Economics 101—The Power of Competition
Printer companies compete with each other to sell printers but once the printer is sold they have a monopoly on replacement cartridges. If you want an original cartridge you have to buy it from the company that made the printer.
Of course, the printer business isn’t about selling printers; Printers are packaging for cartridges; the printer business is about selling cartridges. That is where the “printer” companies make their fortunes. The printer business is all about getting printers into homes and offices, not as an end in itself, but as a means to an end, selling replacement cartridges.
Printer companies will sell printers at a loss; they’ll even give them away if that’s what it takes to get their printers into the hands of consumers. They’ll do whatever it takes to maximize cartridge sales.
In the absence of competition the cost of ink and toner has been steadily rising. To avoid over pricing and smothering demand they’ve cleverly disguised price increases by lowering ink volumes a lot and prices a little. The $29 cartridge that held 40ml is replaced by the $15 cartridge holding 5ml. Customers focused on the sticker price don’t realize they’ve been had. The printer company then has the gall to call the old $29 40ml cartridge an XL sell it for $40–but the so-called XL (short for “high capacity”) no longer holds 40ml, it holds 15ml. What a racket!
What About The Aftermarket? Doesn’t It Provide Competition to the Printer Companies?
Good question. If the price of original cartridges really is prohibitive why does the aftermarket account for less than 30% of cartridge sales? Why don’t more people buy the cheaper alternatives?
The simple answer is that many people–apparently 70%–don’t trust them. They’ve heard bad things about refurbished cartridges from family, friends, neighbors and from the ink company themselves. Or maybe they’ve had a bad experience with a cartridge that didn’t work. Or they’re afraid that refilled cartridges will damage their printers or void their warranties. Some are simply not aware that a cartridge can be refilled or remanufactured.
The quality issue is real but exaggerated. The remanufacturing industry has hurt its own cause, mainly by failing to level with customers, to properly manage customer expectations, but it labors against powerful head winds; the ink companies can huff and puff and blow the house down anytime they choose.
They’ve done their best to make cartridges difficult to refill and to insure that performance will be less than optimal when refilled; they’ve intentionally limited cartridge lifespans; they’ve introduced pricing strategies to make remanufactured cartridges less profitable. They’ve introduced chipped cartridges to discourage remanufacturing; They’ve flooded the market with new (although not improved) models to limit the availability of empties. They’ve used the patent system to thwart competition. They’ve used the courts to to intimidate competitors. They’ve used misinformation and scare tactics to confuse customers.
You can’t blame them. There’s a lot of money involved. For the most part I’d say that the industry’s most dominant company, HP, has competed with a degree of fairness. Their tactics have been rough and tumble but relatively benign. HP tries to make life difficult for the aftermarket but hasn’t tried to deliver a death blow. For the most part, HP, Brother, Canon and others seem willing to accept the existence of the aftermarket.
It may be that we’re useful to them. We provide limited competition but not an existential threat. We are a cheaper alternative for the segment of the market that needs one and is willing to live with the quality issues. We’re a safety valve that deflects attention from monopolist nature of the industry. They can always point to us and say “there’s our competition.”
But there can’t be real competition when one competitor is completely dependent on the other. There won’t be real competition as long as the printer companies are allowed to hide behind bogus patents that have no other purpose than to squelch competition.
There won’t be real competition and lower prices until anyone’s “original” cartridge can be used freely and without restriction in anyone’s printer. The aftermarket can be controlled and limited because it depends on the printer company for raw materials, the empty. Remove that dependence and you’ve got a competitive market.
