Scalpers buying up graphics cards and game consoles to resell them at hugely high prices is a problem. And iD Software co-founder John Carmack has an idea how to stop it, as he outlined Twitter last night. What if manufacturers simply auction their own stock directly to consumers?
“We would really be better off with a transparent auction system direct from the manufacturers and a more efficient market,” he wrote.
I’m not sure there are enough words to express how awful this idea is. Not only does it run counter to business ethics and land in a shady federal-level legal area, but it also messes with the usual supply chain and could potentially make it harder for people than it is now to have an RTX 3080 or a PS5.
In a past life I worked for a small intermediary company in the semiconductor industry for several years, so let me break down the manufacturing process. As an example, let’s use things called toroidal cores. These are thick rings with magnetic properties that are usually made of iron (but they can contain other metal elements). If you opened your PC’s power supply, you would find one.
A raw materials company sells the iron powder to the company that makes the cores. That company then uses their equipment to press the powder into the core models, then they paint them and they can either sell them directly to the company that makes the PSUs or they can sell them to distributors who then sell them to the companies that sell them . make the PSUs. The companies that make the PSUs can either sell them directly to companies like NZXT that provide PC building services, or sell them to retailers like Micro Center, which supply whole PC components to consumers who want to build their own PCs.
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That is the supply chain that everyone is talking about today chip shortageComputers and consoles need many components to make them work, all the way down to raw materials and small parts such as toroidal cores. If there is a shortage somewhere along the way, supply becomes scarce, prices go up and consumers have to wait a long time before they can get their hands on those products at a normal price.
When scalpers come in and buy up all the GPUs and consoles, they create a false scarcity by keeping the end products out of the normal market. Proposing Nvidia, AMD, Sony and Microsoft to keep their end devices out of the normal market and forcing users to go directly to them to buy graphics cards wouldn’t create the false scarcity in itself, but having those companies auction their steady supply to the highest bidder would – not to mention that it would annoy many consumers.
Excluding distributors would also be a terrible idea for Nvidia, AMD, Sony and Microsoft, who rely on retailers or manufacturing / distribution agreements with companies like Asus and MSI to sell their products. Those companies should not only take on the entire distribution task themselves, but coupled with an auction process that Carmack says should “ ultimately deliver better for consumers ” if all manufacturers participate, opens all those companies to potential as well. Violations of the Sherman Act (legislation that prevents anti-competitive behavior and price fixing).
Specifically when it comes to auctions and bidding, the Sherman Act prohibits anything that could be viewed as bidding or pricing behavior that conflicts with a competitive market. Signs of this include price increases that are inconsistent with cost increases at any point in the manufacturing process I have described above, and bid prices that fall when a new or rare bidder submits a bid.
Shut down distributors completely and move to this manufacturer-direct auThe action process can be interpreted as rising prices that are inconsistent with natural price increases in the supply chain – not to mention iIt would likely negatively impact companies like Micro Center, which sell entire PC parts to consumers.
Carmack’s thread drew some comments, of course. Some pointed out that scalpers could still decide to try and win a GPU or console at auction. If the companies somehow recognized that the bidder was a scalper and adjusted the bid price to be more reasonable, that could put them in a situation where they are being investigated by the DOJ for collusion.
The process Carmack suggests would cause more problems than it would solve. The problem of scalping cannot and will not be solved at the manufacturer level. It must be resolved with federal law. But until that legislation is in place, we can only stop scalpers by not buying from scalpers – even if you have the money to spend on a $ 1,000 RTX 3070. Be patient and wait for more stocks to hit the market. Scalpers will only scalpe as long as they think there is demand. When manufacturers auction their own stock, it just keeps the products out of the hands of the common consumer, because only the rich can afford them. That’s no different from what scalpers do.