In Reply to: Re: He's not wrong posted by Ray Chen on September 27, 1999 at 15:28:07:
: There are two ways of fixing prices.
: One way, dictating a fixed price, is probably illegal *unless* the dealerships are owned by the parent company. In that case, the dealerships are merely retail outlets for the company and their pricing is under strict corporate control.
: Unless the car company has a monopoly on the car market or an important segment of it, this is legal.
Not necessarily. The auto manufacturers are not allowed to own all their own dealers. I only think under certain instances, like a dealer going bankrupt, but the mfgr want to keep the dealership going, can the mfgr run it directly. It doesn't matter if the mfgr has a monopoly or not.
: The second method is also legal. That's when you calculate precisely how much profit you're willing to allow a dealership (franchisee) to make on a car and set the dealer cost for the cars so that if the dealers discount below MSRP in any significant way, they don't make enough money to stay in business.
: I think the second method is hard to do but can be done via mechanisms like different destination charges, advertising charges, etc. for different regions of the country which would make the cars cost a little more or less in the different parts of the country. Hopefully, enough to make to compensate for the higher operating costs in region X without incenting too many people to pull a "Cutter" :-) and buy from a dealer in region Y who has lower costs and can therefore charge a somewhat lower price. I believe this method is legal also.
So far it has been, but the dealer don't like it, and they can and do fight back. They want their margin.
: And if BMW catches you misbehaving, they either
: fine-tune the model, alter your allocation or both. I suspect that should be legal too.
Yes, but the mfgrs want to sell cars. They don't do that if they cut of a dealer.
: - Ray