Maryland Law Could Rewrite "Minimum Pricing" of Fly Gear

Thursday’s Wall Street Journal contained an interesting article about a new Maryland law that prohibits manufacturers from requiring retailers to charge minimum prices for their goods. As a tag-along to yesterday’s comments on the relative “priciness” of fly reels, the story tells how the new Maryland law could reach far beyond state boundaries, because it would apply to all online sales as well. So in theory someone buying a fly rod or reel from a fly shop in Michigan could not be forced to pay a manufacturer’s minimum price. Minimum pricing is popular in many industries, including fly fishing, because it protects margins. “By creating a new law that explicitly bans all minimum-pricing agreements between manufacturers and retailers, state legal experts say, Maryland is now able to pre-empt the high-court ruling. Legal experts say more than 30 other states that filed briefs with the Supreme Court could join Maryland in enacting such a law.” Article by Joseph Pereira.

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  • Mike Santangelo

    This legislation may mean many problems for local fly shops. While in the short run there may be great deals for the consumer, in the long run, I think many shops will fall out.
    What the article discusses is the manufacturer’s suggested retail price. For example, Sage recommends that a Z Axis sells for $685. If a retailer advertises and sells the rods for less, Sage can decide not to sell rods whole sale to the retailer. In essence, the manufactures suggested retail price stifles price completion in order to protect the margins of the shops that carry Sage products. With this Maryland law, that move on Sage’s, or any other manufacturer’s part, would become illegal.
    Lots of folks would say great, let the competition begin. However, that opens the door to volume purchases and the discounts that they offer. Staying with the Sage example above. Who is probably the biggest purchaser of Sage rods? I am not sure, but I would venture a guess at Cabela’s. If Cabela’s can purchase 500- 1,000 rods at a shot, that offers many efficiencies to Sage in the entire manufacturing process from purchasing raw material, shipping through to transaction costs. This will reflect in a great wholesale price to Cabela’s. To make sure that the rods sell, Cabela’s will pass some of the saving to the consumer through a lower price. Nobody else will be able to compete unless they can match the same type of volume purchases. Think of what the large box operations have done to many small retailers.
    Fly shops sell other things besides rods, but without the profit of high end items such as rods, reels, lines and soft goods business will be very tough. There isn’t enough profit in selling fly tying material to keep retail shop open. I think shops that stay in business will be those that are a major internet retailers, those selling to a niche market (for example a Spey specialty shop) or shops that have a destination market going for them (for example shops in West Yellowstone).

  • Forget volume purchasing. Cabela’s is large enough that it doesn’t need the 40-50% margins that flyshops require. They could buy at the same wholesale price the shops do and still charge significantly less. Essentially, politicians want to do to the fly fishing, some electronics, and other niche markets, what’s been done to mom and pop hardware stores and locally owned corner gas stations. They won’t be happy until the entire world has no option but to buy from a big box operation. Since there is so much fly fishing tackle, and electronics goods, etc. available at every price range I don’t see where the consumer is being screwed. If I don’t want to buy a Sony product because the prices are essentially the same at all the stores because the company controls the prices, why shouldn’t I just go out and buy Sanyo, Panasonic, and on and on. And these guys will maintain that they’re a friend of the small business owner. Phooey. Trust me, I live in the state that Senator Kohl represents and he is anything but a friend of small business. This is just one example of many.

  • Great explanation Mike S. The end result of this legislation is the demise of small fly shops in favor of big box stores. Which would suck.

  • R.E.Walter

    Good thing I decided to make my own things, years ago.