Opinion ID: 2330622
Heading Depth: 1
Heading Rank: 5

Heading: Brighton's Pricing Practices

Text: Since April 1997, Brighton has provided its retailers with copies of its suggested pricing and promotional policy. Brighton's policy calls for retailers to sell Brighton products at keystone, which is an amount equal to twice wholesale plus a small amount that varies by product. Under the policy, retailers may discount out-of-season products and products that are not selling well that the retailer will not reorder. Brighton ships its products to its retailers with tags displaying the manufacturer's suggested retail price (MSRP). For at least 1 year, Brighton required its retailers to initial and sign an acknowledgement that a violation of its pricing policy was grounds for dismissal. According to Jerry Kohl, Brighton's owner and president, Brighton's pricing policy was not adopted to thwart competition from other manufacturers of similar products. When asked if he had thought about how the pricing policy affected the profitability of retail sales of the Brighton line, Kohl responded that he had not thought about it. Further, Laura Young, Brighton's second-in-command, said that prices were set without regard to retailers' profits. Brighton admits that its pricing policy was not created in response to any problem with retailers failing to provide desired service to customers. It has made certain of its decisions about its pricing policies after consulting with its retailers, such as when birthday club discounting was approved. Many retailers of Brighton products have advertised discounts of Brighton products, but it is unclear which, if any, of these advertisements violated Brighton's pricing policy. Young stated in her affidavit: Since the promulgation of the universal retail price policy, Brighton has never undertaken any systematic, comprehensive effort aimed at determining whether its retailers are following that policy. But Brighton from time to time has acquired information from various sources ( e.g., consumers, other retailers, advertisements, and Brighton's sales force), to the effect that some Brighton retailers are or might be violating the suggested retail price policy, and Brighton has occasionally enforced that policy against retailers in states other than Kansas by refusing to deal with retailers believed to have intentionally violated Brighton's policy. Kohl also testified in his deposition that Brighton sometimes becomes aware of retailers selling products at prices other than the MSRP. Kohl further testified that Brighton keeps reports documenting customer inquiries, including those about Brighton's pricing policies. Kohl testified: Q: . . . And one of the things you do with the reports is keeping [ sic ] track of whether or not the particular retailer is complying with the pricing policy of [Brighton]? A: Well, that's a big stretch. I surely wouldn't call it that. We keep comments regardless of what they might be, everything from talk to Joe about a handbag was damaged. So we keep comments that people give us. Q: Those comments include whether or not the retail customer of [Brighton]'s is discounting or is not following the pricing policy; is that a fair statement? A: Well, again, I wouldn't put it the way you did. You know, there are times when there's comments about pricing policies, but to say they include them implies that it's a regular situation. And the answer is no, it isn't. Q: Well, if a retailer was abiding by the pricing policy, there wouldn't be any need to put information like that in an inquiry report. A: That's correct. Q: And your point is most of the retailers comply with the retail pricing policies of [Brighton]? A: As far as I know, yes. Q: And those who don't, when you find out about it, are terminated, correct? A: Those who don't and who are aware of our pricing policy and is [ sic ] willfully disregarding our pricing policy, yes, they are terminated or I should say put on hold until we make a decision on what we're going to do. In the past, Brighton has rejected at least one promotion for violating its retail price maintenance policy. When rejecting the promotion, a proposed shoe trade-in, Young stated in an email: . . . . Did someone tell you it was ok to do this? The reason I ask is this will spread like cancer . . . one person does it . . . sells more shoes than normal. And they and you tell more people and before you know it the world will be holding their own shoe trade in. It cannot be an individual store authorize [ sic ] event. We have a very clear SRP (Suggested Retail Pricing Policy) and this would be in violation of it. . . . SO, please no matter what/who said its ok, it's not. Young also expressed the following in another email: [W]hen one store begins to lure customers in with an incentive for purchasing . . . the next store thinks they need to `one up' the competition, and then the third customer needs to `two up them both' and so on . . . and after a while it's out of control. What happens is the customers then get confused on if they need to wait for the best offer to purchase Brighton. Our Suggested Retail Pricing and Promotional Policy basically was designed to create an environment for the consumer to shop with confidence that they were being treated fairly. We have always wanted consumers to be able to feel that wherever Brighton is soldauthorized dealersthey can buy now! And not worry if they're getting the `best deal.' One of O'Brien's experts was Gregory T. Gundlach, Professor of Marketing and Senior Fellow at the American Antitrust Institute. He asserted in his prepared report that there was no evidence that a cartel existed among Brighton's retailers in Kansas or elsewhere and that there was no evidence that Brighton's pricing policy was instituted by Brighton at the request of its retailers. Gundlach also concluded, however, that Brighton engaged in vertical price-fixing and in horizontal price-fixing. Gundlach further concluded that Brighton's price-fixing necessarily raised the price at which consumers may purchase its products. In addition, Gundlach concluded that Brighton's price-fixing limited price competition between retailers and that, as a result of the suppression of competition, consumers were denied potential savings. Gundlach also opined that the higher prices faced by consumers were not offset by benefits to competition or to consumers, stating that no facts supported various theories advanced by Brighton's experts to support a pro-competitive explanation of the company's price-fixing. According to him, the more compelling scenario was that Brighton's price-fixing shielded its own stores and those of its retailers from competition by more efficient forms of retailing to the detriment of consumers. Christopher Charles Pflaum, Ph.D., an economist specializing in business and financial economics and the other expert for the plaintiff class, testified about class certification and the measure of damages.