Model Railroading > Kato MSRP policy

Anybody here about this?

From Kato, USA

"Effective today the minimum advertised price for Kato products (Starts with new products) has to equal the MSRP. This includes sites such as EBay. Retailers and wholesellers can quote cheaper prices on the phone, in store and at trade shows."

This was sent to me by a freind of mine who owns a mail order business, he recieved this email from Kato. I work at a hobby shop and have not heard this yet. It seems to me that Kato will have a hard time enforcing this. All hobby shops and mail order outfits get their Kato through Walthers or Horizon or other distibutors. Kato just the same as Athearn and Atlas does not sell directly to retailers.

Is Kato going to tell Walthers not to sell to a certain hobby shop? Is Kato going to sever ties to distributors and only sell direct to hobby shops? That would not be a smart move.

This may have been covered here already and I missed it. I cannot search archives on here. Before everybody starts flaming me, I am just asking. My freind sent this to me this past Wednesday.

...
Foamer

I suspect that you will still see Kato's advertised price in the store, but when you get to the check-out and you are a regular customer, a discount will be applied. There are one or two hobby shops that do that around here, if you are a good customer or belong to a club.

It has already caused a firestorm of replies on the Atlas forum for the past two days. I got my limit of the new Kato SD40-2 at various discounts already, been a hard week on my credit card, but I have 10 of the new beauties and that will do it.

Bob

foamer Wrote:
-------------------------------------------------------
> Anybody here about this?
>
> From Kato, USA
>
> "Effective today the minimum advertised price for
> Kato products (Starts with new products) has to
> equal the MSRP. This includes sites such as EBay.
> Retailers and wholesellers can quote cheaper
> prices on the phone, in store and at trade
> shows."

Is this legal?

This tactic may be new to this industry, but is certainly not unprecedented. One of the first times that I encountered it was years ago when trying to buy a video game console, where the manufacturer directed all the retailers to sell the console at $99, no more, no less. Sony is doing it now with their PS3.

It also puts some level of uniformity for the company out there, I would also guess that some of the Mom & Pop hobby shops have suffered greatly at the hands of the big discounters, and whined to KATO that they can't compete, having to sell the product at Full MSRP, while the big guys are selling 20% to 30% off.

By doing this, they're in theory, leveling the playing field for the retailers, although as noted in a previous message, you don't actually have to sell it at the advertised price, just have to advertise it

I agree, not entirely sure how KATO expects to enforce this policy, as it's up to an individual retailer whether or not they want to sell stock at cost to them. By the time it sits on most hobby shop shelves, KATO has already been paid anyways. Mail order may very well be the exception to this.

Is the original source of this info sure that this isn't just the agreement between KATO and it's licensed dealers that they cannot buy products from them at wholesale any longer, now dealers will be forced to buy at MSRP, and any discounts they offer are out of their own pocket?

I especially don't see how they can possibly enforce this with online auction sites like Ebay, as quite often it's not a model railroad retailer, or hobby shop that's selling them, just some person who came across a box of them and wants to sell them. As an example, I picked up a pair of BNSF Dash 9's for $45 a piece from an electronics store on Ebay. Guy had bought them from a closing down hobby shop I guess at bulk and was trying to move them.

KATO USA Minimum Advertised Pricing (MAP) Policy

Objective:
To ensure that our dealer-product relationships are consistent and value based.

The MAP Policy:
MAP pricing is the minimum or lowest price Kato USA distributors and/or their dealers will be allowed to advertise Kato products.

Kato USA actively supports the advertising and promotion of its products by its dealers and distributors through materials provided by Kato USA at no or nominal cost and through advertisements placed by Kato USA. We at Kato USA have determined that we shall not support advertising, cooperative advertising or promotional materials that have the effect of diminishing or detracting from the perceived value of Kato products.

A Minimum Advertised Price (MAP) on all Kato products will be in effect for all products announced and shipped after February 7, 2008. This policy applies to all Kato USA distributors and their dealers selling Kato USA offered items. We have implemented this MAP policy to preserve our reputation for providing customers with high quality and valued products.

The MAP policy is instituted under the following guidelines:

1. The MAP for all Kato products shall equal the MSRP for all items listed on each Kato price sheet, catalog or product announcement for dealers and distributors. MAP pricing is established by Kato USA and may be adjusted by Kato USA at its sole discretion.

2. The MAP pricing shall remain in effect from the announcement period and through the period of 60 days from the date of the initial shipment of the product for all new products and re-runs.


Page: 1 of 4


KATO U.S.A., INC.
100 Remington Rd., Schaumburg, IL 60173-3705 Phone 847-781-9500 Fax 847-781-9570 www.katousa.com





KATO USA Minimum Advertised Pricing (MAP) Policy (continued)



3. The MAP policy applies to all advertisements of Kato products in any and all media, including, but not limited to, flyers, posters, coupons, mailers, inserts, newspapers, magazines, catalogs, mail order catalogs, e-mail news letters, e-mail solicitations, internet or similar electronic media, television, radio, and public signage. The MAP policy is not applicable to any in-store advertising that is displayed only in the store and not distributed to any customer(s).

4. The inclusion in advertising of free or discounted products (made by Kato or another manufacturer) with a product covered by the MAP policy would be contrary to the policy if it has the effect of discounting the advertised price of the covered product below the MAP.

5. If pricing is displayed, any strike-through or other alteration of the Minimum Advertised Price is prohibited.

6. MAP applies only to advertised prices and does not apply to the price at which the products are actually sold or offered for sale to an individual consumer within the dealer’s retail location, at trade shows or over the telephone. Kato USA dealers and distributors remain free to sell these products at any prices they choose. A Kato USA dealer constitutes any retailer selling Kato USA offered products.

7. MAP does not establish maximum advertised prices. All dealers and distributors may offer Kato products at any price in excess of the MAP. Internet auctions may not display or have reserved bid or other acceptable prices below the MAP price.

8. Kato USA’s MAP policy does not in any way limit the ability of any dealer to advertise that “they have the lowest prices” or, they “will meet or beat any competitors price”, that consumers should “call for a price” or phrases of similar import as long as the price advertised or listed for the products is not less than the MAP.




Page 2 of 4



KATO U.S.A., INC.
100 Remington Rd., Schaumburg, IL 60173-3705 Phone 847-781-9500 Fax 847-781-9570 www.katousa.com






KATO USA Minimum Advertised Pricing (MAP) Policy (continued)



9. From time to time Kato USA may discontinue models or engage in promotions with respect to certain products. In such events, Kato USA reserves the right to modify or suspend the MAP with respect to the affected products by notifying all dealers and distributors of such change. Kato USA further reserves the right to adjust the MAP with respect to all or certain products at its sole discretion. Such changes shall apply equally to all Kato USA dealers and distributors.

10. Intentional or repeated failure to abide by this policy will result in termination of dealership or distributorship and the retailer will be prohibited access to purchasing future merchandise through Kato USA or Kato USA Authorized Distributors. Kato USA will not provide prior notice or issue warnings before taking any action under this policy.

This MAP policy has been established by Kato USA to help ensure the reputation of Kato USA as a producer of precision railroad models for their customers while also helping to promote and maintain a healthier and more profitable retail environment.

Sincerely,



Hiroshi Kato
President
Kato USA, Inc.




Page 3 of 4


KATO U.S.A., INC.
100 Remington Rd., Schaumburg, IL 60173-3705 Phone 847-781-9500 Fax 847-781-9570 www.katousa.com








KATO USA Minimum Advertised Pricing (MAP) Policy (continued)




By signing below, I am verifying my understanding and acceptance of the above terms for MAP pricing for Kato products.



Signed by: ____________________________________________________________

Title: _________________________________________________________________

Dealer/Distributor: _____________________________________________________

Date: _________________________________________________________________

Please return or fax this form to:

Kato USA, Inc.
100 Remington Rd.
Schaumburg IL 60173

This policy quite clearly applies ONLY to authorized dealers and distributors who have marketing agreements with Kato, and not to individual re-sellers who may place Kato products for sale on the open market. Kato has no power to come after you or me if we decide to place a Kato loco up for auction on eBay, but it does have the power to stop selling products through dealers and distributors who don't comply with its policy.

I suspect the consequence of this policy will be that the discounters who sell Kato products will now list "CALL" in their advertising in the spot where they would normally place a price, and will not be able to depict Kato products in their ads under such headings as "EVERYTHING 20% OFF LIST!"

and if you read line 6 on the 1st page i believe that tells the whole story.

'Very un-American. Obviously these individuals do not understand a free market Willful participation in our free market it is not, arrogant control it is.

Booooooo!

MARK

sasquatch0000 Wrote:
-------------------------------------------------------
> 'Very un-American. Obviously these individuals do
> not understand a free market Willful
> participation in our free market it is not,
> arrogant control it is.
>
> Booooooo!
>
> MARK


Okay Mark, before you get others going off on less factal, more emotional Anti-American rants, please re-read line 6 above. As stated in Kato's 4-page release:



"6. MAP applies only to advertised prices and does not apply to the price at which the products are actually sold or offered for sale to an individual consumer within the dealer’s retail location, at trade shows or over the telephone. Kato USA dealers and distributors remain free to sell these products at any prices they choose. A Kato USA dealer constitutes any retailer selling Kato USA offered products. "[/b]

This could really be much ado about nothing if I'm reading this right?

2. The MAP pricing shall remain in effect from the announcement period and through the period of 60 days from the date of the initial shipment of the product for all new products and re-runs.

My interpretation here is that for the first 60 days after the new or re-run product ships, the product cannot be advertised for less than the MAP. But once the 60 days pass, it's "business as usual" and the models can be advertised just like they were previously.

I suspect this effort is aimed more in the direction of equalizing the competition over new products in the near term. Hobby shops and other retailers will now have 60 days where they are on an even playing field with those minimal overhead dealers. You know, the mail order guys, and of course the ever-popular "trainshow only" vendors that keep their stock in a storage unit or personal garage and only bring it out by appointment or for trainshows.

Seems the boys at KATO are looking at this from the perspective that after 60 days, if you haven't managed to make your overhead stock move, then it's time to drop your prices to what the local market will bare. KATO was smart about this, they know dealers would eventually just quit ordering from them if they couldn't sell it at a price that makes it appealing to the customer.

This further makes me wonder, if KATO is approaching a point that a plethora of new releases and re-runs are about to be announced, and they want to maximize revenue on the market fever that generally takes place afterward?

I'm still thinking that it's illegal for a distributor to set a price that all of the dealers are required to stick to. However I guess model trains are small potatoes for the Justice Department and state attorney generals.

I ordered one more Kato SD40-2 Santa Fe this evening, Caboose Hobbies, price $119, considerably under the Kato price. I consider it a bargin, maps not withstanding.

Bob

Try being an Apple dealer and selling for less than MSRP. This is a tried and true way of guaranteeing uniform pricing and is aimed at the Wal-Marts of the world who would (in the phrase we used when selling Weber Carbs in the 70s) "whore up the market." Legal? Sure. Ethical, sure. Kato spends a bundle advertising its products and wants an even playing field for all its dealers. Is that so evil? Not really.

stivmac Wrote:
-------------------------------------------------------
> Try being an Apple dealer and selling for less
> than MSRP. This is a tried and true way of
> guaranteeing uniform pricing and is aimed at the
> Wal-Marts of the world who would (in the phrase we
> used when selling Weber Carbs in the 70s) "whore
> up the market." Legal? Sure. Ethical, sure. Kato
> spends a bundle advertising its products and wants
> an even playing field for all its dealers. Is that
> so evil? Not really.

To clarify, I have not characterized the process as "evil" or "unethical", but according to my understanding of the law, it borders on illegal price-fixing.

Anyhow, here is a webpage that I grabbed from a quick websearch:

http://www.michigan.gov/ag/0,1607,7-164-34739_20942-44650--,00.html

Interestingly, it says that a manufacturer can't enforce a MSRP, but the manufacturer can terminate a dealer that prices below the MSRP. It's OK to go up, but not to go down. I guess Kato's policy is OK, but it definitely appears to be navigating a grey area.

Socialists always tell you how much they are going to do for you, and how everyone will be equal. It all sounds so warm and fuzzy. But I can't be fooled. Thier aim is control (over you) and anything but freedom. 'Don't need model railroad government and police, especially skewed to the far left. Show 'em the door!

Cheers!

An American, MARK

Well, then, I trust you don't plan to collect Social
Security benefits or enroll in Medicare.

Dave


> Socialists always tell you how much they are going
> to do for you, and how everyone will be equal. It
> all sounds so warm and fuzzy. But I can't be
> fooled. Thier aim is control (over you) and
> anything but freedom. 'Don't need model railroad
> government and police, especially skewed to the
> far left. Show 'em the door!
>
> Cheers!
>
> An American, MARK

ts1457 Wrote:
-------------------------------------------------------
> I'm still thinking that it's illegal for a
> distributor to set a price that all of the dealers
> are required to stick to. However I guess model
> trains are small potatoes for the Justice
> Department and state attorney generals.


It's not a question of what they can charge. That would indeed be illegal. What Kato is restricting is the prices its retailers can advertise. I don't know about the legality of that, but it's different from what they can charge, as is made plainly clear in the notice.

toledopatch Wrote:
-------------------------------------------------------

> It's not a question of what they can charge. That
> would indeed be illegal. What Kato is restricting
> is the prices its retailers can advertise. I don't
> know about the legality of that, but it's
> different from what they can charge, as is made
> plainly clear in the notice.

Thanks toledopatch for some analysis instead of a incoherent rant that shows ignorance of the role of anti-trust in our country's history.

I'm still bugged by the Michigan AG webpage that says a dealer can be terminated for pricing below MSRP. What if the dealer got stuck with excess inventory or items that were becoming obsolete? Could he be terminated for holding a sale to clear out stuff?