US Supreme Court case could affect Festool

[HowardH]

The idea that Festool (as well as many other manufacturers) require their dealers to charge list price or face losing their franchise has been reviewed ad naseum in the past.  However, there was an article in today's Dallas Morning Newshttp://www.dallasnews.com/sharedcontent/dws/bus/stories/032507dnbusretailantitrust.379c0e5.html that could redefine the relationship between the dealers and Festool.  The case involves a small dress shop in N. Texas who began to discount a particular designers items without the designers consent.  This designer required a certain minimum retail sales price or the dealer could lose their contract to sell their product.  The designer pulled their product because of the discounting and the shop almost went out of business since this designer was a major supplier of product for this shop.  The Supreme Court has agreed to hear the case and if it rules in favor of the dress shop, it could have far reaching effects including how Festool prices it's products here in the US.  This is an antitrust issue at it's core and how price-fixing affects the consumer.  It's not just Festool obviously, but companies like Ping, Louis Vuitton, Rolex, all kinds of products.  This will be a very interesting decision.  Can a manufacturer dictate a pricing schedule after it sells to a dealer or when they say "manufacturers SUGGESTED retail price", will it really mean suggested only?  We will soon see.

 

[putttn]

I know from personal experience that manufacturers can put quite a bit of pressure on business owners.  I owned a Mercedes Benz dealership for 20 years and during that time we were "encouraged" to hold to sticker price.  My state has strict laws concerning dealers and manufacturers so they legally couldn't pull our franchise but they sure could make life miserable.  Popular models could be held from our allotment or if we did get them we got the worst colors.  I was fortunate in that we could never get enough cars to meet the demand so holding to sticker price was not a big deal.  Resale value, back then, was very good so owners had a good experience and didn't mind paying sticker.  We didn't "pak" our sticker price with anything other than transportation and get ready charges.  There are many ways around these manufacturer pressures like selling to another company owned by the company owner and then marketing from there.  Many dealers sold to their own leasing companies then did as they pleased price wise.  A good way to generate volumn also.  Interesting what will happen.

 

[fcraven]

I'll be curious to see how it turns out. There are so many factors involved, and I have often thought there was something fishy going on. I tend to be against a manufacturer dictating prices. E.g. Festool may be trying to keep their dealers from battling with each other; however, their fixed pricing results in lost sales for local dealers. I can simply save too much money by buying out of state. Thus my local dealer looses sales.

But mostly, I don't like the fact that current stock items sell for X will cost X+n after an arbitrary date. I think that if a dealer has some old stock from  two or three price changes ago, they should be able to sell it at the old price .

Sorry, I'll get off my soapbox.

Thanks for bringing this subject to our attention, perhaps we could get together sometime, I'm up in Plano frequently (live in Duncanville)

Fred

 

[HowardH]

That would be great, Fred!  Would love to do it.  As I read that article this morning, I couldn't help but to think about the Festool situation.  There is no question that they have a quality product and I would assume we are all in agreement that as a value proposition, we have made the decision that their price justifies the perceived value it delivers or else this forum would have no need to exist.  If Festool had company owned stores, i.e. Apple for example, and thus would control every aspect of distribution, then they are free to charge whatever they want.  Apple is an interesting case in they also have dealer networks but I have never seen an Apple product sold for less than full list no matter where the products are being delivered.  I suppose they tell their dealers the same thing, you discount, you don't sell Apple. Oakley is the same way.  Maybe Festool and Apple share a common thread.  They both are proprietary systems with no real competition.  Yes, there are other computer systems out as there are other woodworking tools but both are very unique in how they deliver their value.  There are alternatives available but none that I know of that would promote real competition for them and thus lower prices.  Sort of like having a monopoly.

 

[Paul Franklin]

I think it is atleast fair, I mean I know that I got it at the same price at any dealer, and have not missed a deal somewhere. Although they are not that strict in the UK, I could go from one dealer to the next and get a discount, not much, but none the less a discount on there tools.

Paul

 

[Tinker]

Maybe I'm too oldfashioned, or perhaps just plain stooopid. No matter who gives a discount, i have just two people i deal with for my Festool toys.  i don't shop around for cheap.  I go to Bob Marino because he is always so very willing to answer my dumbest questions and will help out in any way that he can.  I also go to my local Woodcraft toy store, a 30 minute drive each way.  there, i can pick up, handle and play with all of the toys anytime i feel the urge. Besides, they sold me my very first Festo toys. There, they will charge just as much as Bob, I guess more with S. tax, and I do have to drive there to pick up the new toys.  No matter, both dealers, Bob and Woodcraft are very helpful whenever put to the test.  i try to keep it even as far as purchases.  if buy from one, it is not after comparing one against the other.
I am in a service type business and frequently get "replaced" by some other contractor who is "cheaper".  Often, i get called back because it had been discovered "cheep ain't always cheeep"  I like to think "Fair is always fair"  I have told some clients that I undrstand they are looking for reliability.  we are looking for reliable customers at the same time.  I think that is also the way with retailers.  they want and appreciate reliable customers.  In that respect, i would stick with the same guys no matter who else is selling cheaper.
Tinker

 

[CharlesWilson]

In addition to the businesses mentioned, there are other franchises, such as Boy Scouts and Girl Scouts that traditionally fix their prices. However, the margins in those lines are mighty slim, so discounting would be unlikely to improve profits.

Charles

 

[Jesse Cloud]

Reminds me of a time when I wanted to buy a particular brand name coffee maker.  Several stores had it on sale for $79.95.  What I thought was funny, though, was that some places advertised "marked down from $120" and one store had it marked down from $150.  Of course, I bought it at the $150 store, since their deal was so much better.

 

[Jim Becker]

Someone posted an article from "Down Under" at SMC recently where there was court action on this pricing.

 

[tvgordon]

When I asked a Festool rep at a woodworking show why they don't allow discounts, he said that (I don't remember his exact words) it devalues the product.  He said that if ten dealers are selling a sander for $255 and one dealer is selling it for $200 then it really isn't worth $255 anymore. 
Anyway, on one hand I like that the price is fixed because I can buy from anyone and get the same price.  That means I can shop at a nearby dealer that has the item in stock if I need it now or a dealer that has the lowest shipping costs or a dealer that goes out of their way to help with a problem. 
On the other hand, sometimes it's fun to shop for the best deal or look forward to an upcoming sale or show where you know you'll be able to buy a little more than what you usually could afford to bring home.
Tom.

 

[Ron Pegram]

Here's my biased take on it!

Festool's smart. Price protection protects dealers who are willing to provide service!

But here's the irony.

From whom are these service-oriented dealers being protected?

To some degree, the protection is needed from the customers!

I know, I know, and I represent a retailer so I'm out on a limb perhaps BUT read me out.

How many times have you known someone to go to service-oriented retailer A to get the information and technical know-how he or she needs only to go to lowest price and no service guaranteed retailer B to buy the product for $5 less?

It happens! And when the guys who do this see one good retailer after another disappearing, they shrug their shoulders and bemoan this new economy all the while helping its demise.

Bob Marino's a good guy. McFeely's is full of good people. Other retailers are the same.

Some, however, (and they will remain nameless) are too big to care. They don't sell to woodworkers per se. They really just want to sell anything and everything and if the business ever gets too expensive, they'll abandon it leaving their customers in a lurch.

Seriously, imagine how the folks at McFeely's feel about any criticism from you all. You are our life-blood. We don't sell video games or non-woodworking books or popular DVDs or CDs. We sell woodworking products to woodworkers. If a woodworker is upset with us, and he or she has a valid reason, we HAVE to make it right! Heck, even if they don't have a valid reason, we probably need to make it right.

Yet, for Big Company Anonymous, you're just part of a product line to which they're not committed and for which they're not going to spend more than XXX budgeted dollars. So why would you ever save $5 with them and help put a service-oriented company out of business? I hate to sound so self-righteous because I've done it as well.

But, yes, as a retailer, I'm glad Festool price-protects. If they didn't, and certain unnamed retailers could get into this business, they'd sell these products at predatory prices, driving everyone else out, and they'd abandon it once the return wasn't there any longer. The customers wouldn't be served that well in the long-term The dealer network would be a lot weaker and service would be an afterthought even in the short-term. I've seen it happen with good product lines we've carried!

Alright, it's late and I need to get off my soapbox. As always, thanks to you guys for being the dedicated bunch of Festooliacs you are! I know we appreciate you.

Ron

 

[Les]

Ron,

You make some very valid points. No soapbox, just facts.

 

[Bob Marino]

As a dealer, and I obviously am not the most objective person, I agree with Ron totally. I have no problem (actually prefer it sometimes) buying from other places (example Bose) that have a similar pricing/marketing structure. It saves me from wasting time.
  This policy allows dealers to spend the time needed with a customer, answering questions, explaining what's what, fine tuning the order, without worrying that we will be undercut by a competitor on the basis of price. Festool's goal is to allow dealers to compete on service, rather than price. I think it's a win-win scenerio.
Off my soapbox too ;D ;D
  Bob

 

[Dan Clermont]

I could see how this court case could affect all price fixing and although I always like to get a deal and feel like I have saved a couple of dollars this so-called price fixing is a good thing IMO

What Ron and Bob said up above make perfect sense. I'd hate to see Festool's sold at WalMart or HD and the guy selling them has absolutely no idea what they do and his main concern would be selling at a couple of points above cost so no one else can undercut him and he owns the market.

Just my 2 cents.

Cheers
Dan C

 

[Corwin]

Ron,
Nicely put!  And I hope that Festool and the dealers not adversely affected by any decision on this matter.

Despite the high cost of these tools, I do expect to pay top dollar for top tools.  Only makes sense.  So, while it would be hard to say I like the prices, I do enjoy the products.  And I want the company to have continued success.  I would think it a shame to have a change in the marketing structure cause a future change in either the price or the quality.  

Corwin

 

[bassman00]

It will be interesting to see how the court decides and then how it applies to companies like Festool.  Personally, I'm all for a free market.  Bob can vouch for my feelings on this. ;D  Festool can chose who to do business with and how.  If the market doesn't like that, it will show in the sales results.  If the court decides the practice is illegal, I can't see Festool choosing to partner with big box or low price/no service stores.  Imagine the average BORG buyer checking out a row of routers or sanders or drills and seeing a Festool product next to the others?  How many would sell with the typical sales help there? 

PaulD

 

[HowardH]

A perfect example of how service sells is here in Dallas.  There is a local True Value store here called Elliott's Hardware.  You metroplex folks know who I am speaking about.  They have three HUGE stores and carry virtually anything you would ever need.  There's a saying around here, "if Elliott's doesn't have it, it's isn't made".  Are they they cheapest in town?  No way!  Not completely out of line but I do a lot of my business with them because their service is IMPECCABLE!  They have taken the opposite view of HD in that they have more sales guys running around than you can stir with a stick.  Need some help finding something or figuring out what you need, no problem.  Four guys just standing around in your department waiting to help.  Not kids, either.  Mostly retired guys who have 50 years of real world experience.  They aren't open Sunday's and only until 6 during the week but they continue to grow and grow going against the conventional wisdom these days that the big retailers are forcing the little local guys out of business.    It's always a pleasure going to get something there.  You could make an afternoon out of it.  It's not the cheapest but for value, no one can beat them.

 

[Ted Miller]

Its funny how we are in the states. We want a Porche tool but we want to pay a Honda price for it. We are guided, (most of us) by price when it comes to tools and we get a bit poed when the cheaper item does not perform like the ad said. After being in the framing and cabinet work for many years when it comes to tools you really do get what you pay for. Sure you can find a lemon in a Porche as well as Honda. But look at the customer service you get with both brands, the higher end will usually win out. I have no problems paying a higher cost for a great quality tool plus great customer service, I do not even have to think twice about it.

I know if we in the states made our own brand of WWing tools and all the raw materials were made here our product prices would be through the roof. American WWing tool companies are all gone or went over seas to pay pennies on the dollar for labor because we want the cheapest item, but we still want it to perform like a Porche.

I am getting old and I am one of those guys if you the vendor treats me like a number I take my numbers (dollars) elsewhere. You get one chance with me with customer service then I move on.

Like I have said in the past about HD or Lowes, they are like a grocery store, I go in find what I want then leave. Its not a place for tool buying or asking for info. You could learn more off the internet in 5 minutes then anyone in HD could learn you...

 

[Dave Ronyak]

I would not bet any great sum that the US Supreme Court will rule illegal fixed-price distribution like that of Festool.  I recently heard Thomas Leary speak on the pending case.  Leary has been a practicing lawyer longer than most of the members of this group have been alive.  He is a member of the Washington, DC law firm from which current Chief Justice Roberts came, and a former FTC commissioner.  He knows more than a little about anti-trust law in USA.  As many others have already pointed out, there are many valid reasons for Festool to try to maintain resale prices, that actually benefit customers such as ourselves.  Personally, I see some major simularities and some major differences in the manufacturer/dealer/retail customer relationships for women's clothing and fashion items when compared to the products of Festool.  It will be interesting to see if the Supreme Court will go beyond what it needs to discuss and decide in the case before it.  It is possible they could declare the resale price fixing as illegal in the case before them while distinguishing the facts of that case from other situations including Festool.  On the other hand, being the Supreme Court, they can do whatever they please and make new law if they please, as they have on many other matters under the leadership of previous Chief Justices.

Dave R.

 

[mr_hockey]

What ever happened to the FREE MARKET  ??? ??? ???

If Festool wants to control their retail prices they can open their own company stores and control their prices.

If they want independent retailers, they should not dictate price.

It is just wrong!

Let the free market work like it should!

If a bottom feeder retailer sells Festool cheap and provides no service - they won't stay in business long. A free market takes care of things naturally, without interference from govt or a manufacture.

When govt or manufacture introduce "artificial" actions (i.e. dictating pricing) only one thing can happen - someone will win and someone will lose. And in most cases it is the consumer that gets $crewed. 

I will now step down from my soapbox