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July 2012

Senator Herb Kohl Raises Red Flag
on Television Pricing

In a recent press release, U.S. Senator Herb Kohl raised serious questions about information in an article about television pricing. In the May 23, 2012, Wall Street Journal article entitled “Selling TVs at Full Price,” the reporter wrote that Sony Corporation and Samsung Electronics Company are “trying to force retailers to rein in discounts on televisions, a tactic aimed at preserving profit margins.”

Sony and Samsung reportedly would require retailers such as Amazon.com to raise their prices to a certain pricing floor or have their supply of televisions cut off. The reporter noted that this effort was to protect retail chains such as Best Buy Company and Target Corporation from online competition where the consumer first checks out the item at the retail store and then checks the item’s price online at Amazon.com or at another online retailer. This practice, known as showrooming, has many retailers concerned because of sagging sales while online merchants keep setting new sales records.

Visiting several retail electronics showrooms in the past month, I saw evidence of showrooming happening. For example, I noticed one couple with notepad in hand look at televisions. After eyeing various models, the couple rather loudly said, “Now let’s check the online price,” and then they both started working their smart phones. They did not leave the retailer with a new television.

Electronics retailers are very concerned about pricing differences because they must include the cost of “bricks and mortar” within their sales prices, while the online retailers do not. In addition, many online retailers do not charge state sales taxes if they do not have a physical presence in a state like Wisconsin. This can create a large pricing difference between the store and online retailer. However, members of Congress such as Senator Kohl fear that Sony and Samsung may be attempting to gouge consumers by forcing retailers to charge higher prices.

Senator Kohl, in his late May press release, explained that this practice is considered vertical price fixing and that it was illegal until the U.S. Supreme Court “narrowly overturned the century-old ban on retail price maintenance in 2007.” Kohl noted that Justice Stephen Breyer argued in his dissent to the majority opinion, “If only 10 percent of manufacturers engage in vertical price fixing, the volume of commerce affected would be $300 billion, costing the average family of four an additional $750 to $1,000 for retail goods every year.”

Senator Kohl also noted that he once was a retailer but said he was pushing for passage of his “Discount Pricing Consumer Protection Act” because it would allow retailers to sell goods below a threshold price set by the manufacturers. This means Amazon.com and other online retailers could offer the item for sale at a discount off the manufacturer’s minimum price.

Keep Safe from Firework Accidents

July 4 is nearly here and fireworks will soon light up our skies. Remember fireworks can be dangerous, particularly to children. Only allow adults to light fireworks and keep children far enough away to prevent injury. Do not allow anyone to throw fireworks at anyone else. Also, never re-light “duds” and keep water on hand to put out fireworks. Careful advance thought can prevent a terrible trip to the hospital.            

 


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