Model Forum / General / Railroads / July 2005

Thanks Jane
44211

Horizon Hobbies are wholesalers of model railway gear and I believe they are
not willing to supply Walthers.  I heard it alleged that this is because
Walthers wouldn't supply other wholesalers with their own branded products.

John.

A manufacturer or wholesaler can refuse to suplly anyone they like. What
they can't do - with a few legal exceptions - is specify the minimum price
their products are sold at or the minimum level of customer service
provided. That is why the retail industry in the UK has gone down the
toilet.

(kim)

In the UK it's neither illegal for a manufacturer/wholesaler to refuse
to supply a retailer, nor for a retailer to refuse to stock a
manufacturers/wholesalers products.

Andrew

In the USA, it's legal for anyone to not to do business with anyone
else, subject only to civil rights law. Since neither Horizon Hobbies
nor Walthers are discriminating against each other on the basis of
gender, marital status, race, religion, etc, their business arrangements
or lack thereof are (almost) entirely their own business.

Someone might think that "restraint of trade" laws might apply, but so
long as neither Walthers nor Horizon have de facto control of the model
train market, relevant US laws will not apply. (They don't even apply to
Microsoft, so long as MS makes necessary technical information about
Windows available to 3rd-party software developers, and does so on the
same terms for everybody.) In this case, only if Horizon demanded more
costly terms from Walthers than from other distributors would Walthers
have a case.

AFAICT, US anti-competition laws work well only when some identifiable
consumer group sues for redress, but even then it's not easy to prove
that a more competitive market would have resulted in lower prices.
Economic theory does make a legal case: only actual facts are relevant,
and the fact is that sometimes monopolies have resulted in lower prices
because of efficiencies of scale.

Will model railroaders complain that Horizon Hobbies is gouging them?
Not likely. Model railroading is a disposable income market, which means
that price-demand theories actually apply: model railroad prices are as
high as the market will bear (which is higher than some segments of the
market like, but it's what the majority will pay that governs prices.)

It's possible that in the UK (and EU) the kind of integration of
production and distribution businesses that's at play here would be
illegal, but I see no evidence of that in the business news that I read.