Date:
Sunday , June 15, 2008
Author:
Kyle Bennett
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NVIDIA Dictates Advertised Video Card Pricing

Did you wonder why your GeForce purchasing experience may have changed? Have you wondered why you might have seen all cards priced the same or not priced at all? We have some answers for you on that front and it is called "UMAP."

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UMAP Because We Need To

Timo Allison with NVIDIA has explained to us that,”So the reason we did it is we really wanted…it’s a marketing program really designed to give some clarity in our product stack…is how the product is advertised. There is a lot of confusion when there is a big delta in the minimum advertised price and the maximum advertised price, and consumers are confused on where that product should stack against the rest of the NVIDIA lineup. So the minimum advertised price policy is really designed to give some clarity in the product segmentation and really help the consumer see where those products are in relation to other NVIDIA products.” If limiting the ways we shop at major etail sites is better defining the product stack then it would seem that NVIDIA has hit its mark. But one thing does ring true to fact and that is NVIDIA’s product stack has very little definition. NVIDIA’s quick reaction to quell AMD’s advancing 3800 series last year landed them with the 9600 GT and 8800 GT families overlapping and it could be argued in that the 8800 GT at the high end encroached into 8800 GTX territory depending on what resolution you were using the card at. The 8800 GT continues to be a video card fully suggested by all of our editors here at HardOCP.com as it represents probably the best value to the enthusiast gamer, again depending on how big your display is. I would fully agree with Timo that NVIDIA’s product stack needs to be better stratified. TImo went on to say, ““We are in a highly competitive market place and we want to make sure our brand is perceived as how we have designed it to be perceived to be competitive, and by getting our stack clear in consumers’ minds and believe it helps give us the brand strength around those products. Also again, it is only an advertising program not a direct sales program.”

Maybe, Maybe Not

It seems though that NVIDIA’s partners and customers are not so sure UMAP will succeed. In fact, NVIDIA was fairly matter-of-fact that it was not sure UMAP would be around too long. NVIDIA has said to us that UMAP seems to be more of a trial than anything. Timo Allison stated, ““We will have to evaluate after a few months of running it to see if it has been achieving the goal we wanted to. Right now we do feel it is going to do that.” And he later followed up with, “We do not know how successful it will be till it has run a little while.”

UMAP’s a Crime – Just Not in the USA, Maybe

So we know our shopping experience has changed for the worse, but if you think that something about this does not feel right, you might be very correct. This type of UMAP policy is illegal in Canada and in some countries in Europe. It seems to us that this type of UMAP policy would have been illegal in the United States up until September of 2007. A case decided by the Supreme Court, Leegin Creative Leather Products, Inc. v. PSKS, Inc. , has seemingly opened the door to UMAP behaviors among many companies. What Leegin states is policies like UMAP are OK if they promote intercompany competition. The entire language about what is illegal in terms of UMAP type policies is fairly vague and open to interpretation. It seems to us that if UMAP promotes intracompany competition it is illegal, unless that intracompany competition promotes intercompany competition. One thing that is different about NVIDIA UMAP positioning and Leegin is the fact that NVIDIA does not directly sell to the etailers and retailers it is pushing this UMAP policy out to. NVIDIA is telling these companies that if they do not advertise how NVIDIA’s wants to be advertised in terms of price, that NVIDIA will have the etailers’ or retailers’ “preferential allocations” suspended, which likely means “cut off” to you and me. The Leegin opinion did state however that it would be up to the courts to decide what is reasonable in this type of pricing situation. It is worth stating that we are not lawyers, but did talk to some that were very familiar with the Leegin case. We do not suggest you use anything published here as legal advice or fact of law. The opinion and syllabus linked above are not that long and a good read if you enjoy that type of thing.

Make It Up as We Go Along

One of the most valuable statements I found in the Leegin case is contained on page 3 of the Breyer dissenting opinion. “The case before us asks which kind of approach the courts should follow where minimum resale price maintenance is at issue. Should they apply a per se rule (or a variation) that would make minimum resale price maintenance always (or almost always) unlawful? Should they apply a “rule of reason”? Were the Court writing on a blank slate, I would find these questions difficult. But, of course, the Court is not writing on a blank slate, and that fact makes a considerable legal difference.” Breyer continues on through page 11 to make points and counter points that raise a lot of issues surrounding NVIDIA’s UMAP. I would not be surprised if we do see a lawsuit filed surrounding this issue, but then again, the companies that would be doing that have a lot to lose if they are snubbed when it comes to the next GPU allocations. And I have heard stories for years how NVIDIA flexes it muscles with the allocation threat. “If you don’t like it, we don’t have to sell you any more…ever,” seems to keep most of its partners in line, at least here in North America.

The Bottom Line

NVIDIA has implemented a Unilateral Minimum Advertised Price Policy and it is negatively impacting the way consumers shop online. Now you have to specifically ask for a price on an NVIDIA USA partners’ GeForce video card if it appears on NVIDIA’s MAP Schedule. This limitation directly impacts the consumer from easily being able to paint a pricing picture with a wide brush on specific NVIDIA GPUs. This type of UMAP policy might very well be legal in the USA if it promotes intercompany or interbrand competition. Does NVIDIA’s UMAP foster competition in the USA beyond NVIDIA branded video cards?

But here is the true question and the only one that should mean anything to you and me, as long as you are not an NVIDIA stockholder. Is NVIDIA’s UMAP Policy good for the consumer? That remains to be seen.

Discussion

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