of the backslash they got from the resellers they now don't give discounts either, but the end result is just more rigid price fixing.

No-one in their right mind should buy Festools here at the MRP since its a lot higher here than in Germany. Thank goodness they can't stop intra EU shipping anymore.
 
rxe said:
It is entirely anti-competitive - the dealers cannot compete to offer the best price.  At end end of the day it doesn't matter what you or I think, Articles 81 and 82 of the EU Treaty rule that it anti-competitive and illegal.

We'll have to agree to disagree on that one. There are a good many cases that I disagree or agree with and you are right, my agreement or disagreement hasn't effected the cases at all. :)

rxe said:
You raise the point of what will happen as dealers consolidate and possibly exert more power in the relationship.  That is down to Festool to manage.  Given the strength of the brand, I would imagine their response to Axminster threatening to drop them will be a casual shrug.   There will presumably be loads of other dealers happy to take on the business.

I suspect your presumption will be proven incorrect... Wait until dealers find out they can only make one or two percent on the margin of the Festool brand rather then the 10% or whatever they were guaranteed before. No dealer will want to touch a product that requires them to spend thousands to get the brand in the store and they make pennies on the dollar spent.

We'll see how it all hashes out. I really hope you are right but some basic pessimism in me says it won't turn out well... the only way out I see if this becomes a global thrashing for Festool is for them to follow the Hilti model and sell their own stuff. Maybe make their existing dealers work on flat sales commission rather then profits on sales to get around the whole issue.

It'll be interesting to see how it goes...
-Jim

 
No dealer will want to touch a product that requires them to spend thousands to get the brand in the store and they make pennies on the dollar spent

This is what is going to change.  There is no reason to spend thousands of pounds/dollars on a display in a shop, and the customers don't want to pay for it. If I am interested in a new tool, I probably heard about it on here, and one of Paul Marcel's videos tells me far more about it than a shop ever could.  To be honest, the best thing that Festool could do would be to put a "buy it now" button at the bottom of every video.

Certainly in the UK, I see the specialist bricks and mortar retailer dying in short order.  Here, the costs of commercial property are insane, and most of the margin that I hand over is actually going to the landlord.  The last bastion of bricks and mortar is also failing - the idea that you can walk out with the product.  In many cases they say, er, well we have the display one, but no stock.  Powertoolworld or Slingers will have it on my doorstep in 24 hours, and I don't even need to burn the £6 a gallon petrol to go and get it.

Then idea of a middleman taking a percentage simply to handle the goods is a concept that is going fast. 
 
rxe said:
Certainly in the UK, I see the specialist bricks and mortar retailer dying in short order.   Here, the costs of commercial property are insane, and most of the margin that I hand over is actually going to the landlord.   The last bastion of bricks and mortar is also failing - the idea that you can walk out with the product.  In many cases they say, er, well we have the display one, but no stock.  Powertoolworld or Slingers will have it on my doorstep in 24 hours, and I don't even need to burn the £6 a gallon petrol to go and get it.

Couldn't agree more, only thing to add is the lost time travelling to the "local" outlet - another 30-mins each way depending on traffic. One aspect of Festool's delaership network that really doesn't work to the benefit of the user base if there are no dealers in your own town.

I used to work on a fairly large shopping potral/referral site many years ago, I've been stupefied at the way the highstreet has accepted the gouging of their margins through the increasing rents they pay - I REALLY do not want to pay for that part of the price.

 
Well, I'm a more tactile person I guess. The local Festool dealer is about 15 - 20 minutes away but they don't have a "petting zoo" so I can't test stuff there and I don't like them anyway so I drive an hour an a half to another state when I want to see if I like something. If I do and it's not in stock, they will order it and ship it to me so in that sense it's just like ordering online but I am more confident that I'll get what I want at the end of the day. Maybe it's just me but I like having a place even semi-local that I can get the tools in hand and really see what they are about (and this goes for other brands of tools as well, just picked up a new Veritas hand saw at Woodcraft because they had them in stock and let me check it out before buying could have saved $5 - $10 by getting it online but I like supporting the stores I frequent so there it is...). It'll be a sad day when I have to buy everything based on pictures on the computer :(

I'd have never bought any Festools without getting some hands on time with them. Festool needs brick and mortar dealers, they are very expensive tools and getting to use them in person gets folks to buy tools that a million dollars in advertising won't. I still have a ton of Dewalt stuff and they are still decent for what I do and I could have continued to use them blissfully unaware that Festool could help me out in any way until I got some things in hand and got a clue :)

Maybe it's a matter of proximity to things normally but I consider 30 minutes to be a very reasonable drive to pretty much get to anything. My wife drives an hour each way to work and for many years it took me over an hour each way to get to work using public transit. I guess if I lived in a city that would seem to be a long time... but the suburbs are like that... it's what we are used to I guess...

-Jim
 
My favorite Festool dealer is Bob Marino.  My second favorite is Ebay.  I don't know my nearest dealer and have not heard from them, and Festool knows where I live. 

Don't all dealership based companies fix prices to a major extent?  Ever try to buy a Honda generator, or a Stihl weedeater, or a BMW?  You could get three bids and they are within a percent of each other.

 
Seems to me the most obvious solution is for Festool UK to start their own retail chain and cut out the other dealerships.  As sad as that would be for numerous reasons, if they are the only ones selling the product, they can set their prices and that is that.

They might even be able to bring the "fixed" prices down a bit for having cut out the middlemen involved in making the sales, after they cover whatever costs they need to deal with when opening up these retail stores.

Hopefully they are able to do something to reverse the legal decision, but in the end, if it does prove illegal in the UK to do things that make sense...  seems like the dealers that opened this up are shooting themselves in the foot.

The Apple stores seemed questionable to me at first, but they seem to have proven themselves in the end - they present a consistent brand image, offer some very nice services for customers, ...
 
honeydokreg said:
Instead of hashing this topic over and over again why not go after the gasoline companies for gouging us on
Gas and
Jacking up prices overnight sometimes then declaring 35 billion dollars profits

Festools is not price fixing neither is apple and many more. This is the price of the
Tool. You either buy it or you don't. Period as simple as that

Other companies sell drills or saws buy theirs then. All most of you are concerned about with this topic is
That you don't want to pay their price and want it cheaper to save you money. But yet where you work do you want a less paycheck?  Or bid a
Job and have customer say well I can get it cheaper elsewhere. And you say well not with my quality and skills you can't.

Same thing   Buy I'm or don't. It's your
Choice

I would have to agree with you. It's the agreement that is signed and agreed to. If no one signs the agreement, I bet Festool changes the terms. Since dealers are signing the agreement, it is what it is.
 
There are certainly many interesting points of view in this thread. I am willing to pay more for the Festool value-added services and I have benefitted from them in the past but unless or until Festool becomes a public company, we will never know how much we are paying for these services.

The EU has taken a position that a manufacturer cannot control the price of their goods once the goods have been sold to another party. I don't think any of us would like to have a dealer tell us how much we can sell one of our tools for once we have purchased it. For better or worse, this seems to be the objection the dealers have in working with Festool.
 
I like to think that I buy "best value" for my purchases weather it's a car or tools.  I did a lot of comparison shopping and I bought Festool at the prices advertised at first for a unique tool (The Domino) and then after seeing the customer service and quality build I purchased a lot more in their product line.

Would I like to get the same quality cheaper, of course but I want Festool to continue operating and innovating for the best products that I can reasonably buy.  So, I buy Festool when it's best fit for me and in some cases I buy other brands to suit my needs.

Jack
 
My take on this is that even though Festool is playing hard with their dealers and it's probably a bad deal for me as a consumer, the benefits outweigh the drawbacks. I've been a happy Festool user for a good number of years now and I do appreciate the fact that when I go to a Festool dealer, they have more than one sander in stock and they actually know something about the products...
 
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