The Breitling Watch Source Forums

This is a quote from the EU:s competition law:

Chapter 1: Rules on competition
Section 1: Rules applying to undertakings
Article 81
Article 85 - EC Treaty (Maastricht consolidated version)
Article 85 - EEC Treaty
Article 81

1. The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:

(a) directly or indirectly fix purchase or selling prices or any other trading conditions;

(b) limit or control production, markets, technical development, or investment;

(c) share markets or sources of supply;

(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

2. Any agreements or decisions prohibited pursuant to this article shall be automatically void.

As I´ve mentioned, I work in marketing in a distribution company with world wide established brands and this is sort of my backyard.
What this law means is Breitling as a manufacturer/distributor can only suggest retail prices, but cannot demand any AD to sell at a certain price point. It would be illegal. So no, it´s not rubbish. I also checked that US has a similar law. Every year dealers (in Scandinavia) are getting more agressive to use this right and each year we´ve seen more discounting with high end brands.



You are right I don´t know you, but maybe in time. I just thought it was a valid observation and I always call it as I see it. No harm intended. I apologize if I miss spoke.
What ever is your discount doesn´t devalue the brand, but everybody talking about it does. To me it´s just alittle funny to first say i got a nice discount and then say it devalues the brand. (Not intended at you Roff, or anyone else, just a general observation.) Of course we want to pay as little as possible, but I keep my discount my business. I do steer others to the right direction, but never giving away what I get. I don´t care if I even get less as long as I feel my price is ok.
Like I said this is a difference of opinion and I value yours as well.



...Is what I meant with special circumstances.



Good point and very true. Sorry, I missunderstood earlier.

Some of my views differ from yours. I do appreciate your opinions. I feel sharing views, especially different ones is important. I didn´t mean to argue or any disrespect. I hope non were taken.
Cheers

How does limiting the discount that an AD can offer breach competition law?????????????

Breitling already limits who can sell their products to ADs, all they need to do to support prices is change the clause covering discounts to a lower percentage - no competition impact whatsoever.

It comes down to simple supply and demand. As long as the AD has a case full of watches that they have paid for and no one is beating down there door to buy them your going to get discounting. It comes down to a cash flow problem at the AD's.

There are several ways that they can fix the problem.

1. They could consign the inventory and as owners of the inventory they can set the price. They could simply provide a commission on a sale.

2. They could limit the supply until it meets demand.

3. They can buy back all the watches in surplus circulation.

4. They can cancel there AD agreements and open direct operations.

5. They can open there own mini branch inside the AD.

As far as the law, here in the US many companies have very strict control over the sale and distribution of there products. Two companies come to mind, Apple and Bose. You will never find these products discounted at a retail establishment.

It's seems that the intention of the EU law is to stop prevention, restriction or distortion of competition within the common market. The way I read it is that you can set the price, for someone to challenge it they would need to prove that the intention or effect of your pricing was to prevent, restrict or distort competition within the common market. If the contract is set up as such that the AD simply acts as a contracted sales agent for the MFG and gets a commission there is no trading party. The AD is just acting as your agent.

The real problem is that the bottom fell out of the economy and disposable income is sitting in the bank because everyone is afraid to spend or simply has none to spend. No one needs a new Breitling, well maybe a few do

_________________
This is a Rochefoucauld, the thinnest water-resistant watch in the world. Singularly unique, sculptured in design,hand-crafted in Switzerland.
In Philadelphia it's worth Fifty bucks.

The following shall be prohibited as incompatible with the common market:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions.
2. Any agreements or decisions prohibited pursuant to this article shall be automatically void

Which means: Any agreement on fixed prices between any companies (in this case Breitling and AD) is prohibited by law and will automatically become void!!!!!!!!!!! - that´s how!

Like I said earlier, there´s already been a precedent on this. A dealer wanted to advertise distributors product. They agreed that the distributor would pay part of the marketing cost. They also agreed on a certain campaign price ("a discount" if you may!) for the product. The dealer then put a lower price in the ad without consulting the distributor. The distributor then refused to pay their part of the marketing cost, as the dealer had breached their contract. The dealer sued the distributor and won.

The court announced that the EU competition law clearly states that: As the distributor cannot dictate fixed prices on behalf of the dealer, then that part of the agreement becomes void. There by the distributor was bound to uphold the part of the agreement that was binding. So the distributor had to pay the agreed amount and got fined heavily for acting against the competition law and trying to maintain a price cartel.

So, in the free market, to strengthen their competitivenes, the seller/dealer/AD is FREE to price and discount products as they see fit, without any interference from the distributor (or any other company for that matter). It is also meant to benefit you, the customer. So, that when you shop a round, you know there´s the best price to be found, which won´t be restricted by price cartels.

Many price cartels still exist, but they are getting harder and harder to sustain. There are some legal ways around this of course and txturbo had some insightful examples. How ever that´s another subject and way too broad one to go thru here.

There's a fundamental difference between price fixing and discount limiting.

Clearly we see things differently and are never going to agree. I've been doing business in Europe and North America long enough to be comfortable with my statements.

If you limit the discount AD can give, you´re affecting the outprice! Let´s say Breitling limits the discount to 10% off retail and they forbid anyone to sell under that. Then the new fixed price is -10%. Which is once again illegal. It limits the dealer to sell for -15% (which they have a legal right to) or what they feel they need to to get the sale. That´s price fixing and a cartel, no matter which continent. This is not a matter of opinnion, it´s writen in the law.

In the court case the distributor tried to limit the discount and what happened?

If you mean with discount limiting, that Breitling should offer lower margin to AD:s which would of course in turn limit the discount when they have less room to play with. Then, yes you are right. It´s absolutely legal, but even with the lower margin the AD is still free to sell for what ever price they want. So it´s back to square one. The Distributor can´t interfere with the transaction between a dealer and customer with any restrictions. Period!
...And to offer less margin for the dealer then your competition means crashing sales for Breitling. I don´t think that´s their target.

I can´t make this any clearer so...
I hear the fat lady and she´s belting some power notes!