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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."
TFA is not a news article, it is a guest editorial by a friend ("amicus") of the defendants. So, it is very slanted as to why minimum resale price agreements should continue to be in violation of antitrust laws. Knowing there is always two sides to a story, I sought out that other side and found this from the Ayn Rand Institute:
Legalize "Price-Fixing"
Please note that by posting this, I am not saying I support the Ayn Rand Institute's side; I mearly think it is important to hear both sides of the debate. In this case, I think the Institute does a poor job of convincing the public that their position in in our best interest.
Really though, this is about what you do with what you own and we should not undo a century of sensible policy. Once you buy something you own it and can do what you want, right down to giving it away. Why give up that right? So McSoft can make more money? No one but monopoly providers will benefit from this.
Large online clearinghouses benefit from this.
Local bookstores for example are starting to massively suffer from online competition. Customers walk in, browse, leave and order the book from amazon.com for 10-20% less. How do you combat this? Retail cannot lower their prices to the same level online companies can -- they have prime real-estate leases vs a warehouse in some grungy commercial district. They deal in hundreds of books per week in stead of per hour, etc, etc.
The proposed legislation prevents amazon.com from lowering the price of the books to less than the retailers can survive.
I don't know if that is a good idea, but I do think *something* needs to be done to protect retail. Retail is not an obsolete business model - online sales would suffer too if we couldn't kick the tires at retail. The issue here isn't that retail is 'obsolete', its that retail has to figure out how to make money from customrs who just come in to browse and try things on.
Would you pay 'cover' to get into a retail store? Would you pay a sales person even if you didn't buy something. ie... the bookstore or shoestore could lower their prices and compete with amazon if you paid $20 dollars at the door just to get into the store. There'd be no incentive to buy online as the price in the store would be the same. You could still avoid going into the store, and just buy online directly, and save money, but you lose out on the chance to browse etc.
Essentially, retail and online provide the same final product. retail costs more because of the extra service of bringing the inventory close to you, and having staff available to work with you with it. Retail needs to figure out how to get paid for that component because whats going on right now is that people use the retail outlet to decide what to buy, and then buy it online.
Or put another way online retailers are basically letting retail to all work, and bear all the costs, of making the sale, while swiping the actual transaction because their prices are cheaper. Right now retail bundles the cost of making the sale into the product, and are losing out to online competition who don't have that cost.
Retail needs to unbundle that cost, so they can offer the same product for the same price as online, while somehow charging directly for the service of letting you play with it, try it on, decide what to buy, etc.
Its sort of a bizarre model, but I can't see a better solution. regulated minimum pricing doesn't strike me as a solution.
As online shopping grows other markets will be hit by this, like sports equipment (runners (Nike/Addidas/Reebok), weights, skis, etc), electronics, designer clothing, etc. In fact pretty much anything where you can look at the product (at retail) to gauge its fit/quality/comfort/whatever and then order online and expect to receive an identical product.
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.
As a player in the market I play not just for profit, but for market share. My aim is to put all competitors out of business, and since I'm in a market with very high barriers to entry I can keep them out of business. Now that I have achieved a monopoly (and monopoly rents), the retailers have no choice but to do business with me and I will certainly dictate the exact conditions under which my products can be sold. If I'm unable to achive a monopoly, I will instead collude with the other surviving players to our mutual advantage, and again to the disadvantage of retailers and consumers.
This scenario is historically why Anti-trust law was necessary in the first place.
Are you seriously suggesting that retailers are refusing to stock Microsoft products because these products come with strings attached? Reality check: Should their sales agreements specify minium resale prices, the mum & dad computer shops will be in no position to refuse MS. And they won't.
This is but one of the reasons that the intervention of the state is necessary to a healthily functioning capitalist economy.
Better to be despised for too anxious apprehensions, than ruined by too confident a security. --Edmund Burke
"Local bookstores for example are starting to massively suffer from online competition. Customers walk in, browse, leave and order the book from amazon.com for 10-20% less. How do you combat this?"
Offer better services ranging from knowledgeable clerks to coffee bars to author signings to small concerts certain nights of the week.
Or maybe the local bookstore's days are at an end. It hardly seems worthy of laws or court actions. Times change. We all adapt or end.
You were mistaken. Which is odd, since memory shouldn't be a problem for you
Intuitively, I find that fixing this is the least offensive of the "everything copyable should be freeeee!" movement, but at the same time the difficultly is that the alternative actually restricts the ability for other companies to try alternative business models.
For example, let's say I want to buy a song from Garth Brooks. Curiously, none of the music services I've tried (as far as I can remember) offer his songs for download. Maybe iTunes does; I haven't tried that one. But that's perfectly fine in my view -- he (or his distributor, or whatever) decided he didn't want to distribute his songs under that model. Who am I to force him to?
One of the great things about the music business is that there's a lot of talent out there. This means there's a lot of opportunity to create and try new business models, even if not everybody signs on. Exclusivity can be used to push business models, both to an individual consumer's advantage and disadvantage. But that's OK.