Jump to content

Is it Price Fixing?


You are about to reply to a thread that has been inactive for 1326 days.

Please take a moment to consider if this thread is worth bumping.

Recommended Posts

My friend has recently started looking into retexturing and selling mesh clothes like you see so many creators do.

However, while working with her, I noticed a lot of these mesh sellers have purchase agreements (we won't get into how including a notecard after the purchase doesn't count), and that these purchase agreements often say what price you have to list your merchandise at.

Now, I'm no lawyer, and most of our fellow forum residents aren't, but in the interest of conversation, I gotta ask- wouldn't that count as attempted price fixing? Which, of course, is technically illegal.

 

Link to post
Share on other sites

hmmm ... some statements:

- Do we have a business to business contract? - thats not possible between avatars only between RL persons
- why does the seller not pay the tax to my country if he delivers wares to me? LL takes the tax from me whenever I buy something from LL and hopefully pays it where it belongs. :) 

- If I don't payout Lindens regularly in not too small quantities there is not way to treat that as a business - if that is possible at all (virtual shop with virtual owner?).
- if I consider myself as customer, I can buy things and sell them for whatever price i want. Contracts like this are invalid. Even if the text is given to me in my language b4 I buy - still invalid.
- Even if this is valid in the USA - why would I care? One needs to sue me here at my place.
- Since this are copy-able objects it's more like a licence, like a software licence, but copying is allowed here. Between 2 business partners (RL persons or institutions) all kind of stuff could be set in a contract. A notecard send to me with the object is in no way a contract btw.

 

So the main question is - do we have a B2B relation? And if we have one - Is the notecard a valid contract? And not to forget is B2B possible between avatars over the SL platform? (nahhh :) )

If it's a B2C or C2C relation - nobody can tell me what to do - except we are talking about a licence. Limitations are possible but that could be complicated in this case. Limit copy and usage yes - limit price no. 


 

Link to post
Share on other sites
18 minutes ago, Nova Convair said:

hmmm ... some statements:

- Do we have a business to business contract? - thats not possible between avatars only between RL persons
- why does the seller not pay the tax to my country if he delivers wares to me? LL takes the tax from me whenever I buy something from LL and hopefully pays it where it belongs. :) 

- If I don't payout Lindens regularly in not too small quantities there is not way to treat that as a business - if that is possible at all (virtual shop with virtual owner?).
- if I consider myself as customer, I can buy things and sell them for whatever price i want. Contracts like this are invalid. Even if the text is given to me in my language b4 I buy - still invalid.
- Even if this is valid in the USA - why would I care? One needs to sue me here at my place.
- Since this are copy-able objects it's more like a licence, like a software licence, but copying is allowed here. Between 2 business partners (RL persons or institutions) all kind of stuff could be set in a contract. A notecard send to me with the object is in no way a contract btw.

 

So the main question is - do we have a B2B relation? And if we have one - Is the notecard a valid contract? And not to forget is B2B possible between avatars over the SL platform? (nahhh :) )

If it's a B2C or C2C relation - nobody can tell me what to do - except we are talking about a licence. Limitations are possible but that could be complicated in this case. Limit copy and usage yes - limit price no. 


 

A mutual agreement is a contract. It doesn't have to be written or between "businesses." As the "buyer" and "seller" are both controlled by humans an agreement is a contract, and if the seller says, "By buying this you agree to not re-sell it under a certain price," buying it creates a contract -- given, of course, that the buyer knew that stipulation when buying it.

http://www.businessdictionary.com/definition/contract.html

  • Like 1
Link to post
Share on other sites
11 minutes ago, Theresa Tennyson said:

A mutual agreement is a contract. It doesn't have to be written or between "businesses." As the "buyer" and "seller" are both controlled by humans an agreement is a contract, and if the seller says, "By buying this you agree to not re-sell it under a certain price," buying it creates a contract -- given, of course, that the buyer knew that stipulation when buying it.

http://www.businessdictionary.com/definition/contract.html

If I get it in my language b4 i buy and the seller can proof that I have agreed then it's a valid agreement. 

Even then it's still possible that terms in that agreement are invalid. (in my country - the US i don't care) but for that details one need a lawyer.

Link to post
Share on other sites
1 hour ago, Theresa Tennyson said:

"Price fixing" is when competitors agree about pricing. A single supplier can set resale prices.

https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/dealings-supply-chain/manufacturer-imposed

Weeeeeeeeeeeeelllllllllllllllllllllllll....

Federal Antitrust Law Does Not Preempt State Law

https://www.naw.org/govrelations/advisory.php?articleid=641

Since many states (not to mention the EU) have laws regarding it, I would think that that part of the agreement wouldn't apply to someone in one of those locations, at the very least.

This falls under the DMCA thing. Anyone have much experience with that?

If I lived in California and put something up on the MP for less than the price they said, then they filed a DMCA, and I countered it and cited that case, LL has to put it back up and the original merchant has to take me to court, correct?

 

Link to post
Share on other sites

Amazon routinely sells things (mainly books) below cost (and therefore below MSRP). And the price at which they make a profit will be lower than everybody else's, not only because of their scale, but because of their inventory turnover, which is typically 20 days. Standard retail payment terms are 45 days. This gives Amazon free use of their supplier's money for 25 days, during which they can invest it for a small return. Other retailers carry inventory for far longer than the payment terms and so must add the time value of money to their selling price.

Some years back, the DOJ went after book publishers for collectively attempting to protect their businesses from Amazon's tactics, effectively those tactics and the resulting monopolization of the industry.

Although the "S" in "MSRP" stands for "suggested", suppliers can refuse to work with distributors who won't agree.

Here's more...

https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/dealings-supply-chain/manufacturer-imposed

  • Like 1
Link to post
Share on other sites

Since there are many laws in many countries, let's think about the MORALS of this rather than the legalities (which would be unlikely to come into any kind of trial situation).

IF the purchaser ONLY (and to my mind the only is a big part of the picture) finds out that there is an EULA agreement AFTER purchasing, then to my mind it isn't any kind of contract since they did not know and hence did not agree before purchasing. 

IF the seller has that information obviously in their shop or on the Marketplace page where the item was purchased, then "I" anyway would consider it viable and my purchase if made would lead me to go along with the rules from that seller. 

I definitely know as a Marketplace seller (not full perm) that shoppers seldom actually read the information in the listings --- sometimes they don't even read the text on the photos.  So just saying that there was "only" in a notecard is a bit suspicious in my mind. I have seen many references to lowest price you may sell these at on the listing pages as well as whether items may be given as gifts or hunt items. 

The seller of course has no recourse really except to trust that people will follow the rules. Some do. Some do not. 

  • Like 1
Link to post
Share on other sites
2 hours ago, Gadget Portal said:

Weeeeeeeeeeeeelllllllllllllllllllllllll....

Federal Antitrust Law Does Not Preempt State Law

https://www.naw.org/govrelations/advisory.php?articleid=641

Since many states (not to mention the EU) have laws regarding it, I would think that that part of the agreement wouldn't apply to someone in one of those locations, at the very least.

This falls under the DMCA thing. Anyone have much experience with that?

If I lived in California and put something up on the MP for less than the price they said, then they filed a DMCA, and I countered it and cited that case, LL has to put it back up and the original merchant has to take me to court, correct?

 

Might be risky, as the same statute that bans price fixing in California also bans selling below cost/predatory pricing. Another store might smack them for selling too cheaply.

Link to post
Share on other sites
5 hours ago, Theresa Tennyson said:

A mutual agreement is a contract. It doesn't have to be written or between "businesses."

Yes, however:

7 hours ago, Gadget Portal said:

(we won't get into how including a notecard after the purchase doesn't count)

I think we'll have to get into that actually. Are you saying the buyer is not made aware of the terms until after they have purchased the items? If so, I can't imagine it will count as a contract or an agreement by any law anywehre in the world.

Edited by ChinRey
Link to post
Share on other sites
11 hours ago, ChinRey said:

Yes, however:

I think we'll have to get into that actually. Are you saying the buyer is not made aware of the terms until after they have purchased the items? If so, I can't imagine it will count as a contract or an agreement by any law anywehre in the world.

I'm not talking about a specific situation. I've just seen that sort of thing in the past. This is more a general discussion of just how enforceable price fixing in SL is.

Link to post
Share on other sites

Also, remember, we are talking about licenses, not physical objects. Everything you buy on SL, regardless of permissions, comes to you in digital license form. You're buying permission to use someone's Intelectual Property rather than an actual object. This is true whether it's a finished no-trans item or a full permission one marketed for reselling. 

This significantly changes how things work as far as ownership and purchase terms. If you buy a toaster at a store, you have every right to resell that toaster for anything you want, but when you buy a program, or digital book or ANYTHING in SL, it's not yours. You've merely purchased permission to use as long as you adhere to the license's terms and conditions. If you fail to adhere to said terms, they can revoke your right to use the IP you've licensed. Additionally, depending on how good their TOS is written, they can also revoke any of it at any time.

This is one the chief differences, Walmart can't come reclaim the toaster you purchased, but a video game creator can shut down an online game or ban you at will because they've carefully laid out in the TOS that they can do so.  The same thing applies to anything you purchase here on SL. While there is no system for revoking permissions after sale without Linden Labs Involvement, (there HAVE been cases where animations and sounds have been stripped from the grid due to IP infringements), you are still obligated to respect the sellers Intelectual Propertry and TOS.  That being said, if you're in the habit of purchasing full perm products, and want to cover your <MODERATOR: Profanity Removed>,  I suggest taking screen shots of their TOS at the time of purchase and saving a copy just in case it is changed later. If they have a "we can change this TOS" clause, it may or may not hold up in court, but at the very least it might help you prove you were just following the original TOS.

Edited by Dakota Linden
http://wiki.secondlife.com/wiki/Linden_Lab_Official:Community_Participation_Guidelines
  • Like 1
Link to post
Share on other sites
On 9/3/2017 at 9:50 AM, Gadget Portal said:

Weeeeeeeeeeeeelllllllllllllllllllllllll....

Federal Antitrust Law Does Not Preempt State Law

https://www.naw.org/govrelations/advisory.php?articleid=641

Since many states (not to mention the EU) have laws regarding it, I would think that that part of the agreement wouldn't apply to someone in one of those locations, at the very least.

This falls under the DMCA thing. Anyone have much experience with that?

If I lived in California and put something up on the MP for less than the price they said, then they filed a DMCA, and I countered it and cited that case, LL has to put it back up and the original merchant has to take me to court, correct?

 

 

No, not correct. 

First, as others have explained, price-fixing involves one or more businesses, usually competitors, colluding to set an artificial price in order to gain a monopoly control between the colluding businesses. 

There is a lot of case law that is being missed here already set by the licensing and re-selling of software on the internet, which is very similar to this case. In the case of software, and this case of original mesh, the supplier sets all legal parameters, including re-sale price, before purchase to ensure enforcement. 

I think the likelihood of *any* court anywhere severing this original licensing contract is basically nonexistent. There is no way that the contract created by a private sale of software would be terminated by any court. This form of software licensing is extremely common for virtual products sold on the internet, and has *a lot* of case law that already exists in many courts worldwide, notably the United States and China. 

Further, it's not just DMCA takedown notices that play a role here. Wherever software like this is being sold on the internet there are usually many strategies in place to mitigate and immediately process copyright and trademark infringement, and contract/license violations. Because these copies are virtual representations, and pure software, not a physical good, the originating business always maintains control over the legal re-sale or re-distribution of that good. 

Edited by Lada Charlton
  • Like 1
Link to post
Share on other sites
14 hours ago, Gadget Portal said:

I'm not sure that matters in this particular case, whether it's a toaster or licensed item like that, when we're talking about the original provider trying to set your price.

With a toaster, the reseller has a fixed number of toasters. If forced to sell at an unrealistic price they'll find themselves with unsellable items; if they anger the supplier they can't get any more toasters to sell.

With software and "products" in Second Life the reseller can create infinite copies at negligible marginal cost, and (at least in Second Life) the supplier has no physical way to stop them from doing so.

  • Like 2
  • Thanks 1
Link to post
Share on other sites
6 hours ago, Theresa Tennyson said:

With a toaster, the reseller has a fixed number of toasters. If forced to sell at an unrealistic price they'll find themselves with unsellable items; if they anger the supplier they can't get any more toasters to sell.

With software and "products" in Second Life the reseller can create infinite copies at negligible marginal cost, and (at least in Second Life) the supplier has no physical way to stop them from doing so.

That ultimately is the crux of the matter. While RL objects take materials and time for every unit sold, thus forcing the price to stay above a certain point, digital goods don't have that limitation. There is only the one-time purchase price from a full perm seller and the one-time labor cost to texture the item. This means without a min price listed in the TOS, the price of such items could quickly hit zero if a "generous" creator decides to spend a couple hours in photoshop, quickly erasing the value to other resellers and destroying the original creator's ability to sell the item.  

It would be like if musicians had crappy contracts and all the Music sites charged what they want. It'd only take one little site selling music for 1c a track and suddenly all the rest have to follow suit, destroying the ability of all involved, including the artist, to make any money at all.

Link to post
Share on other sites
On 6.9.2017 at 6:38 AM, Chellynne Bailey said:

It would be like if musicians had crappy contracts and all the Music sites charged what they want. It'd only take one little site selling music for 1c a track and suddenly all the rest have to follow suit, destroying the ability of all involved, including the artist, to make any money at all.

That's happened already. Spotify killed off recording as a source of income for musicians.

Since I'm posting int his thread again, here's another twist: What if the full perm seller also has a second store where they sell at lower prices than they allow their full perm buyers to?

 

  • Like 3
Link to post
Share on other sites

Then that full perm seller would be really shady. Even though it's their creation and they do as they wish with it it would be kinda horrible because I imagine they would shift more items because their product is cheaper than those they licenced their product to. Unfortunately I know of one full perm maker who has taken people to court over breaking their terms of service regarding pricing and the person got their account closed because it was multiple infringements. They also incurred real life fines.

Link to post
Share on other sites
On 06/09/2017 at 2:38 PM, Chellynne Bailey said:

 This means without a min price listed in the TOS, the price of such items could quickly hit zero if a "generous" creator decides to spend a couple hours in photoshop, quickly erasing the value to other resellers and destroying the original creator's ability to sell the item.  
 

This ^

Minimum price fixing is to protect the value of the item, and prevent a race to the bottom. It makes it fair for everyone - the full perm seller and purchaser. Creators who buy full perm items are expected to add value, not devalue it.

As a full perm seller I want people who don't agree or intend to follow my TOS to stay away.  Don't buy it....save us both a headache.

  • Like 1
Link to post
Share on other sites
On 03/09/2017 at 11:50 PM, Gadget Portal said:

If I lived in California and put something up on the MP for less than the price they said, then they filed a DMCA, and I countered it and cited that case, LL has to put it back up and the original merchant has to take me to court, correct?

 

Why would anyone buy a full perm item, to go against the TOS and then do this? Wouldn't it be easier and more ethical to just not buy it?

Edited by Reid Parkin
Link to post
Share on other sites
On ‎9‎/‎16‎/‎2017 at 10:35 AM, Reid Parkin said:

Why would anyone buy a full perm item, to go against the TOS and then do this? Wouldn't it be easier and more ethical to just not buy it?

Your original post was gonna get you trolled so hard.

As for this one, I can just say that I personally don't buy from people that have bad agreements, 'cause their products are probably bad too.

I was just pointing out that in RL, courts have tossed out agreements that said sellers have to set a specific price (at least in some cases), and I thought it'd be an interesting topic since we see it in SL now too. Wondered if people worry about that sort of thing.

Link to post
Share on other sites

Ok, here's the deal. The term you are looking for is "vertical price-fixing" not just price fixing, which is when competitors agree to inflate or deflate prices to mess with the market in their favor. Vertical price fixing is when a supplier sets a resale price for a distributor or reseller. In most states this is illegal, however, Federal law does not ban this practice. Now, seeing as we all agreed to follow US law and specifically California law, where vertical price fixing is illegal, I would say that dictating a minimum resale price would be illegal in SL and if it went to court the creator would lose said case. I will call my family lawyer later to see what he says. 

On 9/3/2017 at 9:27 AM, Nova Convair said:

If I get it in my language b4 i buy and the seller can proof that I have agreed then it's a valid agreement. 

Even then it's still possible that terms in that agreement are invalid. (in my country - the US i don't care) but for that details one need a lawyer.

It doesn't have to be in your language. And you really should care about US laws, you agreed to follow them when you joined SL. 

  • Like 1
Link to post
Share on other sites
5 minutes ago, Drake1 Nightfire said:

Now, seeing as we all agreed to follow US law and specifically California law, where vertical price fixing is illegal, I would say that dictating a minimum resale price would be illegal in SL and if it went to court the creator would lose said case. I will call my family lawyer later to see what he says.

Way to make my point better than me. 

If you do get an answer, I'd love to know it. 

Wouldn't be the first time that SL residents didn't know how a TOS works.

  • Haha 1
Link to post
Share on other sites
You are about to reply to a thread that has been inactive for 1326 days.

Please take a moment to consider if this thread is worth bumping.

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...