SCOTUS Case May End Sale Prices

An anonymous reader writes "If you own a mom & pop store and can't get rid of some of your inventory, you can always clear out some shelf space by holding a sale. If the Supreme Court sides with business interests in a case they heard today, however, such sales may no longer be possible. Since 1911 it has been illegal for manufacturers to force retailers into setting a price floor for products — individual retailers get to decide how much they sell products for. But today the Supreme Court heard oral arguments in a case seeking to overturn this longstanding rule. Should the Court do so, it would drive up consumer prices across the board. This case is particularly salient in the era of Internet shopping: consumers are now easily able to shop around to multiple retailers to find the best price. The Court could wipe out this advantage." From the article: "Should the Court abandon the... rule against minimum resale price maintenance... it would send a signal that the Roberts Court will continue to narrow the application of the antitrust laws and that the Court may disregard settled precedent and Congressional will in other areas of the law as well."

Comments

Re:adam smith is rolling in his grave

[profplump]

And the free-market answer to that is that no manufacturer will be able to sell the price-fixed product because no retailers will do business with them. While I'm sure you could come up with a few counter-examples, in many markets manufacturers are at the mercy of retailers, and exactly the *opposite* problem occurs -- retailers dictate price to manufacturers. This is one of the thing people whine about when the bash Wal-Mart.

Re:No minimum price? Fine. No product for you.

[whoever57]

A retailer has the right to refuse price floor contracts. Likewise, under a pure free market, a producer has the right to refuse to sell its product to retailers that refuse price floor contracts.

We are increasing moving away from a free market, the DMCA and other laws have created new government sanctioned monopolies -- for example, you can't buy anything except an iPod and expect it to work with iTunes. Increasingly, products are intangible and as such are protected from competition by copyright law, or they are tangible products that are protected by patent law. Free markets really only work when there are viable alternatives.

Sort of.

[Chmcginn]

Under current law:

a.)Manufacturer telling retailer "You must sign a contract to sell at this price, and if you sell below that afterwards, we sue you" is illegal.

b.)Manufacturer telling retailer, "You can't advertise at cheaper than this price, or we won't sell to you anymore" is legal. According to the ACSBlog people, the net effect of the case in point would be to make both legal.

Re:Isn't Apple doing this? & Bose?

[silverhalide]

Apple and Bose maintain tight control over their distribution. As such, they control directly the price the retailer pays for the goods. Other companies use third party distributors which introduce more padding into the pricing, and as such more flexibility. If you violate Apple's pricing policies, well, no more iPods for you to sell, and you can't get them anywhere else for less than the retail price. With other companies, you could simply call up another distributor and continue selling the goods for whatever price you wanted (even if it's below retail).

The practice of selling things too cheap will lessen as more and more companies take control of their distribution, cut out distributors, and enforce their pricing policies.

Re:There are other ways.

[Martin Blank]

Walmart doesn't sell below cost, they buy in such huge bulk that they can profitably sell for mere pennies over cost.

But WalMart still sets their own prices. They may sell for eight cents over or twelve cents under their costs, but that is WalMart's call. The worry here is that WalMart would be forced to sell, say, a shirt at $14.98 even if they want to sell it for $6.92, or a mower for $149.99 even if they wanted to price it at $105.96.\

Substitute the name of your favorite local mom-n-pop for 'WalMart.'

Re:There are other ways.

[adrianmonk]

Wal-Mart alone would lobby that one right into the stratosphere.

Wal*Mart won't give a flying fuck whether, on paper, its suppliers gain the legal right to walk away if Wal*Mart won't agree to minimum price rules. Wal*Mart has its suppliers firmly by the balls, and if they want to continue selling to Wal*Mart, they do whatever Wal*Mart says. And they do want to keep selling to Wal*Mart, because Wal*Mart is literally the largest retailer that has ever existed in the known universe, and no longer being able to sell to them is not good for business.

Re:Until you consider Patents and other G. Monopol

[Maniakes]

He also said that attempts to prevent this were doomes, and he went on to say that in the absence of active government support these conspiracies are doomed due to chiselling and competition from those outside of the cartel.

People of the same trade seldom meet together, even for merriment and
diversion, but the conversation ends in a conspiracy against the
public, or in some contrivance to raise prices. It is impossible,
indeed, to prevent such meetings, by any law which either could be
executed, or would be consistent with liberty and justice. But though
the law cannot hinder people of the same trade from sometimes
assembling together, it ought to do nothing to facilitate such
assemblies, much less to render them necessary.

A regulation which obliges all those of the same trade in a particular
town to enter their names and places of abode in a public register,
facilitates such assemblies. It connects individuals who might never
otherwise be known to one another, and gives every man of the trade a
direction where to find every other man of it.

A regulation which enables those of the same trade to tax themselves,
in order to provide for their poor, their sick, their widows and
orphans, by giving them a common interest to manage, renders such
assemblies necessary.

An incorporation not only renders them necessary, but makes the act of
the majority binding upon the whole. In a free trade, an effectual
combination cannot be established but by the unanimous consent of
every single trader, and it cannot last longer than every single
trader continues of the same mind. The majority of a corporation can
enact a bye-law, with proper penalties, which will limit the
competition more effectually and more durably than any voluntary
combination whatever.

It's pretty clear from context that when Smith says "corporation" here, he means what'd we'd call a guild or an industry association. An organization which everyone in the industry was compelled to join and which had the power to regulate the business activities of everyone engaging in the trade. More like the AMA than, say, Microsoft or Google. Smith was not arguing for government antitrust regulation, but rather for governments to avoid mandating or encouraging industry self-regulation.

Re:There are other ways.

[Kadin2048]

So? Who the fuck cares? This is *Wal-Mart* you're talking about, ya know. They can't always call the shots. Let 'em suffer.

I think you're forgetting that Wal-Mart basically owns dozens of Representatives and bunches of Senators; if something threatens their business model they will find a way to legislate around it. Experience has shown that legislation bought by corporate interests tends to be incredibly bad and destructive in the long run; therefore, anything which causes Walmart to call in all of its favors at once and get a lot of stuff rushed into the U.S. Code should be avoided. (Because if you don't think Wal-Mart could in about ten minutes get the "Flying Happy Face" turned into the national bird, and Sam Walton's face printed on all U.S. Currency, you're smoking crack. Walmart has a gun to the head of the government, in the form of the ~1.2M people it could suddenly dump onto unemployment.)

If you think the telecommunications industry, the music companies, or big IT (Microsoft, etc.) have an overabundance of power in government, Walmart is orders of magnitude more powerful than them. It's just that Walmart really doesn't have to do anything very often, because it's busy making money hand over fist the way things are.

As other people have pointed out, Walmart's opening move would probably be easy: they'd just force manufacturers to produce slightly different versions of products for their stores, with lower minimum MSRPs. Rather than forcing everyone to sell at the same price, Walmart would just use the law to its advantage and use the law to prevent anyone from ever competing with them on price, even if they wanted to sell certain products at a loss to get people in their stores.

Since manufacturers already package things specifically for Walmart anyway (with different SKUs, etc.) it's a pretty trivial change in many cases. You just package it a little differently, maybe throw in some different add-ons or different configuration options, or create a new "product line" to market it under (particularly good with clothing), and make the minimum MSRP whatever Walmart demands. Since nobody else can buy the 'Walmart version' (Walmart would insist on exclusivity, of course -- and don't think that's ever going to be legislated against; nobody in government would ever really take on Walmart in a fight) there's no way to compete on price.

*Imagining*?

[weston]

Stop imagining conspiracies of collusion between cutthroat competitors.

http://www.usatoday.com/life/music/news/2002-09-30 -cd-settlement_x.htm
http://www.engadget.com/2007/03/21/sony-others-nam ed-in-video-tape-price-fixing-scheme/
http://news.com.com/Samsung+to+pay+300+million+for +price+fixing/2100-1004_3-5894862.html
http://illinoisissuesblog.blogspot.com/2007/03/pri ce-fixing.html
http://www.sfgate.com/cgi-bin/article.cgi?file=/ch ronicle/archive/2002/05/10/MN24643.DTL
http://www.reviewjournal.com/lvrj_home/2002/May-08 -Wed-2002/business/18699104.html
http://www.powells.com/biblio?PID=28734&cgi=produc t&isbn=0767903277

What's more, you don't have to spend long in today's business culture before it becomes *obvious* that there's enough of a critical mass of actors who believe in getting ahead by amassing control over channels and perception (rather than producing/adding value) that the emergence of price-fixing behavior is practically inevitable.