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Monday, August 27, 2012

Judge Dismisses Suit Against GC and NAMM

Guitar Center sign from Bobby Owsinski's Big Picture production blog
Just to show how slow the wheels of justice actually move, a class action suit against NAMM, Guitar Center, Fender, Korg, Martin, Peavey and a dozen more MI vendors started in 2009 has finally been dismissed for lack of evidence.

The suit involved 38 separate plaintiffs from 15 states, and alleged that NAMM, GC and the various manufacturers conspired to raise the minimum advertised price (MAP) policies, thereby bilking musicians out of hundreds of millions of dollars in the process. What the suit basically said is that GC and the various manufacturers unlawfully restrained trade and artificially reduced competition, thereby violating the Sherman Antitrust Act.

After numerous court exchanges, the judge couldn't find any evidence to support the allegation, and threw the case out. The MI industry finally breathed a sigh of relief since the damages could have been north of $200 million, which would have really hurt in this economy.

Okay, so here's the reality as I see it. Guitar Center is definitely guilty of wanting to monopolize the MI retail business, and they've successfully done that, but not by conspiracy. They've achieved their monopoly by bullying the manufacturers. If anyone thinks that the manufacturers want to go along with GC's pricing policies, they're sorely mistaken. GC forces a manufacture to sell to them almost at a price they determine, not the manufacturer, so the only one making out in the deal is GC, not the rest of the industry.

And NAMM? The last thing they want to see is less competition, since the more market share GC gets, the less relevant they become. Bottom line, this was a misguided suit from the beginning.

That said, GC is the big winner, as always. You know you owns them? Bain Capital. Ring a bell, by any chance?

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Brendan said...

To give people an idea of how GC throws its weight around, back around 1999 GC stopped carrying Gibson for about 2 years. At the time, GC only had around 40 stores, and was competing with Sam Ash and MARS to become the predominant "big box" music retailer. As I heard the story, when Gibson started selling US made Gibsons to MARS, GC offered to buy EVERYTHING Gibson made for entire year if they would not sell to MARS. Gibson refused, and so GC stopped carrying their products.

I worked for GC at the time, and remember the salesmen wondering what we were going to do without Les Pauls to sell people. Every single person that asked for a Les Paul had a PRS placed in their hands. I think that went a long way from taking PRS from the small manufacturer it was, to the company it is today.

Anonymous said...

Well, good for Bain Capital then! The last decade has seen higher-quality musical instruments available at much lower prices. It's one of the few silver linings around the music industry's dark cloud. No doubt manufacturers have had to find creative ways to cut costs, but the retail industry has always been a challenging environment. I suppose one could wish for a more socialist and egalitarian marketplace, but have you ever met a musician who lusted for a Soviet-made guitar? Not I!



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