Common knowledge?

[JR]

This is kind of interesting. I'm no expert on this stuff, but have been exposed to it from time to time.

It's clear there is no "monopoly" present in this relationship. I wonder if it's restraint of trade in some way, though. The issue is whether the consumer has access to goods at the best price. In this relationship there's no way to know because the goods are available from only one source. You can't go to Lowe's and ask for their best price on a BT3100 with a view price-matching against HD.

I don't think the Craftsman example is comparable because it's Sears making it's trademark'd goods available through their retail operation. In the TTI case it's two separate businesses agreeing to an exclusive relationship.

So I went to the FTC site to read their primer on illegal business practices. Here is a quote that seemed revealing to me:

"A practice is illegal if it restricts competition in some significant way and has no overriding business justification. Practices that meet both characteristics are likely to harm consumers -- by increasing prices, reducing availability of goods or services, lowering quality or service, or significantly stifling innovation."

Reduced availability of goods is exactly what the agreement provides. And lowered quality of service - well, we are talking about the BORG after all.

This quote from the FTC primer is perhaps a bit more oblique, but potentially on point.

"Resale price maintenance agreements. Vertical price-fixing -- an agreement between a supplier and a dealer that fixes the minimum resale price of a product -- is a clear-cut antitrust violation. It also is illegal for a manufacturer and retailer to agree on a minimum resale price. "

I have no reason to believe that HD and TTI people ever went into a conference room and agreed minimum prices for TTI tools. But the fact that those two popular brands are available only from HD means that the consumer sees a de facto minimum because he can't find the product elsewhere.

I'm betting this kind of relationship is viewed more skeptically by the FTC due to the size of the organizations involved. HD is dominant on the retail side and TTI is at least "very big" on the mfg. side.

As I said, I'm really out of my league here, but it has at least the faint smell of fish.

JR

[LCHIEN]

let's look at it this way: the net result of a monopoly is the raising of prices of commodities and lack of choices to the customer; because there are no alternatives, basically the law of supply and demand is broken.

In the retail tool market, i really believe that prices are the lowest they've ever been (partly due to chinese supply) but there are a whole bunch of suppliers competing with frequent sales. Granted there's consolidation with some suppliers controlling several brand names (WMK-Jet Powermatic etc, and Delta-Porter cable- dewalt-B&D and bosch-skil-milwaukee, TTI-Ridgid/Ryobi, etc) but there's still lots of competition, Makita, Hitachi and others.

I don't see any of the trademark evidence of price fixing and monopolistic practices. I think the competition is the hottest, ever. Price fixing by one supplier in a competitive market results in loss of share to that one supplier.

ergo, no monopoly.

[cwsmith]

I agree, I don't think there really is a basis for a "monopoly" as such, but the whole subject of legality is a bit out of my league. However, the way I look at it, the only way a monopoly could be claimed would be if TTI was the only manufacturer of a particular type of tool, say the circular saw and it's patents protected the total design and function of the tool. Then if it signed an exclusivity agreement with Home Depot, who then fixed the price, that would be a monopoly.

In this example, no other manufacturer could manufacture the tool and no other store could sell the tool and the price would be fixed... thus NO competition and you have a MONOPOLY!

But of course, with power tools that is not the case. Even if you prefer one brand over another and you can only buy the one brand at one chain of stores, there is still a choice and there is still variation in price. So, you can't really call it a monopoly anymore than you could claim that Mustangs are monopolized by Ford because they are only sold through Ford dealerships. Ther are other competive models sold through other dealers at competitive prices. Exclusivity is not the same as a monopoly.

My uneducated take on it anyway,

CWS