Guitar Center, Fender and Gibson cleared of price fix allegations

by Ronnie Dungan • in
  • MMR Global
• Created: August 26, 2015

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A ruling in the US Ninth Circuit Court has cleared Guitar Center, Fender and Gibson of price fixing.

According to The Ninth Circuit refused to revive a class action accusing Fender, Gibson and other guitar manufacturers of conspiring to fix prices.

Consumers flooded courts around the country with such claims after the Federal Trade Commission settled its investigation into music-products price-fixing in 2007.

Though NAMM also faced a cease-and-desist order as part of the consent decree, it never admitted any wrongdoing and did not even face a fine. A federal judge in San Diego eventually consolidated the ensuing consumer complaints, which took aim at five manufacturers, NAMM and Guitar Center.

Joshua Ramsey and the other plaintiffs claimed that, between 2004 and 2009, the defendants conspired to implement and enforce MAPP (minimum-advertised-price policies) which fixed the minimum price at which any retailer could advertise the manufacturers’ guitars and guitar amplifiers – as part of a classic “hub-and-spoke” agreement designed to raise retail prices and restrain competition.

A three-judge panel with the Ninth Circuit found that the case had properly been dismissed for failure to state a claim.

A “hub-and-spoke” conspiracy involves both vertical agreements between manufacturers and retailers and horizontal agreements among competitors.

The role of the “hub” is typically filled by a dominant purchaser, the “spokes” are competing manufacturers or distributors that enter into vertical agreements with the hub and the “rim” of the wheel consists of the horizontal agreements among the spokes.

Consumers painted Guitar Center acted as the hub, pressuring the manufacturer defendants (the spokes) to adopt the advertising policies, with the manufacturers’ agreements to adopt the policies forming the rim.

Rather than indicating illegal action, the allegations of the “parallel conduct” might simply show that the defendants responded similarly to similar market pressures.

Judge Carlos Bea, said: ”In an interdependent market, companies base their actions in part on the anticipated reactions of their competitors,” he said. “And because of this mutual awareness, two firms may arrive at identical decisions independently.

To support their allegations, the plaintiffs identified six “plus factors” – such as the manufacturers’ simultaneous adoption of the policies, and a rise in retail prices occurring during falling demand. Bea said, however, that these factors still indicated nothing more than similar reactions to similar pressures

The policies were not adopted all at once, but over a period of several years, which Bea said “does not raise the spectre of collusion.”

Since the consumers alleged rising prices for all guitars, not just for those manufactured and sold by the defendants, Bea dismissed those claims as well.

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