"Germany fines Lego for playing with prices"

[firos]

http://m.rte.ie/news/business/2016/0112/759458-lego-fine-germany/

Not sure if this is old news, if it fits in Lego trying to diminish the reselling business, if it is minor quarrels in the distribution negotiations. 

I thought throwing this out there to see what more knowledgeable brickpickers could add about this topic.

If this is not the right forum please move ahead.

 

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Danish toy maker Lego has been fined €130,000 by German regulators for preventing stores from offering discounts on its popular toys in 2012 and 2013. 

Bundeskartellamt, the German regulator, said Lego kept lists of its toys, prices and retailers and threatened those shops that sought to lower their retail prices. 

"In some cases the retailers were threatened with either a reduction in supply, or even with the refusal to supply if they offered articles at retail prices below those set in the lists," Bundeskartellamt said in a statement. 

In other cases, discounts on the cost of Lego products for stores were made conditional on the retailers maintaining the listed resale prices, the regulator said. 

Lego is the world's largest toymaker by sales having recently overtaken US Barbie-maker Mattel and Monopoly-board maker Hasbro. 

"We take the non-compliant actions from the specific Lego employees, as well as the decision of the Bundeskartellamt, very seriously and we have taken steps to prevent such conduct again," Lego's chief financial officer John Goodwin said. 

Edited January 14, 2016 by jaisonline
added article's content

[Mos_Eisley]

It sounds to me like the CFO is putting the blame on some random LEGO employees.  He knows they've done this all over the world, right?

[jaisonline]

"In some cases the retailers were threatened with either a reduction in supply, or even with the refusal to supply if they offered articles at retail prices below those set in the lists," Bundeskartellamt said in a statement.  "

It wouldn't shock me if lego is playing the same game here with exclusives. 

[Armor]

Go to any Lego store, they are not allowed to offer price drops below 20% on damaged boxes. The only time that you can every get anything lower than 20% off in a Lego store, unless you stack VIP points, is for Lego to officially mark it down. One of my friends that still works with Lego said there was a policy that came out 3 or so years ago and Lego was wanting to monitor it's stores sales more closely. He also told me that exclusives should never be lower than the standard price, some stores get around this and give 500 bonus VIP points to sets like the red 5 and the tumbler. I did not know this affected other non Lego branded stores though, I wish there was more on the article for me to read about.

Edited January 14, 2016 by Armor

[seapotato]

Anything licensed will only receive 20% off discount in store if the box if damaged but 30% if it is an unlicensed item like city sets.

[gregpj]

8 hours ago, Armor said:

Go to any Lego store, they are not allowed to offer price drops below 20% on damaged boxes. The only time that you can every get anything lower than 20% off in a Lego store, unless you stack VIP points, is for Lego to officially mark it down. One of my friends that still works with Lego said there was a policy that came out 3 or so years ago and Lego was wanting to monitor it's stores sales more closely. He also told me that exclusives should never be lower than the standard price, some stores get around this and give 500 bonus VIP points to sets like the red 5 and the tumbler. I did not know this affected other non Lego branded stores though, I wish there was more on the article for me to read about.

I doubt this applies to LEGO brand stores themselves.. Since LEGO owns those stores, they are also free to set policy. I know the EU has some of the most strict rules regarding competition (see their stupid decision to make Microsoft bundle other internet browsers with Windows) but I highly doubt that a corporate directive to prevent larger discounts on damaged sets is at play here.

I would bet a worriz fire bike that this applies to LEGO preventing other stores from discounting those large exclusive sets that eventually find their way our of S@H exclusivity.

My comment is only €130,000? That's not going to deter anyone...There must have been some other repercussions the article didn't go into detail about or that was a total waste of a good fine.

[Val-E]

They will have a much bigger problem if the issue is escalated to the European Commission. For this to happen, some retailers (or consumers) would have to file an official complaint with proof and you feel they might be scared to do so incase they lose their preferential buying prices.

Now that Amazon is no longer offering Exclusives o a regular basis and even the prices of normal Lego are higher than they were 2 or 3 years ago, one gets the impression that what happens in Vegas stays in Vegas and no one will break rank. That´s what happens when you become number 1.

[Roy vd M.]

2 hours ago, gregpj said:

My comment is only €130,000? That's not going to deter anyone...There must have been some other repercussions the article didn't go into detail about or that was a total waste of a good fine.

According to the cartel office president, the reason for that is that TLG fully cooperated with the investigations, certain managers were fired and thorough internal measures were taken by TLG to prevent these things from happening again. 

Source: http://www.welt.de/wirtschaft/article150909205/Lego-setzte-Einzelhaendler-massiv-unter-Druck.html

I'll translate some other relevant passages in that article: 

"TLG has acted contrary to the prohibition of resale price maintenance, said the cartel office. On the basis of that non-cartel rule, producers of goods are not allowed to limit the freedom of resellers to set the prices for the goods."

"In 2012 and 2013, distribution employees of Lego had forced resellers in the north and east of Germany to fix prices. This regarded exclusive articles. According to TLG some 20 sets were at issue. Those sets, and the designated resellers, were kept track of in a regularly updated list, according to the cartel office. If the resellers didn't act in accordance with this imposed rule, they would receive fewer of those items, or none at all, according to the investigators. In some cases, clearance sales were influenced."

"TLG accepts the verdict of the cartel office and won't appeal."

[HandyHand]

I've heard from multiple sources that 3rd party general toy stores and also specialised Lego-focused toy stores do not get to sell "special" sets (those that are marked as "Hard to Find" on the Lego LEGO Shop at Home site) any longer. They can't order them any longer from Lego, and this new policy has apparently been spread to retailers selling Lego sets here. It's active at least for the first half of 2016. 

Quite possibly TLG decided that if they can't prevent retailers from selling exclusives and Hard to Find sets with discounts, then they will simply not deliver those sets to those retailers but only sell them through their own B&M Lego Stores and through the LEGO Shop at Home website.

We'll have to see if big toy retailers like Toys'R'Us (NL, DE for example) will not have these Hard to Find sets in their inventory any longer once they sell out of their remaining stock...

[gregpj]

24 minutes ago, Roy vd M. said:

According to the cartel office president, the reason for that is that TLG fully cooperated with the investigations, certain managers were fired and thorough internal measures were taken by TLG to prevent these things from happening again. 

Source: http://www.welt.de/wirtschaft/article150909205/Lego-setzte-Einzelhaendler-massiv-unter-Druck.html

I'll translate some other relevant passages in that article: 

"TLG has acted contrary to the prohibition of resale price maintenance, said the cartel office. On the basis of that non-cartel rule, producers of goods are not allowed to limit the freedom of resellers to set the prices for the goods."

"In 2012 and 2013, distribution employees of Lego had forced resellers in the north and east of Germany to fix prices. This regarded exclusive articles. According to TLG some 20 sets were at issue. Those sets, and the designated resellers, were kept track of in a regularly updated list, according to the cartel office. If the resellers didn't act in accordance with this imposed rule, they would receive fewer of those items, or none at all, according to the investigators. In some cases, clearance sales were influenced."

"TLG accepts the verdict of the cartel office and won't appeal."

Thanks for the translation... That makes sense, though it seems a total copout to their policies in the first place. I _HIGHLY_ doubt that some distribution employees came up with that policy all on their own unless what they get paid is directly tied to what the resellers were charging/earning on a sale. And even in that case, I would _HIGHLY_ doubt LEGO wouldn't have know such a policy would translate into no discounts on exclusives.

In North America, we have a saying for this... LEGO that's bush league blaming distribution center employees.

[Roy vd M.]

26 minutes ago, Haay said:

I've heard from multiple sources that 3rd party general toy stores and also specialised Lego-focused toy stores do not get to sell "special" sets (those that are marked as "Hard to Find" on the Lego LEGO Shop at Home site) any longer. They can't order them any longer from Lego, and this new policy has apparently been spread to retailers selling Lego sets here. It's active at least for the first half of 2016. 

That doesn't include Galeria Kaufhaus then, as of this week they have UCS Tie Fighter and Ewok Village and Slave I in stock. Both last ones are not even available at LEGO Shop at Home. 

See here: https://www.galeria-kaufhof.de/search?q=lego&sort=price+desc

All three mentioned sets weren't available last week. 

[Brenner]

UCS Tie Fighter was available at Galeria last weekend (not long unfortunately) and Ewok Village and Slave I were added, correct. Collishop.be has some hard to find sets as well.

 

[Val-E]

There is a fine line between hard to find and shooting yourself in the foot. Go to far and they will lose sales as there are a huge % of people who will only buy what they see in a real shop or a general online store like amazon or even ebay, rather than fiddle about with SAH, if they even know it exists or it may not serve their country.

We have already seen how some of  the real SAH exclusives like EEE, Fairground Mixer have performed below par saleswise and TLG would have to make a substantial investment in their web and their network of shops and semi official shops to be able to seriously limit availability and not lose sales. They are not making handmade sportscars with a ten year waiting list, after all.

 

 

[Roy vd M.]

22 minutes ago, gregpj said:

Thanks for the translation... That makes sense, though it seems a total copout to their policies in the first place. I _HIGHLY_ doubt that some distribution employees came up with that policy all on their own unless what they get paid is directly tied to what the resellers were charging/earning on a sale. And even in that case, I would _HIGHLY_ doubt LEGO wouldn't have know such a policy would translate into no discounts on exclusives.

In North America, we have a saying for this... LEGO that's bush league blaming distribution center employees.

You're very probably right. I think it's a matter of terminology. Also in TLG's own press release about the matter (http://www.lego.com/de-de/aboutus/news-room/2016/january/bka-fines-lego-germany) they mention "Mitarbeiter" which I'd translate as 'employee' (any German-speaking Brickpicker may correct me on this). They say "those employees who are responsible" so probably those 'employees' are in reality midlevel managers. Legally, they also work for TLG so they are also 'employees'. If I were their lawyer writing such statement I'd probably also choose such terminology, to ensure as much as possible that the masses wouldn't get the impression that top management had anything to do with it. 

[HandyHand]

23 minutes ago, Roy vd M. said:

That doesn't include Galeria Kaufhaus then, as of this week they have UCS Tie Fighter and Ewok Village and Slave I in stock. Both last ones are not even available at LEGO Shop at Home. 

See here: https://www.galeria-kaufhof.de/search?q=lego&sort=price+desc

All three mentioned sets weren't available last week. 

It could be older stock they had already ordered from LEGO and just received last week, so they could make it available since this week. Similar to what Toys'R'Us Netherlands is offering now:

With a few other exclusives also available: Simpson's House (€199,99) and Kwik-E-Mart (€199,99).

Still remains to be seen if they get new stock after they sell out of these sets, and whether they get other new "Hard to Find" sets in the coming weeks/months...

 

[zskid00]

I don't have all the details and I'm sure these sales practices are governed differently in the U.S. vs the EU, but this seems to be a company policy adopted about 3 years ago.  Third party retailers have not been allowed to discount exclusive sets and that's been pretty much across the board.  I'm almost certain the few exceptions we've seen have been a result of retailer pricing/promo errors.