The Price of Excellence

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" colspan=2 height=110 BGCOLOR="#666699" TEXT="#080000" bgproperties="fixed" background="04900840erlcjm.png"> <div> <B> <TABLE BORDER="0" CELLPADDING="1" CELLSPACING="1" WIDTH="600" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="BOX" RULES="ALL" ALIGN="LEFT" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=TOP HEIGHT= 103 ><NOBR><div> <A HREF="index.htm" TARGET="_top" TITLE="Hoytnet Home"><U><B><IMG SRC="063775a0.jpg" border=0 width="119" height="90" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></B></U></A></div> </NOBR></tD> <tD VALIGN=TOP><NOBR><div> <B>Hoyt & Company</B></div> <div> <A HREF="services.htm" TARGET="_top" TITLE="What We Do"><U>What We Do</U></A> | <A HREF="who.htm" TARGET="_top" TITLE="Who We Are"><U>Who We Are</U></A> | <A HREF="articles.htm" TARGET="_top" TITLE="How We Think"><U>How We Think</U></A> |<A HREF="contact.htm" TARGET="_top" TITLE="Contact Us"><U> Contact Us</U></A></div> </NOBR></tD> </tR> </TABLE></B></div> <bR> <div> </div> </td> </tr><tr> <td valign="top" width=165 BGCOLOR="#CCCCFF" TEXT="#080000" background="04311c00egdysm.png"> <div> <A HREF="articles69.htm" TARGET="_top" TITLE="Chris Hoyt Articles"><U><B>Back to:  Articles</B></U></A></div> <bR> <bR> </td> <td valign="top" height=370 BGCOLOR="#FFFFFF" TEXT="#080000"> <div> <I><B>www.reveries.com - 2/02</B></I></div> <div> <I><B>The Price of Excellence</B></I></div> <bR> <div> By:  Christopher W. Hoyt</div> <bR> <div> <B>This is a story of government interference which could potentially have ramifications for any manufacturer engaged in the production and marketing of consumer products.  While the parallels may not be exact to your particular situation, the legal precedents that emerge could provide your competitors with a pathway to seek judicial protection for any number of imagined wrongs as a result of your becoming </B><I><B>too good</B></I><B> at what you do.</B><FONT SIZE="3" COLOR="#000000" FACE="Arial" >  </FONT></div> <bR> <div> Let's say that you've developed and marketed a product that revolutionized a culture and satisfied the needs of over 100MM households - for example, a toothpaste brand.</div> <bR> <div> For years, you have worked to improve your toothpaste by adding features to make your product more effective and less expensive to the consumer.  Your efforts have been rewarded by fantastic market share.  Your competitors are not pleased.  Looking for a way to cut you down to size, they come up with a plan.  Because your toothpaste has cavity fighters, whiteners and breath fresheners, the people who make separate cavity fighters, whiteners and breath fresheners <I>(and</I>, not incidentally, the makers of competitive toothpastes) get the federal government to sue you for antitrust violations.  Your competitors assert that competition is diminished because your product provides <I>too much</I> value to the consumer - not because your product harms consumers but because it eliminates the need for separate whitening agents, breath fresheners and mouthwashes.</div> <bR> <div> The government sues and wins.  Because you produced an outstanding product and spent millions of dollars continually improving it - despite the fact that you were already the market leader - you will now be punished.  You are required to disclose your product's formula to enable your competitors to produce compatible products that can coattail your franchise and marketing.  You must publish your trade terms and trade allowance programs, including spending, on a public website.  You must explicitly allow retailers to alter your ad copy and POS materials to mix and match products of their own choosing - even if directly competitive to yours.  You must eliminate any additives in your products (peroxide, fluoride, flavorings, etc.) which in any way might limit the ability of free-standing additive makers to compete.  To make sure you comply with all this, the final judgment provides that the plaintiffs have the right to inspect your books, to interview <I>any</I> employees, order you to prepare a report on any subject and - last but not least - be advised of any changes to your product formula.</div> <bR> <div> One month after you sign off on these terms, you learn your competitors are still not happy.  Using the same tactics they used to get the federal government to sue you, they persuade nine states that the Justice Department settlement is still not in the consumer's interest.  The Attorneys General of these states are themselves toothpaste-clueless and simply parrot the lines given to them by your disgruntled competitors.  Again, you find yourself in court but this time with a judge who has asked to rule <U>simultaneously</U> on the fairness of the terms of the original Justice Department settlement <U>and</U> the new suit brought by the nine states.  What the nine states want essentially boils down to stripping your product of any proprietary features that might give you a competitive edge and making its formula available to every Tom, Dick and Harry who wants to use your product as a platform on which to develop their own add-ons - which your product already includes.  In addition are highly restrictive proposals for the ways in which you will be allowed to market your product.  To make sure that you are thoroughly and permanently eviscerated by this ruling, the nine states lobby to extend the compliance period of the Justice Department settlement from five to ten years - a lifetime for any company in a competitive environment.</div> <bR> <div> As a first step in these new proceedings, the presiding judge orders you to provide your product's formula to the nine states Attorneys General.  Now these Attorneys General will need experts to help them evaluate the formula - and, not surprisingly, the “experts” they are likely to select are your competitors.  Completely ignoring property right issues or the fact that you spent 20, 50 or even 100 years and zillions of dollars in developing and refining this product, the judge's rationale is that, “It seems to me that if your side has access to it, then the other side, frankly, should have access to it.”  In a poll taken the day after this decision, 64% of consumers allegedly harmed by your actions said they believed the judge was not correct in ordering you to provide this information.  </div> <bR> <div> Does all this sound implausible?  Well, think again.  The foregoing is a play-by-play description of what is happening to Microsoft with respect to Windows as we write this. None of the plaintiffs has ever produced a shred of evidence that <U>any</U> consumers were ever harmed by Microsoft - and preventing harm to consumers, according to every prominent jurist interviewed for this case - is the sole purpose of antitrust legislation.  In fact, based on the new proposals submitted by the nine states seeking additional “consumer protection” from Microsoft, we as consumers will “benefit” by paying more for a lesser product.  In addition, we will now have the “freedom of choice” to buy features already provided by Windows from Microsoft's competitors and then have the opportunity to develop our computer skills by having to integrate these ourselves.</div> <bR> <div> Clearly, none of the above rulings proposed by the nine states in these second Microsoft proceedings has anything to do with benefiting consumers but everything to do with benefiting Microsoft's competitors. Let's hope the judge in these second proceedings sees this attempt for what it is.  It will be a black day for marketing if competitors can use the courts to achieve legally what they are incapable of achieving on their own in a free market competitive environment.  </div> <bR> <bR> </td> </tr></table></body>