An Official Statement From Gibson Guitar Corp.

[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.