Money changers who buy graphics cards and game consoles just to resell them at highly inflated prices are a problem. And iD Software co-founder John Carmack has an idea of how to stop it, as he put in Twitter last night. What if manufacturers simply auctioned off their own stock directly to consumers?
“We would really be better off with a transparent auction system directly from the manufacturers and a more efficient market,” he wrote.
I’m not sure if there are enough words to express how terrible that idea is. Not only does it go against business ethics and enter some obscure legal territory at the federal level, it also messes up the normal supply chain and can make it harder than it is now for people to get their hands on one. RTX 3080 or a PS5.
In a previous life, I worked for a small, medium-sized company in the semiconductor industry for several years, so let me analyze the production process. For example, Iet’s use things called toroidal nuclei, which are thick rings with magnetic properties usually made of iron (but may contain other metallic elements). If you open your PC’s power supply, you’ll find one there.
A raw material company sells iron powder to the company that makes the cores. This company then uses their equipment to press the power on the main models, then they paint them and then they can sell them directly to the company that makes the PSUs or they can sell them to distributors who sell them to the companies that make the PSUs. Companies that Make the PSUs can then sell them directly to companies like NZXT, which provide PC building services, or sell them to retailers like Micro Center, which provide complete components for consumers who want to build their own PCs.
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This is supply chain that everyone lives talking about in the current chip shortage. Computers and consoles need many components to function, from the raw material to small parts like toroidal cores. If there is a shortage at any point along the way, supply becomes scarce, prices go up and consumers have to wait for a long before they can get their hands on these products at a normal price.
When money changers come in and buy all the GPUs and consoles, they create a false scarcity, maintaining the end products outside the normal marketPlace, put. Suggest that Nvidia, AMD, Sony and Microsoft maintain their end devices outside the normal marketput and force users to go directly to them to buy graphics cards would not create the false scarcity itself, but having these companies auction your regular stock for the highest bidder would be – nnot to mention it would irritate many consumers.
Çdistribute distributors too be a terrible idea for Nvidia, AMD, Sony and Microsoft, which have retailers or manufacturing / distribution contracts with companies like Asus and MSI to sell their products. Not only would these companies have to take on the entire distribution task, but combined with an auction process that Carmack says “it should yield better for consumers in the end” if all manufacturerss participated, which also opens up all these companies to the potential Violations of the Sherman Act (legislation that prevents anticompetitive behavior and price fixing).
When it’s about auctions and bids specifically, the Sherman Act prohibits anything that can be viewed as bidding or conducting prices at odds with a competitive market. The signs of this include price increases that are not in line with cost increases at any point in the manufacturing process that I described above, and bid prices that fall when a new or infrequent bidder submits a bid.
Cut off the distributors entirely and switch to this manufacturer– the process of direct action can be interpreted as an increase in prices that do not correspond to an increase in the natural price iin the supply chain – not to mention it would likely negatively affect business like Micro Center that sell parts of entire PC components to consumers.
Carmack’s topic naturally attracted some comments. Some pointed out that money changers may still decide to try to win a GPU or console at an auction. If companies somehow recognized that the bidder was a money changer and adjusted the bid price to be more reasonable, this could put them in a situation where they would be investigated by the DOJ for collusion.
TThe process that Carmack suggests would cause more problems than it would solve. Scalping cannot and will not be resolved at the manufacturer level. It needs to be resolved with federal law. But until such legislation exists, the only way to stop moneychangers is not to buy from them – even if you have money to spend on a $ 1,000 RTX 3070. Just be patient and wait for more stocks to hit the market. Money changers will only continue to scalp as long as they think there is a demand. If manufacturers auction your own shares, it just keeps products out of reach of regular consumers hands because only the rich can buy them. This is no different than what the money changers are doing.