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

There are other ways.

[ScentCone]

You'd see a vastly improved rebate industry ramp up, and more importantly, you'd see retailers "bundling" things that they would then instantly take back for a substantial credit/refund. Anyone who's worked retail (especially IT supporting retail!) knows how creative someone can get while competing with someone else two doors down in the strip mall. Where this would get ugly is the little stuff... like, toothbrushes.

Another solution? Retailers who thrive on competitve pricing all become like Costco, and sell things "wholesale" to their member customers. It's sort of like those bars where you have to become a "member of the club" (for $0.01) in order to have a drink poured.

This effort will flop, or there will be a legislative cure anyway. Wal-Mart alone would lobby that one right into the stratosphere.

Re:Good news for the black market

[publius1234]

Price controls/manipulation are never a long term positive economically speaking. These kinds of things always lead to inefficiencies, which have a net negative economic impact.

They do, however, make excellent fodder for populist politicians and the pathologically uninformed. Bread and circuses, anyone?

Blame the Victim

[The Monster]

these are exactly the types of questions that capitalism can't solve by itself

Hogwash. If a manufacturer places rules on retailers that they don't like, they're likely to find those retailers stocking competitors' products instead. All it takes is one player who sees the value of not actively alienating his distribution channels. With a free capital market, such a player can be assembled with little difficulty. But of course, we don't have a free capital market. Everything is regulated by SEC, and every time a large company goes out of business, someone decides There Ought To Be A Law to be sure it doesn't happen again. So they pile on more regulations that act as a barrier to new entrants, stifling competition.

The apologists for the Nanny State routinely trot out antitrust as an example of where the free market doesn't work, but in reality it's the industries with the most regulation by government that are the most monopolized. Take telecommunications. For most of the history of telephones, it was illegal to compete for customers. That monopoly was enforced by local governments. But I guess as long as you control the government schools that teach the history of 'Robber Barons', people will believe the propaganda.

I'm OK with it

[LunaticTippy]

If online retailers can provide the same thing for 24% less then we should have very few brick and mortar retailers.

Grocery stores would still exist, as would convenience stores. Clothing shops might do OK since people like to try things on. There are always impulse/emergency items, in many categories. I can see the need for a handful of electronic/computer retailers in a large city.

Can you give me a good reason we should prop up an obsolete business model besides nostalgia or personal preference?

The way I've shopped in the last 10 years is: Online comparison/research. Online purchase unless shipping is more expensive than local, I want an easy return, I need to touch/smell/hear/taste the item first, or I'm in a big hurry.

I always assumed that eventually everyone would adopt this model of shopping and we'd see a massive collapse of brick-and-mortar retailers. Retailers that are smart will be able to adapt. Lots of opportunities, like partnering with an online retailer, offering amenities that aren't possible online, etc.

Re:adam smith is rolling in his grave

[alisson]

Well both small and large retailers do it; and most manufacturers don't care, or have a reason to. Small retailers do it to get rid of stock that isn't selling well; large ones do it to get rid of... the small retailers.

Although most manufacturers do set a minimum advertiseable price. But again, many major retailers refuse to follow such rules, and most small ones aren't really subject to scrutiny.

Re:Until you consider Patents and other G. Monopol

[Zeinfeld]

Once upon a time there was this guy called Adam Smith who observed that whenever people engaged in the same trade meet they almost invariably engage in a conspiracy against the general public.

That same Adam Smith is the same Adam Smith who is the origin of pretty much everything that has historically been considered a free market.

In Smith's day state monopolies were a common means of raising revenue. Smith demonstrated that such restraints on trade have hidden costs that are much greater than were imagined at the time. The cost of the tax is much greater than the amount paid raised in revenue.

In libertopia they do things differently of course, the only evil that can ever exist in libertopia is the result of people consipiring together through the government. The fact that a large corporation has a similar coercive power to government is inconvenient ideologically and is thus ignored.

Nothing is going to happen here. At worst the SCOTUS redefine the interpretation of the anti-trust acts. But that might well be the best outcome long term for consumers since if Congress revisits price maintenance agreements making them explicitly illegal they wil probably act on advertised price maintenance as well.

I don't see an argument being made that prohibiting retail price maintenace is unconstitutional. Even though many members of SCOTUS are notorious partisan hacks I don't see that as being very likely.

Re:Until you consider Patents and other G. Monopol

[tkrotchko]

"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.

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.

Except that consumers disagree.

[Kadin2048]

if the local bookstores days are at an end, so are the local butcher, the local grocer, the local record shop, the local clothing boutique, the local computer shop, local hardware store, etc, etc, etc. pretty soon, all we'll have is walmart, target, barnes and noble, borders, best buy, macy's, jc penny, circuit city, compusa, and home depot.

What's your point?

People vote with their wallets every day, and they've pretty clearly indicated that they don't value these type of establishments, in most cases, enough to pay their premiums. The "value added" in other words, of the local butcher, just isn't enough to most people, to cover the increase in cost versus prepackaged meat from the megamart.

I'm sorry that you don't like the way it's worked out -- and if it helps, I agree with you, and I refuse to shop at Walmart (or Target, or Home Depot) when there's an alternative -- but I think it's fundamentally wrong to try and keep obsolete businesses alive at a direct cost to consumers who have clearly voted with their feet and their wallets and said they're not interested. That's at best regressive, and at worst tyrannical.