An Official Statement From Gibson Guitar Corp.

[NewsFetcher]

An Official Statement From Gibson Guitar Corp.
http://www.mandolincafe.com/news/publish/mandolins_001176.shtml

Gibson Guitar Corp. of Nashville makes formal statement about being named as a party to approximately 30 lawsuits that claim they conspired to artificially increase and fix the prices of musical instruments.

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[Perry]

"Unfortunately, that process will undoubtedly result in high costs to many organizations that, like Gibson, strive to provide music lovers everywhere with quality instruments, and aggressively compete on price."

Ok so now they have a reason for the increasing prices.

[JimRichter]

I was thinking the very same thing, Perry.

[sunburst]

Wow, a troll from the NewsFetcher...

[mrmando]

Next they'll sue us! I don't know if the denizens of Mandolin Cafe can fix prices, but we can certainly drive up demand.

[Scott Tichenor]

Not a troll, dear John. It's a real news release sent to many news outlets with the work of posting the article done by yours truly. Would you rather read about it on some other site, tomorrow, or here today?

[sunburst]

Just joking Scott, and besides I already found it on another site. ;)

[chip]

People always "pickin" on Gibson....

[GRW3]

A little google snooping and it appears this is an expansion of a lawsuit that originally targeted Guitar Center and NAMM for working toghether to fix prices. Besides Gibson, Fender and Yamaha are evidently included in this expansion.

[barney 59]

I have heard complaints from good dealers over the last few years how hard it is to deal with Gibson and how they have been virtually pushed out of the market of selling Gibson's...if this can be interpreted as price fixing only a lawyer would know for sure...but if a customer wants a Gibson and you can't sell them one----

[bmac]

A lawsuit is terribly expensive for all parties. I was in one for 25 years in NYC and it set a record for length and though I (we) won, I hardly think it was worth the agravation, for either side.

I dont think our opinions on the lawsuit one way or another are worth much... What bringes prices down is competition. What brings prices up is price fixing so the consumer has fewer choices. If the government follows through and can prove its case then prices will go down through laws of supply and demand. If a company can't compete on the open market then it should go out of business...

Gosh... I am sounding like my father.

Bart

[Rob Gerety]

Defendant's in antitrust cases always claim they did nothing wrong and always claim that the cost of defending the claims will just increase prices. Just have to wait and see how the cases go. I hear nothing but bad things about this company. On the guitar side no one I know would buy a new Gibson. Mandolins is a different story. But the company sure seems to be going in the wrong direction. And this comes from the proud owner of a Gibson mandolin - of course it was built in 1916.

[allenhopkins]

Whether it's "price fixing" or not, there have been some interesting practices by Gibson and other manufacturers (Martin, Taylor), to control the way their instruments are marketed and sold. Some on-line and catalog retailers aren't allowed to put their discount prices on the internet or in their catalogs; you get the "call for price" listings. Taylor for a while wouldn't let its dealers advertise that they sold used Taylors, or the prices of them. Several manufacturers have required their dealers to buy "full line" inventories, so the dealers had to take items that were hard to sell, in order to get items that were in demand.

Whether any of this violates anti-trust -- which generally is violated when separate firms collude to fix prices or carve up markets -- I leave to those with legal expertise (which I lack). Unfortunately, some of the above posts just reiterate the "Gibson bashing" with which we're all familiar: "Gibson makes bad instruments, nobody buys them any more, their prices are too high," etc. etc. The question of anti-trust violation is a specific legal one, having nothing to do with product quality, customer service, CEO salaries, or varnish color. Let's see how these 30 lawsuits pan out; wonder if I'll get a letter from some law firm asking if I want to join a class action? Who knows?

[mmukav]

"On the guitar side no one I know would buy a new Gibson".

Wow. What a blanket, BS statement. You'd buy a Gibson mandolin, but not a guitar? I just picked up a used Gibson J-185, and it's the nicest guitar I've ever owned. I also own a Gibson F9 mando. But their guitars are wonderful. I think you're listening to too many store owners who knock Gibson guitars because they're "difficult to deal with". How many professional performers play Gibson acoustics? Tons, and I'll put mine up against any other brand. I got rid of my hard-to-play Martin HD28, and prefer the Gibson to it in tone, fit and finish.

Mike

[Stephen Perry]

Anybody have a PACER account? I'd like to read one of the numerous complaints and the Gibson answer.

[Schlegel]

If there were any thing illegal about the ban of advertising discounts, a vast swath of the manufacturing world would be in trouble. It's very common for all kinds of high-end merchandise.

I don't see right off the bat how price-fixing could even work with guitars. There's how many guitar manufacturers? A whole lot of them, anyway. And guitars at all prices.

[Keith Erickson]

Two sides to every story.

Yes this lawsuit will cost Gibson a lot of $$$.....but who is bringing the lawsuit against Gibson? Who is providing the $$$$ which supports this lawsuit against Gibson? What organizations are supporting this lawsuit?

Inquiring minds what to know......

[Big Joe]

Many companies do not allow selling on the internet or e-bay. If you wish to be a dealer you have to abide by the contract you sign for that privilege. They cannot dictate a price you have to sell at and I have never seen one that does. Gibson does have requirements for stocking that many small shops cannot possible do. That is not price fixing. That is just a decision both companies make. Gibson makes a decision its dealers will carry a certain amount of product and the dealer decides they cannot or will not. These kind of requirements are very normal in business and most of the products we carry have similar requirements.

I thing Gibson makes some great instruments. Particularly the Acoustic Division. I think they are making the best acoustic guitars in Gibson history. I would love to be able to be a dealer for that division. However, I am too small to be able to meet the requirements. I don't harbor any ill will towards companies that I cannot be a dealer for. I just have to continue to grow until I can or find alternative products (as I have) that suit the needs of both me and my customers.

I am not defending Gibson or any other company. Just trying to put some basics back into this discussion. The suits will take their course and continue to completion or be thrown out by a judge at some point. Which matters not directly to me. Just remember that there were many companies named as defendants in this suit and not just Gibson. Just because it makes the papers or just because it hits the courts does not mean there is smoke or fire. On the other hand, it does not mean there is not either.

[MikeEdgerton]

This will turn out to be much ado about not very much as well. If there had been anything here I'd think the justice department would have taken it further.

[MikeEdgerton]

Hmm, I guess we can't do links here. There's an article at this address:

http://www.bizjournals.com/nashville/stories/2010/01/25/daily6.html

[swampstomper]

I can't imagine this suit has any merit. First off, I can buy acoustic guitars from Gibson, Martin, Taylor, and many smaller shops like Santa Cruz, Stonebridge (Furch) etc. in the same price range, plus there is massive competition from PacRim or Mexican imports like Fender (excellent guitars for the money IMHO). I don't have to buy from Guitar Center, there are 100's of dealers most of whom will ship anywhere, and as Big Joe says, they are free to set their prices. There is a Minimum Advertised Price but that is not a restriction on selling. Years ago the camera makers did set minimum selling prices for dealers and that was successfully challenged by anti-trust. I hate the smell of a lawsuit that seems on the face of it just an attempt to extort a settlement.

[Tom Haywood]

Stephen, I no longer have a PACER account, but I would love to see a complaint if you find one.

[resophil]

Ultimately, the consumer's dollar is king, and we, as consumers, control those dollars, and the will of the marketplace is the factor that determines whether a company will sink or swim.

I love nice old guitars as much as the next person, and would have nothing against owning a Gibson guitar, but would I go out and actively look for a new one...? NO!!!

After the hassle I got from Gibson whilst trying to buy one of their recent re-issue series dobros (the Orville Gibson commemorative mando was included in that lot) I swore Gibson off my shopping list. Any company that deliberately and intentionally sets so many roadblocks in a prospective customer's path, and then compound the problem with non-existent or sometimes downright rude customer service, will NEVER get my custom.

Gibson has every right to set it's marketing strategies to whatever they wish. But I don't have to buy into their methods, and they're just going to have to do without my meager number of dollars... If enough potential customers thought the same, Gibson might sit up and take notice, but as long as they have people clamoring to buy their products at inflated prices, they're not about to listen.

I'm not one to get caught up in "hype," but there are a LOT of choices when spending one's dollars on a musical instrument. I've spent a lot on instruments, but I simply won't buy anything new from Gibson any more! When they change their marketing methods and start actually providing customer service, I may be enticed back!

[Greg H.]

Anybody have a PACER account? I'd like to read one of the numerous complaints and the Gibson answer.

Well, here's one of the complaints (taken from the Nashville business site that Mike Edgerton linked to):

http://assets.bizjournals.com/cms_media/nashville/Gibson1.pdf

[MikeEdgerton]

There are currently 30 complaints. What you want is the final compalint that is put together after they compile all the complaints into one.

resophil wrote: "...but I simply won't buy anything new from Gibson any more! When they change their marketing methods and start actually providing customer service, I may be enticed back!"

Honestly resophil, there are many more names on the one complaint here, this has little to do with Gibson and everything to do with the musical instrument industry. Gibson and Fender are going to be on that list because they have the deepest pockets. The car dealer you bought your car from operates under more stringent dealership rules than Gibson puts on their dealers and you still bought the car. If you don't like Gibson I'm fine with that but your post has no bearing on why this suit was brought.

[allenhopkins]

Amen to Mike E. Anti-trust and price fixing are specific areas of violation. They have nothing -- repeat, nothing -- to do with product quality or customer service. Usually they involve "competing" companies agreeing on a price structure (presumably higher than what the "free market" would dictate), to increase the companies' profits. Alternatively, companies may agree not to compete in certain price ranges, geographic areas, or product types, giving one company an effective monopoly and the ability to jack up prices.

Prohibiting retailers from discounting a company's products below a certain amount, or prohibiting retailers from advertising discounted prices or using certain sales methods, is a borderline case. It isn't "dictating the selling price," as Big Joe rightly points out, but it is keeping the seller from advertising the discount he/she is willing to give. Normally, the dealer has purchased the instruments from the manufacturer at the wholesale or dealer price, which can hover around 50% of the "manufacturer's suggested retail price" or "list price." What the dealer wants to turn around and sell the instruments for, is almost entirely up to the dealer; those instruments now belong to him/her.

All this is speculation; don't know which of Gibson's marketing practices generated lawsuits. It'll be interesting to see how this develops. It will also be interesting to see if we can focus our discussion on the issues actually included in the court cases, rather than digressing about whether new Gibson guitars are as good as older ones, and other such "side issues."

[Tom Haywood]

Thanks, Greg H., for the link. Very interesting statistics in there.

[Nelson Peddycoart]

To everyone who claims that Gibson's prices are too high:

We hear people complaining all the time about the loss of jobs to overseas workers. At some point we have to put our money where our mouth is. I own one Gibson, a 1923 that belonged to my grandfather. Mostly, I have purchased Weber mandolins because I want a product made by an American craftsman and look for that quality/price point that makes sense to me. I also have a Phoenix on the way. Same story, there. On the other hand, my latest acoustic guitar is a Takamine because I went straight for the absolute most bang for the buck.

The great thing is that we live in a relatively free economy. If you want a cheaper instrument, there are plenty around. Besides, I think the Jam Master series shows that Gibson is sensitive to the fact that not everyone is able to afford a Sam Bush or Doyle Lawson model.

[resophil]

Of course they are specific areas of violation!!! And since we are talking about Gibson's press release, this has to do with Gibson in particular, in terms of this thread...

Gibson (and every other company named) is enabled in it's continued (alleged) price fixing by the fact that they have a demand for their product. A demand perhaps out of proportion to the true market value of the product in a free marketplace... Whatever the reason for the demand, ( history, customer hype, marketing, advertising, word-of-mouth, and a zillion others) brand affiliation is a powerful and much-desired thing! Kudos to them for having built up the customer-brand affiliation over time. It gives them the cash-flow and leverage to continue in their chosen path.

I'm doing a personal act to deprive them of my little bit of their cash-flow, because I don't like the way Gibson presently does business! That was made manifest to me by their action (and inaction) in the field of marketing and customer service. When I wanted to buy one of their products, I was ignored by Gibson itself, and told by no less than 5 of their dealers that it was almost impossible to extract any information about a new product from the corporation, in spite of their press releases. Several large Gibson dealers opined that Gibson just didn't care, because they thought they could sell everything they made ( and the supply was restricted) at the prices they wanted to command, and it didn't matter if it was now or at some point in the future.

Whether or not Gibson and others in the musical instrument manufacturing industry were involved in collusion or price-fixing remains to be seen. But I'm not going to continue to enable the practice as it directly affects me. (or doesn't affect me as Gibson's direct customer) It may affect me when I go to buy a competitive brand, but that's where the effectiveness of anti-trust legislation and the accompanying watchdogs are put to the test.

So, you are in fact right to suggest that this thread isn't about customer service per se. Poor customer service was what drove me to the conclusion that Gibson should be judged in the court of good sense! Ultimately, the decision to spend my money wisely depends on me, not on some anti-trust legislation watchdog.

All too often in these pages, we see fawning and drooling over this or that "great" instrument. Accompanied by hyperbole and adjective description, these instances do a lot to create desire and demand for a brand, sometimes out of all proportion to reality. People talk about saving, and hoping that maybe someday they can own one of these, or those... And sometimes it leads to unfortunate business decisions and results, as witnessed in recent threads.

Remove the hype from the situation and a producer is no longer enabled to charge prices out of proportion to his product's true value. ( a form of price fixing) The marketplace is the great equalizer, and it will eventually find equilibrium. But as long as there is a demand, there will be methods to capitalize as much as possible on that demand. So anti-trust legislation has been established...

[Rob Gerety]

"On the guitar side no one I know would buy a new Gibson".

Wow. What a blanket, BS statement.

I don't mind if you disagree - but I could do without the "BS" comment. My honestly held opinion, based on my own personal experience, not the rantings of some angry guitar shop owner, is that modern Gibson guitar don't even come close to the quality they once had. Its sad really. I respect your opinion, please respect mine.

But the quality issue with Gibson is not the point of this thread. The issue is are they engaging in anti competitive conduct. We'll just have to wait and see.

[Nelson Peddycoart]

Resophil,

How do you determine "their true value" other than the equilibrium price that demand and supply settle on?

Clearly, to a portion of the mandolin buying market, the demand for a Gibson instrument is nearly inelastic.

[resophil]

QUOTE:
"Clearly, to a portion of the mandolin buying market, the demand for a Gibson instrument is nearly inelastic. "

That's what the "true market value of a product in a free marketplace" is exactly. It's the "inelastic" part of your equation that gives rise to problems, and is part of the reason I have removed myself (and the hype) from that equation.

[Nelson Peddycoart]

That literally means that you won't buy a Gibson because other people will essentially pay what they need to inorder to get one. You don't buy gasoline or diesel for your automobiles?

[resophil]

I can buy gasoline or diesel fuel from a variety of retailers and wholesalers. Their quoted price at the pumps seems to vary with wind direction...
I can buy at variations in price of perhaps 10-11 %, depending on where I buy.
Depending on the quantities of gasoline or diesel fuel I buy, prices vary, can be negotiated, and storage and further distribution is up to me.
At least up til now, when I want to buy gasoline or diesel fuel, suppliers have it available for sale. They don't issue press releases for product that they don't have for sale. They respond when I call them. They don't ignore me.
I said that it was "part of the reason"

Your comparisons don't wash...

[Rob Gerety]

You don't buy gasoline or diesel for your automobiles?

Different situation. Gas is for all practical purposes a necessity in this modern world. Gibson guitars and mandolins - surprising as it may seem - are not necessities.

None of us knows if there is merit to the anti-trust claims. If there was antitrust activity they should be held accountable. If not, they should be exonerated. End of story.

[Nelson Peddycoart]

The price of fuels in general is not controlled by true market value as you would say. OPEC and the speculative oil markets take care of that. The comparison was in the nature of the price determination. I guess you don't understand.

"End of story"...That's funny.....

[Rob Gerety]

The price of fuels in general is not controlled by true market value as you would say. OPEC and the speculative oil markets take care of that. The comparison was in the nature of the price determination. I guess you don't understand.

"End of story"...That's funny.....

Wow, that was a witty comment. Guess you put me right in my place, eh?

[JEStanek]

Let be civil, please.

Jamie

[Nelson Peddycoart]

An interesting side note here is that at the heart of these lawsuits is The Guitar Center. An equity firm named Bain Capital owns the The Guitar Center, among at least part of other companies that we all know.

Bain Capital was co-founded by Mitt Romney.

[JEStanek]

Just a reminder, politics are out of bounds. For the record Mitt Romney left Bain Capital in 1998.

Jamie

[mrbook]

After watching Gibson sue others or threaten makers and dealers with lawsuits, I get no satisfaction seeing the company on the other end of one. I'll let the courts decide the issue. Many companies have minimum stock or sales requirements for their retailers, as well as other rules for selling their products. Whether they can pass the legal costs of the case on to their customers will be a true test of that customer loyalty.

[Rob Gerety]

One example of the information about this company's general business practices that is spread all over the web. If any of this is true - it certainly makes you wonder if indeed they are capable of intentional and unlawful anti-competitive conduct.

<removed by Moderator. Outside of posting guidelines>

[MikeEdgerton]

I'm going to guess that link is going to leave the cafe for the fourth or fifith time. If this thread doesn't get on tack I'm going to predict it's demise.

[onassis]

Frankly, I'm shocked it's lasted this long.

[zookster]

I think the basic laws of supply and demand will even out the guitar making world, as opposed to the gas companies. That price goes up due to "speculation". Figure that one out.

Gibson is an easy target because of a number of mismanagement gaffes over the past decade. The way they go about dealing with their retailers is not unlike a goodly number of other instrument manufacturers, including Martin, Taylor, Larrivee, Guild, etc. You might have to take several models along with the ones you KNOW are going to sell immediately. I don't think they are in cahoots with other instrument manufacturers to falsely esclate prices. The price is always going to be set by 1)current market value and 2) profit line vs. manufacturing cost.

Foreign competition is the driving dynamic in todays instrument market. As a former supervisor for one of the major US makers, I was constantly striving to reduce costs in order to go toe-to-toe with the Asian imports. It was pretty hard. Because of the amount of hand work necessary, instrument factories are your basic early 20th century off-line assembly concerns. Sure, you can automate some basic functions like spraying and buffing, but the product still demands the human touch. Of course, we instrument freaks appreciate that fact. Everything is still - essentially - hand made.
But it makes it mighty tough to pay a decent wage, manage your overhead costs, and put out a product that will yield a decent return. We often used to joke at the plant that it would be a lot easier selling refrigerators.

I personally buy American, and would not buy a Pac-Rim guitar. However, if you've played any of the new Eastman mandolins or Recording King guitars, those folks are starting to get good at what they do. How many of us would admit to buying an import for their first guitar? I did, because it was the best guitar for the least amount of money.

There is plenty of competition to go around. I admit Gibson is making a better guitar than 10 years ago, but I don't think their current lines match the quality or sound of some of their rivals.

Bottom line: don't worry about lawsuits. The market forces will level the playing field.