"An era can be said to end when its basic illusions are exhausted." - Arthur Miller

Thursday, June 28, 2007

Supreme Court OKs Price Fixing

From CNN:
WASHINGTON (Reuters) -- The Supreme Court on Thursday overturned a nearly 100-year-old precedent that some price-setting agreements between manufacturers and retailers are automatically illegal under federal antitrust law.

By a 5-4 vote, the justices overturned a 1911 Supreme Court ruling that minimum prices set by manufacturers on what dealers can charge customers for their products are unquestionably illegal.

The decision was a victory for U.S. business groups that had argued the agreements are often pro-competitive. The groups had urged the high court to adopt a less exacting standard that examines each agreement on a case-by-case basis.

Antitrust authorities at the Justice Department and the Federal Trade Commission also had urged the top court to overturn the precedent, while 37 states and a leading consumer group had urged that the precedent be preserved.

The ruling stemmed from an appeal to the Supreme Court by a company called Leegin Creative Leather Products Inc., the manufacturer of the Brighton brand of women's accessories.

In 1997, it adopted a policy stating it would do business only with retailers that followed its suggested retail prices and would not sell to retailers that discounted its products.

PSKS Inc., operators of a retail store known as "Kay's Kloset" in Lewisville, Texas, placed the entire line of Brighton products on sale below the suggested price in 2002. Leegin then stopped all shipments of its products to the store.

PSKS sued under the antitrust law, alleging illegal price fixing. A jury awarded PSKS $3.6 million in damages and $375,000 in attorney fees, an award upheld by a federal appeals court.

The Supreme Court's majority opinion, written by Justice Anthony Kennedy, reversed the appeals court's ruling.

Justices John Paul Stevens, David Souter, Ruth Bader Ginsburg and Stephen Breyer dissented.

Large retailers impacted by the decision include Wal-Mart (down $0.23 to $48.23, Charts, Fortune 500), Target (down $0.17 to $63.58, Charts, Fortune 500) and Lowe's (down $0.40 to $30.85, Charts, Fortune 500).
Basically the very very very pro-Bush administration pushed for a law that allows businesses to get together and fix prices, reducing competition. If a competitor wants to compete in price and the supplier doesn't like it, then its just to bad so sad. The door is open for price fixing and underhanded agreements.

The reasoning behind the decision, in the usual Bush admin non-logic: "Minimum price agreements can benefit consumers, Kennedy wrote, by enabling retailers to invest in greater customer service without fear of being undercut by discount rivals. The agreements also could make it easier for new products to compete, he added, because a retailer could recoup the costs of marketing a new good by charging a higher price."

So it helps business by giving them money to increase customer service? Seriously? that is the legal grounds? What the hell does that have to do with anything.

From the Consumerist:
"....s Justice Stevens put it slightly more eloquently in his dissent, "The only safe predictions to make about today's decision are that it will likely raise the price of goods at retail.''

Under the old system, manufacturers could send pricing signals to retailers by way of a Manufacturer Suggested Retail Price (MSRP,) though retailers were free to compete by selling products below MSRP. Under the new system, championed by Justices who promised to respect stare decisis at their confirmation hearings, manufacturers can now use resale price maintenance (RPM) agreements to ban retailers from offering

Leegin is the 15th ruling this term that harms consumers by shielding businesses and corporations from lawsuits."
I see it going one step further. Semi-exclusive agreements. For example, Wal-Mart could sign a deal with company A. They will sell a product at the companies desired price of $19.99. In return, the company agrees that it will require other competitors, say Target, to sell that same item at $24.99. I think this will be the dawn of a new method to screw consumers. You want to say businesses wouldn't do that, but honestly why wouldn't they? Its win-win for everyone but the consumer.

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