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Your correct but irrelevent (archive)

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Posted by MikeW on September 28, 1999 at 11:16:04:

In Reply to: Re: Look at it this way posted by . on September 28, 1999 at 10:04:30:

I'm not arguing that Saturn doesn't have to compete against Toyota, Honda, and even Chevy. They do. What I'm saying is that since the antitrust laws were written over half a century ago, they have been interpreted to mean that a manufacturer can't dictate retail pricing to their dealers. Again, that why the stick on the car says 'Manufacturer SUGGESTED retail price'. Now it seems that GM is trying to (and succeeding) enforce MSRP. So what changed to allow them to do this?

As far as the rest of their product line goes, Saturn gave them an opportunity reengineer the entire organization of a brand. One of the things they did was restrict the number of dealers. If you notice, there isn't a Saturn dealer on every street corner, as opposed to, say, Chevrolet, which does have a dealer on every street corner. More dealers = more competition between dealers = lower prices.

: Yes law and economics do not always mix, but in this case if you can discover all you want but the economics of the case will shoot your lawsuit down. --You will find out that Saturn does not have significantly higher profits. Why? Because it is in a market that is extremely competitive. The U.S. economy car market.

: For a long time in fact, they weren't making money. And if Saturn was making money hand over fist, do you think GM would keep the rest of their product line on non-uniform pricing?

: So okay, let me lay it out as plainly as I can. Repeat after me, everyone:

: 1. Uniform pricing by one manufacturer in a market with many competing manufacturers does not suddenly allow the uniform pricer to charge monopoly prices. Uniform pricing is not monopoly pricing.

: 2. What uniform pricing does is remove the variation in prices across dealers. However, the profit-maximizing (for the mfr) uniform price will just be the average price in the non-uniform price regime. Some dealers and consumers will get hurt, but other dealers and consumers will benefit.

: 3. Uniform pricing, especially in a competitive market like the U.S. car market, is not a monopoly devise, it is a promotional/marketing devise. It helped Saturn to stand out from the crowd despite a basically mediocre product. It spurred dealers into focusing their competitive energies on things like service and "dealer experience" that Saturn decided would be it's selling point, rather than on price cutting.

: Oooh, DoctorBimmer's head must be spinning by now.

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