Bush's Supreme Court OKs Retail Price Fixing - U.S. Politics Online: A Political Discussion Forum

Angry American · #1 (**permalink**) 06-30-2007

Bush's Supreme Court is churning out more fruit for corporate fat cats.

Quote:

Supreme Court OKs retail price fixing by manufacturers
By David G. Savage, Times Staff Writer
10:43 AM PDT, June 28, 2007

WASHINGTON -- Manufacturers may set a fixed price for their products and forbid retailers from offering discounts, the Supreme Court said today, overturning a nearly century-old rule of antitrust law that prohibited retail price fixing.

The 5-4 ruling may be felt by shoppers, including those who buy on the Internet. It permits manufacturers to adopt and enforce what lawyers called "resale price maintenance agreements" that forbid discounting.

Until today, the nation has had an unusually competitive retail market, in part because antitrust laws made it illegal for sellers or manufacturers to agree on fixed prices. The Supreme Court, in a 1911 case involving Dr. Miles and his patented medicines, had said that price-fixing agreements between manufacturers and retail sellers were flatly illegal.

The rule's practical effect was to discourage a manufacturer from setting a price, leading, for instance, to stickers on the windows of new cars that list the "manufacturer's suggested retail price."

However, in today's opinion, the high court described this rule as outdated and out of step with modern economics.

Manufacturers of products ranging from watches and computers to golf clubs and tennis rackets compete with other brands, so competition will not suffer, the court majority said. Moreover, manufacturers should be free to control how their products will be marketed and sold, it said.

"Resale price maintenance can increase inter-brand competition by encouraging retailer services that would not be provided ... absent free riding," said Justice Anthony M. Kennedy said for the court.

He noted that retailers that offer displays and service for customers can be undercut by discounters.

But lawyers for the Consumers Union said that abandoning the rule against retail price fixing will result in higher prices for a variety of products.

The decision is a victory for a Los Angeles-area maker of women's handbags and other leather products. Leegin Creative Leather Products, based in the City of Commerce, makes handbags under the Brighton brand. Owner Jerry Kohl has insisted that shopkeepers sell his bags at prices he sets.

He was sued by the owner of a women's clothing shop near Dallas on the grounds that his pricing policy violated antitrust laws. A jury agreed with the shopkeeper, and the decision led to a nearly $4-million judgment.

The Supreme Court reversed the verdict today in Leegin vs. PSKS. Chief Justice John G. Roberts Jr. and Justices Antonin Scalia, Clarence Thomas and Samuel A. Alito Jr. also were in the majority.

The decision, coming on the last day of the court's term, was the 15th this year that benefits business and corporations by shielding them from lawsuits and legal claims.

The dissenters, led by Justice Stephen G. Breyer, faulted the majority for overturning a long-established rule that had benefited consumers.

"The only safe predictions to make about today's decision are that it will likely raise the price of goods at retail and that will create considerable legal turbulence," Breyer said.

The ruling leaves open the possibility that price-fixing agreements can be attacked under antitrust laws, but only when a manufacturer's brand dominates the market. This is rarely true with common retail products.

-L.A. Times-

I fail to see the constitutionality of this decision. Retailers pay manufacturers a price they already set to purchase their inventories, so what business is it of manufacturers to tell retailers at what price they can sell to consumers?

That just doesn't sound constitutional, or like free trade, to me.

Gone are the days when you'll see "... below MSRP."

Steve · #2 (**permalink**) 06-30-2007

Quote:

Originally Posted by Angry American

Retailers pay manufacturers a price they already set to purchase their inventories, so what business is it of manufacturers to tell retailers at what price they can sell to consumers?

I work in the guitar industry, and can only an opinion from that perspective.

Some manufacturers employ what's known as "MAP", or "minimum advertised price". it's simply the lowest price a dealer can advertise the product for. He can, however, sell it for whatever he wants.

Of great concern to a manufacturer, though, is the perceived value of their brand, which is of monumental importance. If a dealer sells guitar "X" for $1,000.00, it's a $1,000.00 guitar if other dealers follow suit, despite what the actual retail price of it is. If a manufacturer puts a retail price of $2000.00 on that product, the manufacturer is seen as a company that "gouges", thereby helping to "cheapen" the brand. A dealer who puts a more reasonable price on that same product won't be able to sell it and, as a result, he doesn't reorder that product from the manifacturer.

Also, manufacturers want their dealers to realize as much profit as possible from selling their products. Often, dealers are just interested in beating the price of another dealer, and will damn near drop their pants to get the sale. Unfortunately, once they do that, the customer will expect the same type of deal every time he walks into that store. Manufacturers rely on good dealers who represent their products well. Selling for a few dollars over the dealer cost doesn't do that.

It's a discussion which has very valid points on both sides. I know this, as I've been on both sides, and it's difficult to determine, sometimes, which is the more valid argument...

Imperator · #3 (**permalink**) 06-30-2007

once the product is sold from the manufacturer to the wholesaler or retailer that should be it...I don't see the purpose of this..

Angry American · #4 (**permalink**) 06-30-2007

Quote:

Originally Posted by Steve

I work in the guitar industry, and can only an opinion from that perspective.

Some manufacturers employ what's known as "MAP", or "minimum advertised price". it's simply the lowest price a dealer can advertise the product for. He can, however, sell it for whatever he wants.

Of great concern to a manufacturer, though, is the perceived value of their brand, which is of monumental importance. If a dealer sells guitar "X" for $1,000.00, it's a $1,000.00 guitar if other dealers follow suit, despite what the actual retail price of it is. If a manufacturer puts a retail price of $2000.00 on that product, the manufacturer is seen as a company that "gouges", thereby helping to "cheapen" the brand. A dealer who puts a more reasonable price on that same product won't be able to sell it and, as a result, he doesn't reorder that product from the manifacturer.

Also, manufacturers want their dealers to realize as much profit as possible from selling their products. Often, dealers are just interested in beating the price of another dealer, and will damn near drop their pants to get the sale. Unfortunately, once they do that, the customer will expect the same type of deal every time he walks into that store. Manufacturers rely on good dealers who represent their products well. Selling for a few dollars over the dealer cost doesn't do that.

It's a discussion which has very valid points on both sides. I know this, as I've been on both sides, and it's difficult to determine, sometimes, which is the more valid argument...

The argument for manufacturers just doesn't ring true for me. The value of a product is in the demand, and the demand is set by the perceived or actual value to the consumer.

Retailers are in business to make a profit, selling Sony televisions below wholesale--or their cost--is just bad business, and is counter-productive.

But now if the manufacturer can tell the retailer that they must set a retail price that is twice wholesale, the retailer no longer has bargaining power with the consumer in regards to price. I'd say most people buy from a particular retailer based on product, and price; that being the case, in order for retailers to compete based on price they will have to set a retail price above the mandated retail price, in order to have a discount or sale price.

I don't know, it just smacks of corporate favoritism to me.

Steve · #5 (**permalink**) 06-30-2007

Quote:

Originally Posted by Angry American

The argument for manufacturers just doesn't ring true for me. The value of a product is in the demand, and the demand is set by the perceived or actual value to the consumer.

That's exactly one of the points I made...

Quote:

Retailers are in business to make a profit, selling Sony televisions below wholesale--or their cost--is just bad business, and is counter-productive.

Agreed...

Quote:

But now if the manufacturer can tell the retailer that they must set a retail price that is twice wholesale, the retailer no longer has bargaining power with the consumer in regards to price.

And, in actuality, he wouldn't need it.

If someone is going to buy a camera, for instance, right now they can shop around and get the best deal. With consistent pricing, the consumer can't shop around, because everyone's selling it at the same price. That notwithstanding, the average consumer is still going to buy the camera.

Like I said, I've been on both sides of this debate, and both sides have very, very solid and valid arguments...

pramjockey · #6 (**permalink**) 06-30-2007

Quote:

Originally Posted by Imperator

once the product is sold from the manufacturer to the wholesaler or retailer that should be it...I don't see the purpose of this..

The only purpose of this is to maximize profits for some, and to drive out business for others.

Price fixing - another "benefit" brought to you by the Bush Administration.

Ash · #7 (**permalink**) 06-30-2007

The government has no business in private industry.

partofme · #8 (**permalink**) 06-30-2007

As a consumer this really pisses me off. So much Roberts respecting precedent and leaving a small footprint.

Angry American · #9 (**permalink**) 07-01-2007

Quote:

Originally Posted by Steve

That's exactly one of the points I made...

Agreed...

And, in actuality, he wouldn't need it.

If someone is going to buy a camera, for instance, right now they can shop around and get the best deal. With consistent pricing, the consumer can't shop around, because everyone's selling it at the same price. That notwithstanding, the average consumer is still going to buy the camera.

Like I said, I've been on both sides of this debate, and both sides have very, very solid and valid arguments...

Well now that camera is going to cost more.

And I'm not convinced that manufacturers have a solid, and valid argument. I just don't buy it that a discounted price cheapens a manufacturer's brand, especially an established one.

I'd have to read how this new law is worded, but if it in fact is restricted to the actual manufacturers, then China might actually be the one who sets our retail pricing, since they manufacture just about every product sold in this country.

I'd love to see that debated in court.

Steve · #10 (**permalink**) 07-01-2007

Quote:

Originally Posted by Angry American

Well now that camera is going to cost more.

Yep.

But people will still buy it...

Quote:

And I'm not convinced that manufacturers have a solid, and valid argument. I just don't buy it that a discounted price cheapens a manufacturer's brand, especially an established one.

A discounted price won't do that, necessarily. A deeply disounted one will...

Quote:

I'd have to read how this new law is worded, but if it in fact is restricted to the actual manufacturers, then China might actually be the one who sets our retail pricing, since they manufacture just about every product sold in this country.

I'm sure the pricing would be determined by the actual company. Plenty of US companies have their products built overseas, and I would imagine that it's the US company that wets the pricing...

Quote:

I'd love to see that debated in court.

I admit, it would be interesting to hear the arguments from both sides...

Thematic-Device · #11 (**permalink**) 07-01-2007

Quote:

Originally Posted by Steve

Yep.

But people will still buy it...

And before more people would buy it. For the people its worth it for the higher price but not worth it to shop around or wait for the next sale, they'll pay the higher price. For the people who want it at a lower value they'll shop around, wait for the sale, and buy it at the lower price. Its known as price discrimination and is a largely valid concept.

But what this does allow is anti-competitive price fixing, on a poor claim that sometimes, somewhere, somehow it'll promote competitive price fixing, which is a ludicrous concept.

goober · #12 (**permalink**) 07-01-2007

This is a pure payback to big business ruling, they bought and paid for this court and now it's going to rule in their favor.

Minimum Retail Pricing is all about profits for the manufacturer.
It results in higher margins for retailers, and higher margins for manufacturers.
All paid for by the consumer.
This hurts the retailer who discounts, and the result is a marketplace that has more retailers, but smaller retailers, allowing the manufacturer more control of the market. The minimum retail price, coupled with minimum order amounts, limit the number of competing products a retailer can stock.
This is just the beginning of the bad decisions that this Supreme Court will start to churn out and with the older justices being the pro-consumer liberals, it's important that the Democrats occupy the White House in 2009.

Angry American · #13 (**permalink**) 07-01-2007

I wonder if it will be possible to set up some sort of retail buy-back scheme, similar to France's short term car leases. Where they lease cars primarily to foreign tourists for anywhere from three weeks to six months tax free. Then the French auto makers re-sell the cars to the French public--minus a large portion of the initial sales tax not associated with pre-owned cars (that's my interpretation, I'm not fully versed in the details.)

So maybe retailers could take back recent purchases from customers, and then give them a store credit, which they could then use to purchase the same, or different, product. They wouldn't be able to buy the product they returned as it would be in escrow for 30 days, while it was reconditioned.

Manufacturers could also do this to compete on price.

That's just a quick thought on how price fixing might be subverted, but I haven't seen how this law/regulation is written, nor how it will be enforced.

How do manufacturers intend to police price fixing? Word of mouth?

There are an awful lot of deals to be had, which aren't advertised, or published. Those deals are private transactions between the store and the customer. Would it be done in year-end receipts, thus enforced by a new arm of the IRS?

This is more government regulation, and effectively adds a tax to the American consumer, and restricts free trade in the distribution chain.

This will certainly increase the cost of living by several percentage points, which will put additional strain on wages that already fail to keep pace with the cost of living.

If manufacturers don't adjust their mandated retail price with fluctuations in demand, the economy will slow, and the manufacturer who can adjust prices most effectively may hold a competitive edge.

Blah, blah, blah ... this is killing my beautiful Sunday, gotta go out and fire up the grill now.

Dilettante · #14 (**permalink**) 07-01-2007

Quote:

Originally Posted by Angry American

Bush's Supreme Court is churning out more fruit for corporate fat cats.

I fail to see the constitutionality of this decision. Retailers pay manufacturers a price they already set to purchase their inventories, so what business is it of manufacturers to tell retailers at what price they can sell to consumers?

That just doesn't sound constitutional, or like free trade, to me.

Gone are the days when you'll see "... below MSRP."

Perhaps, I'm a little confused, but how is this unconstitutional?
What section of the constitution is violated here?

As best I can tell, this ruling decreases government control of the market. I have trouble figuring out why a manufacturer would want to set a minimum retail sales price (it's not like it affects the price the manufacturer sales are at). But I'm not sure I see how it could be unconstitutional to allow them to include that in a contract if they wanted to.

Angry American · #15 (**permalink**) 07-01-2007

Quote:

Originally Posted by Dilettante

Perhaps, I'm a little confused, but how is this unconstitutional?
What section of the constitution is violated here?

As best I can tell, this ruling decreases government control of the market. I have trouble figuring out why a manufacturer would want to set a minimum retail sales price (it's not like it affects the price the manufacturer sales are at). But I'm not sure I see how it could be unconstitutional to allow them to include that in a contract if they wanted to.

Yea, probably nothing in the constitution would apply to this; just wishin' there was I guess.

How is this decreased government control of the market? Now the government has to enforce price-fixing agreements; which the government now condones.