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Sony in internet 'price-rigging' rumpus

Ramps up wholesale cost to UK e-tailers

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Sony and other manufacturers have been accused of asking online retailers for 10-15 per cent more for wholesale electronic goods than they charge their traditional counterparts, The Times reports.

This "dual pricing" strategy - designed to narrow the price differential between net and high street - was allegedly initiated by Sony and quickly adopted by other suppliers. Big-name retail chains have exerted pressure on the CE giants at a time of falling high street sales in the face of cut-price internet offers.

Online retailers have naturally cried foul and will meet today to decide whether to "name and shame" the guilty parties. Sony already faces Office of Fair Trading (OFT) and European Commission examination of its pricing strategy.

Sony has a specific interest in supporting its branded Sony Centres, of which there are around 100 in the UK. It has the clout to force the issue too, as one website's MD told The Times: "If you are seen to be a troublemaker it can have a detrimental effect on supplies. If they want to, they can just put you out of business. We are struggling to stay in business and some companies have already gone to the wall."

The manufacturers' case was put this morning by Edward Whitefield of retail consultancy Management Horizons. He told the BBC's Today programme that this "variable pricing" strategy was designed to create a "more even playing field between different channels of distribution". He noted: "The high street retailers are already suffering thin and declining margins. It's becoming very unprofitable to retail electrical goods on the high street."

According to Whitefield, the cost of distribution through the internet is about 20 per cent of sales, compared with 45 per cent of sales for a bricks-and-mortar store, and consumers have greatly benefited as a result of online operations. They'll continue to benefit, too, added Whitefield: "Even after this 10, 15 per cent, the internet price points will still be 15 to 20 per cent lower than comparable high street stores."

Asked if it was legal to charge different wholesale prices to different retailers, Whitefield asserted: "Yes it is, and it recognises that there are actually different costs of distribution in running a market stall and an expensive high street store". He added that if internet retailers complain to the competition authorites "they will find that they that they are up against not only Sony but they're up against the whole industry".

Whatever the OFT decides in the matter, e-tailer spokesman James Roper, of the Independent Retail in Media Group, told The Times that manufacturers face a backlash from millions of online customers. "For the major brand which has instigated this policy, this appears to be an extremely risky step which will upset a lot of consumers," he warned. ®

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