Supreme Court Allows Manufacturers To Dictate Minimum Prices, Screws Consumers

The Supreme Court ruled today in Leegin v. PSKS that manufacturers can collude with retailers to set the minimum prices of products, arguing that such a decision was good for competition. Succumbing to the court’s recent bender of conservatism is a 96 year-old precedent from Dr. Miles v Park that held minimum price accords as intrinsically – or in legalese, “per se” – illegal. Writing for the majority, swing-Justice Anthony Kennedy showed kiddies the dangers of taking crazy pills:

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.

Pardon us for scoffing at the notion that Best Buy might “invest in greater customer service” now that they can work with manufacturers to screw consumers out of an additional $20 for a DVD player. Or as 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 discounts.

Leegin is the 15th ruling this term that harms consumers by shielding businesses and corporations from lawsuits.

Justices End 96-Year-Old Ban on Price Floors [NYT]
Minimum-Price Accords May Be Allowed, Top Court Says [Bloomberg]
Leegin Creative Leather Products v. PSKS (PDF) [Supreme Court]
(Photo: takomabibelot)

Comments

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  1. banned says:

    The Supreme Court is supremely retarded. I wonder what this will do to future oil prices.

  2. Well that sucks.

  3. xkaluv says:

    Bose has been doing this for years. They simply tell all of their retailers that if they continue to sell the product below a certain point that it is Bose’s internal (unilateral) policy to stop delivery of that product to the retailer.

    Since the policy was “unilateral” or one sided (Bose’s internal policy) it was not considered price fixing because the retailer sill had the free will to sell the product for whatever they wanted. … they would just never be refilled on that product again.

  4. costanza007 says:

    so… just to make it clear, retailers will always be forced to collude with manufacturers to set minimum prices, thereby destroying free enterprise.

    nope, thats not it at all.

    but their reasoning (or rather, the clip of it we got here) doesn’t sound all that great to me either.

  5. castlecraver says:

    And this embodies the ideals of free-market capitalism… how?

    I love how so many internet Libertarians (as naively as the most socialist hippie) clamor about the sacrosanctness of that concept all up until it starts cutting into their bottom line. You’re exactly right in saying it’s laughable that this will benefit customer service or product innovation. It benefits already-fat pocketbooks.

  6. Franklin Comes Alive! says:

    Beautiful graphic BTW

  7. superlayne says:

    I always thought it worked soft of like an add on…That the retailer bought product for price X, and sold it for X+Y, with their profit equal to Y. Why would the manufacturer care what y equaled?

  8. azntg says:

    I have something to say to Justice Kennedy: “Minimum price agreements can benefit corporate executives, by enabling retailers to funnel additional profits to their board of directors without fear of being undercut by discount rivals. The agreements also could make it easier for stores to screw the consumers over, because who’s to say that a retailer/manufacturer cabal won’t decide to unilaterally set the minimum prices for everything $20 higher without legal concerns or fear of any competition whatsoever?”

    I hope this ruling gets overturned soon. While, I’ll admit I do favor SOME socialist programs, this one, I do not support at all. It’s ridiculous!

  9. dbeahn says:

    I understand the idea, which is “let’s boost the customer service by protecting the retailer and the manufacturer!”, but that isn’t what will happen. Customer service will still suck, while profit margins will go up.

  10. DeeJayQueue says:

    @superlayne: it doesn’t always work that way. Sometimes stores buy products at X and then sell it for X-Y instead of X+Y so that they can offer a discount, or stay competitive. They lose money on certain items so that they can make money back on higher margin items.

    Best Buy has been doing this for years on CD sales. They sell CDs for 9.99 that they probably pay 11.99 for, but they hope that you’ll come back when you need cables or a switchbox because they make huge profit margins on those items.

    I guess that this new bill is supposed to eliminate that, so that retailers won’t have to lose money on things, they can charge full price and say “welp, the manufacturer demands it” and sooner than later we’ll see everything go from having a “List” price and a “What we’ll sell it to you for” price (like Guitar Center or Sam Ash catalogs) to only having a “List” price which will undoubtedly be the higher of the 2.

  11. TheBigLewinski says:

    Thank You “Supreme Court Assholes” for letting companies screw the little guy. How about forcing the oil companies to set a “fair and reasonable” price for gas…

  12. dmac says:

    The only business I go to for the “good customer service” is the Bunny Ranch.

  13. rohde88 says:

    @superlayne: The manufacturer cares about y because certain products rely on customer service and need price minimums. For example, a bedroom set requires lots of showroom space and knowledgeable staff. If a catalog vendor sold it for much, much less, sales from the B&M store would decrease, eventually hurting the manufacturer.

  14. B says:

    @castlecraver: If Company X sells its DVD playesr for $120, and Company Y sells a DVD player with the same features for $100, Company X will eventually go out of business. Of course, if Company X and Company Y are colluding with price fixing, it would be different, but I think that’s still illegal.

  15. Shadowman615 says:

    The manufacturer cares about ‘y’ because:

    Suppose Best Buy sells pays $90 for Sony DVD players, and sells them for $100.

    Then, Circuit City decides to undercut Best Buy and sell them for $80 (losing money on the DVD players, but hoping to make up for it by stealing Best Buy’s customers, selling add-ons, etc).

    A price war ensues, and eventually both sides find they can’t make any money selling these DVD players anymore — so they stop buying them, and Sony ends up losing as well.

    That’s the theory, I guess.

  16. Shadowman615 says:

    ^^^ Oops, that should have said, “Suppose Best Buy pays $90 for Sony DVD Players and sells them for $100.”

  17. dbrown10028 says:

    Ten years ago, I would have said collusion was a bad thing. A manufacturer will then work with certain headline retailer to make sure their price in store A & B is lower than competition.

    However, the Internet has opened up quite a few different ‘channels’ of product distribution so now its always easier to find the lowest price for a product.

    Choice to all is now available where there were maybe one or two in a store. So instead of 2-3 brands, you’ll have 5-8 brands.

  18. bluegus32 says:

    @azntg: Sorry, but this came from the U.S. Supreme Court. The only way for it to get “overturned” is by an act of Congress.

  19. LionelEHutz says:

    smells like corporate socialism to me

    Why does SCOTUS hate America?

  20. Steel_Pelican says:

    I think the idea here is that instead of competing with price, businesses will have to compete with service.

    However, this will allow manufacturers to set their own shelf prices for goods. Let’s use the Sony DVD player example again. Let’s assume that the highest price the market will bear for that particular product is $150. Sony knows this, and to maximize their profits, sets their minimum price at $148. Sony sells the units to Best Buy at $140 each. Now Best Buy can’t charge more than $150 for the item, because no one will buy it. Best Buy is forced to only make $10 on each item sold.

    Where will they make up that profit? Where will they cut their overhead? I’ll give you a hint. It starts with “C,” ends with “e” and has “ustomer servic” in the middle.

  21. alhypo says:

    @superlayne: The reason manufacturers claim they care about price Y is because setting a minimum price helps to eliminate the competitive advantage of the bare-bones, discount retailer.

    In other words, imagine you are a consumer who knows nothing of digital cameras but you want to buy one. Presumably, you want someone to help you find the camera best suited for your personal use. So you go down to Sears and the salesperson talks with you and supposedly helps you find an appropriate product. Then, instead of buying it there, you go down the street to another retailer, one that provides no knowledgeable sales staff, and buy the same camera for a lower price.

    The obvious problem is that Sears invested time/money into helping you find the right camera, but received nothing back since you bought it somewhere else. Eventually, we would expect to see no retailers with sales personnel.

    I am strongly in favor of a mandatory minimum retail price. There are other forms of competition besides price. I would prefer retailers compete on a customer service level while the manufacturers compete for price and product quality. Remember, manufacturers can only control the prices of products they make. If the price is too high you can buy a competing product. So this does not eliminate competition by any means.

    Manufacturers who truly make an efficient, high-quality product would love the ability to dictate minimum prices because the retailers, who no longer compete on price, are going to try and match customers up with the best products. If they don’t, the customer will return the item or refuse to shop there in the future.

    In my opinion, this is one of the very few good decisions the new court has made. This will not screw consumers. It will result in better quality products and customer service all around.

  22. JamieSommers says:

    So I guess we know where the first 5 iPhones were delivered last week….

  23. sled_dog says:

    The Sony example assumes that only Sony makes DVD players. Say JVC steps in with a comparable product and places it at $10 lower minimum price?

  24. TurdsAndWhey says:

    Is this the “All Requests All the Time” term of the SCOTUS (“Responsibility Thwarted While-U-Wait”)? Of course, one need not to pay heed to precedent if one can feign ignorance. The real question is: is the ignorance fake or real?

  25. bluegus32 says:

    And sorry, but I must respectfully disagree. I think the court’s ruling was appropriate. You have to read the whole 55 page opinion to see what this case is really about. Allow me to sum up.

    From the introduction

    “Given its policy of refusing to sell to retailers that discount its goods below suggested prices, petitioner (Leegin) stopped selling to respondent’s (PSKS) store. PSKS filed suit, alleging, inter alia, that Leegin violated the antitrust laws by entering into vertical agreements withits retailers to set minimum resale prices.
    . . .
    At trial, PSKS alleged that Leegin and its retailers hadagreed to fix prices, but Leegin argued that its pricing policy was lawful under §1.”

    This case did not have to do with the facts of this case. Instead, the retailer claimed that the manufacturer’s policy was per se illegal.

    In other words, the retailer was claiming that ANY situation where a manufacturer sets a price for its product, and directs the retailer to not change the price, is illegal in all situations.

    The court reasoned that no such law provides a blanket per se rule.

    “Notwithstanding the risks of unlawful conduct, it cannot bestated with any degree of confidence that retail price maintenance “always or almost always tend[s] to restrict competition and decreaseoutput,” Business Electronics, supra, at 723. Vertical retail-priceagreements have either procompetitive or anticompetitive effects, depending on the circumstances in which they were formed; and the limited empirical evidence available does not suggest efficient uses of the agreements are infrequent or hypothetical. A per se rule should not be adopted for administrative convenience alone.”

    What the court said, in essence, was only that we have to judge anti-trust laws on a case by case basis. The court did not, by any stretch of the imagination state that “manufacturers can collude with retailers to set the minimum prices of products.” Collusion between manufacturers and retailers can still be against anti-trust laws.

    Nutshell: as an example: Imagine a retailer wants to sell Cadillac Escalades for $10,000, a sum far less than the MSRP. The retailer wants to do this as part of an overall business plan. However, Cadillac is concerned that if a single retailer sells its high-end vehicle for next to nothing, that it will diminish the perceived value of the vehicle to the public. They will think it’s a crappy car and not a luxury vehicle. This, in turn, harms overall sales of the Escalade. Obviously, Cadillac has a vested interest in making certain that the public views the Escalade as a luxury vehicle.

    The only thing the Supreme Court said in Leegin v. PSKS, is that we cannot fashion one blanket rule for illegality. It has to be judged on a case by case basis. This ruling does not give the thumbs up to price fixing.

    Sorry for the long post, but this Consumerist article was misleading and just plain wrong. I had to chime in.

  26. Steel_Pelican says:

    @alhypo: I agree with you that minimum prices work in theory, because the can help curb Wal-Mart style customer service.

    However, in practice, I feel that this will give manufacturers a way to maximize THEIR profits, by setting their minimum prices high, which will lower a retailer’s ability to markup.

    Markups are where the $$ for good customer service comes from. One of the reason customer service sucks so much now is because markups are so small. This could allow markups to become even smaller.

    Secondly, if you look at MSRP’s, they are often ridiculous, compared to what you pay (for an example, a musical instrument’s MSRP is often 40% higher than it’s street price). This is the manufacturer’s idea of a good price for an item. Do you trust them to set fair minimum prices?

  27. Trai_Dep says:

    Anyone that voted Republican in Presidential elections, THANKS!

    The only consolation is that you’ve just reamed yourself as badly as you’ve reamed this country. Good job!

  28. badlydrawnjeff says:

    At the end of the day, the Court isn’t there to necessarily make a “good decision” for a consumer, but rather a “good decision” for the law. The Court feels that the ability of manufacturers/distributors and retailers to negotiate on price is not in violation of law. Whether it screws over consumers shouldn’t make a difference, and those who want it to be about whether it screws over consumers might be missing the point entirely.

  29. PeeJay says:

    The Roberts Court should just issue one opinion that’ll cover all of their furture decisions:

    1. If the case involves corporations, they can do whatever they want and consumers, employees, etc. can just suck it.

    2. If the case does not involve corporations, the following groups have priority:

    The Wealthy
    The White
    The Male
    The remainder is based on skin color – the lighter the skin, the higher the priority.

    3. For challenges to executive branch authority, the executive branch always wins and the legislative branch can suck it (subject to change if Democrats ever manage to win an election).

    I guarantee that the Roberts Court decisions will ALWAYS follow these rules.

  30. B says:

    @bluegus32: Thanks for the (long-winded) post. Now I feel better about the decision.

  31. Steel_Pelican says:

    @PeeJay: Add “The Christian” to subheading #2.

  32. Hawk07 says:

    Isn’t this already done with game console sales?

    MS, Nintendo and Sony set the prices nationally and don’t allow retailers to charge a penny more, or a penny less. This has happened for as long as I can remember.

  33. Hawk07 says:

    @PeeJay:


    what does race have to do with anything? Oh that’s right, everything according to democrats.

  34. nequam says:

    @bluegus32: Thank you for the digest. As you probably know, it’s all too common for decisions to be misconstrued based on a quick read or a less than thorough news report.

  35. Steel_Pelican says:

    @bluegus32: Thanks for the reading, it’s actually very helpful. It’s uncommon to find a well-supported opinion in blog comments. Kudos.

    But I still think that Popken’s reading of the ruling is valid- call me a cynic, but I think that most corporations (manufacturers and retailers) will usually choose their profits over their consumer. I see this ruling as giving those corporations more opportunity to screw us. The ruling itself does not in itself screw us, but it’s handcuffing us to the radiator and passing the lube to the corporations.

  36. bluegus32 says:

    @Hawk07: You’re exactly right. And someone took that to the Supreme Court saying it was illegal.

    And then newspapers vilify the Supreme Court for making the right decision.

    Interesting world we live in.

  37. kaikhor says:

    I actually work for a wholesale distributor and can tell you why the manufacturer cares. I work with knives, so I’ll use that example.

    Let’s say Swiss Army makes a knife and it costs them $5 to make. They charge my company $10 to buy it from them. My company then sells it to your local knife retailer for $15, who turns around and sells it to you for, at minimum $21.

    Now, if the retailer decides, hey, I can sell these at a loss for $10 because, hey, this Buck knife is making me more money than my Swiss Army is and I can get rid of my competitors selling Swiss Army. So your retailer lowers their price. So the competition lowers their price (to stay in business). Here soon, I have to lower my price, which in turn causes Swiss Army to lower their price. Nobody is actually making money on this deal.

    As a consumer, you will be happy. But anyone else on the chain is losing money, which we know businesses hate. So Swiss Army says that I can’t sell it to a retailer for $15 (I can’t raise it either) and that a retailer cannot sell it for less than $21 (but they can charge higher, if they so desire, thus why prices vary from store to store).

    Yes, I agree in the consumer’s mind this sucks (and I know what website I’m on) but look at it in this point of view. Who do you work for? Unless you are a government employee, this affects the company you work for and the prices they set for their clients. Your company’s bottom line affects you in your paycheck that you use to go buy these goods (and pay for things like housing and electricity, etc). So I’m upset from the end that my already expensive items may go up, but I’m grateful because it gives me a job to go to.

  38. nequam says:

    The decision would also appear to have opened the door to lots of litigation. The issue will come up again and again as bargain retailers challenge manufacturer’s plans. While the SC has rejected a per se rule, it will now be up to the lower federal courts to fashion the parameters of legal conduct by manufacturers.

  39. bluegus32 says:

    @nequam: The solution to that is not to have the Supreme Court fashion a per se rule. If we want one, then that is up to Congress, not the courts. The court was only interpreting the law. The court did not open up or close off anti-trust law.

  40. balthisar says:

    Well, I tend to think that the manufacturer’s right to enter into contracts with resalers is something that ought to be allowed. How’s the consumer get screwed? Just don’t buy that product. We’re still protected at the point monopoly abuse becomes evident.

  41. Steel_Pelican says:

    @kaikhor: What if Swiss Army sets your minimum price at $20, and the retailer’s price at $21? If Swiss Army sets your prices, they’re setting your profit margin- this can mean stability, but it also takes away your ability as a businessman to create your own strategy.

    Your position in the minimum of the value chain makes you just as screw-able as those of us at the end of the chain.

  42. Steel_Pelican says:

    EDIT: “Your position in the MIDDLE of the value chain…”

  43. kaikhor says:

    @Steel_Pelican: Very true, but I’ve never seen it happen.

  44. kaikhor says:

    Actually, as I sit and think some on your idea, I realize it won’t happen. Why? Because if Swiss Army made my price $20 and said minimum is $21, then my company would say, just as a consumer can, “Never mind, I’ll go buy these from Wenger (who also sells the multi-tool we call a Swiss Army knife. Swiss Army, like Tylenol, is a brand name.)” so when my retailers come back to buy it, I can tell them, “sorry, we no longer carry it” and I can see every other wholesale company doing so (and, so you know, I work for the largest on the west coast, there aren’t a whole lot of others to deal with) because they aren’t making money on them either. The only way to get them is to go straight to the manufacturer, who usually doesn’t want to deal with a retailer who may only buy 4 every 3 months. So they set their prices so they are making money, we are making money, the retailer is making money, and you, the consumer, might actually buy their product (or see it’s too expensive and go for a Wenger anyway!)

  45. dickthesnake says:

    OK, so if I buy some lemons and want to make lemonade out of it and sell the lemonade at a lemonade stand on my corner, I might now be subject to some “contract” I agreed to by purchasing the lemons that I can’t sell the lemonade for less than $10 a glass? Provided I throw in a carwash? (BTW, the lemons will cost $9.50 each.) Sounds like real bullsheet.

  46. cdan says:

    I’m curious how this would apply to a company like Walmart. WMT wants the lowest price possible from its manufacturers in most cases, sometimes to the point that the supplier goes out of business when forced to sell through the low-price high volume channels (i.e. Vlasic). Would this new reading allow Walmart’s competitors to set price floors on commodity items like food and other staples and force Walmart to comply? That would put the giant retailer at a competitive disadvantage, as the value of its scale would be diminished.

  47. hemaphore says:

    HELLO INFLATION!!!!!!!!!!!!!!!!!!!!

  48. Crazytree says:

    not so bad:

    consumers will vote with their dollars and elect manufacturers with the lowest prices, anyways.

  49. trashbear says:

    The main argument for setting a minimum price is that certain products may require a certain level of service to help sales. This is especially important as people start buying more and more products online.

    For example, I recently bought a new laptop backpack. I found a backpack that I liked at Fry’s electronics. It was $80 there. I then proceeded to purchase the backpack for $45 from Amazon.com. I wouldn’t have purchased the backpack online if I hadn’t been able to see it in person. Fry’s provided the essential service that led to the sale, but Amazon received all the money from the sale.

    In the extreme case, if everybody did this, eventually Fry’s would stop selling backpacks. Then people wouldn’t order the backpacks from Amazon because they couldn’t see them in person. To solve this problem, the manufacturer might say that nobody can sell the backpack for less than $60. This way Fry’s doesn’t have to worry about being drastically undercut by Amazon. So while this minimum price agreement would lead to higher prices in the short term, it would allow the manufacturer to continue selling backpacks in the long term.

  50. alteredcarbon says:

    Some say this is a case of judicial activism by the Supremes, and I tend to agree. But the whole decision can be null & voided by Congress simply changing the law.

  51. latemodel says:

    I think it will result in another hit to the small retailer. The small retailer has to have higher mark-up due to the lack of volume. While WalMart is happy with a gross profit margin of 25% the small retailer needs 35%. Which price point is the manufacturer going to settle on? These issues were addressed in the thirties with the Clayton and Robinson-Patman legistation.

  52. clarient says:

    Maybe I’m a little bit confused – I don’t undersand how this can apply to every single product everywhere.

    So Sony likes this price minimum thing and talks with the retailer and decides their minimum price is X.

    Some other manufacturer that produces a similar good can still sell the good for less than the Sony product, right? It’s not setting a minimum price on ALL ITEMS OF ONE KIND, just on brand name items. So while your Sony DVD player might go up, the knockoff manufacturer will still be willing and able to sell for less than the Sony DVD Player. And Sony will likely want to keep their prices reasonable in order to maintain a market for as long as that less expensive DVD player with the same features is still available.

    Granted I can see prices going up. But I don’t think it’s a complete license for companies to start going wild like a few of you have been implying.

  53. superlayne says:

    Thanks everyone for chiming in to my horribly-spelling-error-ridden question. :D Now I’m less stupid!

  54. krunk4ever says:

    Hasn’t Apple been doing this all along with their iPods. in order to sell apple products, retailers have to agree to not go below the MSRP.

  55. TalbotD says:


    The old joke (or dogma for many) is:

    When prices are high — that’s gouging & price manipulation.

    When prices are low — that’s cut-throat competition & predatory dumping.

    When prices are the same — that’s collusion & price fixing.

  56. bgeek says:

    Hooray!!! I’m ready for more rebates. Thank you government. As for the customer service examples, I don’t need product descriptions at the retailer. That’s what internet forums and reviews are for.

  57. number9ine says:

    Look on the bright side, there’ll be a lot less traffic on Black Friday from here on in. :)

  58. Crazytree says:

    @krunk4ever: or risk losing advertising subsidies from Apple. this is a backdoor way of doing the same thing.

  59. alhypo says:

    @Steel_Pelican: Again, manufacturers still must compete with each other. This is the mechanism that will drive costs down.

    And the MSRP is not always the same as the minimum required price. Retailers constantly sell below MSRP and proudly display this so as to make the product look like a good deal. But there is also a secret minimum price much lower than the MSRP. I doubt I’ve ever bought a musical instrument for MSRP. You’re right: that would be absurd.

  60. FlownOver says:


    Alhypo:

    Yeah, except all they know at Sears is which camera carries the best profit margin. The odds of getting good customer service anywhere are negligible, so do your own homework (I hear there’s this thing called the “Inter…” something or other) and then go for price.

  61. TechnoDestructo says:

    So are price ceilings legal?

  62. Trai_Dep says:

    @Hawk07: there are things called market development funds (MDF) which are a carrot that, say, Sony or Apple offers for co-op advertising with retailers. So long as they don’t go below a certain price, retailers get subsidized ads for the mfr’s products, basically.

    It’s an agreement. Best Buy is free to forego the MDF $$. But they’d be foolish to.

    This is much different than mfr’s setting prices amongst themselves, which in reasonable minds would constitute price-fixing. Which is now (whee! God bless Republicans!) the Courties just made legal.

  63. suburbancowboy says:

    I own a brick and mortar mid to high end A/V store. For me, this is a good thing, and in the end, it is probably very god for my customers too..

    I need to make money to stay in business. Profit margins on items like plasma TVs are very low right now. I can not stay in business if some guy with a website, and barely any overhead like my retail store has, is willing to do volume and make just a few percent profit on each item he sells.

    If I go out of business my customers will no longer have the great tech support and instant service, and the house calls that I provide.

    I try to sell brand names that are exclusive because when I give someone a price on something, you can bet your ass they are going to take the three seconds it takes to google it.

    For me, the MAP pricing (minimum advertised price) is good because I don’t have to worry about Best Buy selling it for cheaper than my threshold.

    Sure, I like to get a good deal on something when I purchase something, but as a business owner, I see this as necessary for survival.

  64. nequam says:

    @bluegus32: I wasn’t suggesting that the Court’s decision was something that needed a solution. I merely wanted to point out that what a manufacturer can and cannot do remains an open issue. One the courts can handle. This flexibility seems to be lost on a few people here.

  65. queen_elvis says:

    Is it more anticompetitive to allow price fixing or to outlaw it? I’m really not sure.

    The Roberts court makes me want to blow something up. It’s inconsistent with precedent and with itself. They don’t have to conform to my values, but it would be nice if the majority weren’t so nakedly catering to the interests of the elite.

  66. bgeek says:

    Get ready for the rebates!

  67. redbird_guy04 says:

    This seems to be the Walmart way of thinking. They are pretty well dictators of what the company will pay and when the product will be shipped, etc. I think we have to take a stand and support the local mom and pop stores that try to make an honest living. I used to shop Walmart and the big chain stores all the time, now I try to find the small guy to take my business too. They are the true businessmen.

  68. bluwapadoo says:

    Big deal:
    Overruling Dr. Miles will have little impact – businesses can get around it now
    Donald M. Barnes and David T. Fischer, attorneys at Porter Wright Morris & Arthur, LLP in Washington, D.C., “Dr. Miles: Will the Supreme Court Find a Cure?”, The Antitrust Source, February 2007, p. [www.abanet.org]
    Regardless of how the Court ultimately rules, the decision will likely have little practical effect. In the almost 100 years since Dr. Miles was decided, astute businesses have developed practices to avoid the Dr. Miles per se rule, yet achieve a de facto minimum resale price. For example, as in Colgate, the manufacturer can pre-announce to dealers a suggested resale price and let them know that it would stop selling to those who fail to sell at that price. Manufacturers can also use nonprice vertical restraints and can set a maximum resale price to avoid the per se rules. Another common technique to avoid per se treatment under Dr. Miles is the use of minimum advertised pricing (MAP). The most common form of MAP occurs where a manufacturer provides marketing subsidies to a retailer, but only if the retailer advertises the product at or above the price set by the manufacturer. MAP, however, has its own limitations. For example, MAP programs cannot contain overly strict penalties or simply be “cover” for a price-fixing agreement.42 Nevertheless, MAP programs are increasingly popular. The dearth of minimum resale price cases in the last 25 years and the minimal efforts to overturn Dr. Miles legislatively suggest that manufacturers have been able to use alternatives to minimum resale price agreements and have not felt the need to challenge Dr. Miles directly.43 As a result of the numerous “antidotes” that manufacturers already have, a reversal of Dr. Miles will have limited impact on the marketplace (although it would allow sellers to more efficiently establish a minimum resale price).

  69. Trai_Dep says:

    Bluwapadoo -

    Wow, that’s an awsome post. Thanks!

  70. halhiker says:

    First, everyone bitches about places like Walmart undercutting the little guy by demanding low prices and selling everything on the cheap. Now, everyone bitches because manufacturers can set prices for the products they make not allowing big retailers to undercut the mom and pop shops. So what is it? Do we want “always the low price” or do we want to have small business owners make a decent living?

    I don’t see this screwing the consumer at all. It is the consumer who has the ultimate power of the purse strings. If you don’t like the price people are charging for a certain product, then don’t buy it. But whatever you do, please quit bitching about it.

  71. kingdom2000 says:

    My theory is this will create a new method of competition. Instead of competing for customers, retailers will compete with manufacturers and not in the best interst of customers.

    By this I mean this precedent gives the manufacters the ability to dictate the price of items rather then suggest them. Based on this that means there is nothing stopping say Wal-Mart from going to a manufacture and coming up with an agreement to buy X quantity of items to sell at the manufacturers required price of $19.99 but only if same manufacter would require say Target to sell the same item at $24.99.

    From a pure business standpoint (the only one that matters really) its win-win. The retailer gets a good deal, the manufacturer gets a good deal and the retailers competition (and the consumer) gets screwed.

  72. Optimistic Prime says:

    What I want to know is how will this affect Clearance items? That’s just about the only thing my wife and I buy as far as luxury items go. Hell, I even buy my meat on clearance when possible… I guess this means the stores will get less of our money as we will just stop buying crap we probably didn’t need in the first place…

  73. nathanlevans says:

    This is long — but this is a complex issue. I am interested in economic issues and shave studied them. Anyway — here is what I think about what I think about this issue:

    I have a few initial thoughts as to the economic motives and situational factors that this influences.
    First, I think about how income inequity has risen sharply under Bush. That meaning that the rich are getting richer and the poor getting poorer at a much higher rate than previously. So this means that some people have more money to spend while a lot of others have less. And when you have less you aren’t worried about getting a new DVD player or other retail based items. You are worried about paying the rent and utilities, and not having to go to the food bank. So in this sense, the decision makes sense becasue as long as this gap increases, you might as well get more out of those who can afford to buy these products. After all, they have the money to do so. In neo-classical economic theory this might relate to a concept known as the point of marginal returns. In other words, at some point making another “widget” at the factory will decrease profits. Capitalists want to maximize this without going over that point, because then they take a loss for each additional “widget” made.
    This law plays into this way of thinking about economics mass. It totally raises the returns on each widget and substantially expands the territory between maximum profit for each item and entering into the point of marginal returns. In short, it gives the owners of capital a lot of wiggle room. Of course I reject the whole model. But these are the concepts that mainstream economists use.
    Second, to me it does seem to increase competition. But the real question is who does it increase competition for. Obviously, it increases the competition for retailers to bend over for manufacturers. A term that capitalist critics often use here is the “race to the bottom.” In other words, what other expenses can retailers decrease (this almost always means raising rates of exploitation and usery – but does rarely come into effect with innovation) And the retailers that can do this most are the big ones. It gives the owners of capital substantively more leverage in negotiating and bargaining at the expense of the retailer and the consumer. Even using neo-classical economic reasoning, it’s seems totally false to say that this will increase customer service.
    Or does it? Given that the rate of income inequality is increasing right now at a faster rate than since the pre-depression era market, it seems that owners of capital are simply changing the rules to fit a new paradigm of the “consumer market.” Which really means that they will have to get more out of fewer “consumers” if they are to maintain profit margins. In terms of customer service, it probably is trie that those who can afford these items might get better service. But remember, if you can’t afford something you are not considered a consumer. So, if you understand the jargon and what it means, this is probably true. But it only tells a slice of the story.
    Third, even thought this initially will only affect manufactured products like DVDs etc, – it seems that it would soon spill over into all sectors, thus further increasing income inequality. After all, even those producing/selling flour or oranges will need to increase their profit margins to keep in the game and maintain their class status. So the mid-term outlook looks bad too.
    In terms of the long run – whoa. I don’t know if it will – but it seems like it paves the way for a two-class system in some regards – if you want to graph it out and run with it. But isn’t this what Bush’s whole “ownership society” is really about anyway? That seems to be the vision they are going after.
    I look at old National Geographics I have from 1929, 1930, 1931 and 1932. You would never know that the depression was happening. Vacations and luxury items are what is being advertised. The articles are about domestic elites and foreign “savages.” But most people in the US were suffering hardcore.
    Looks like that is the direction the “Supremes” are forging.
    Perhaps a “two class” system is what it will take for the vast majority to confront oppresive systems. That is the hope I have here. But these are clever fucks – and they will try and divide people as much as possible. And – even within this blog – there is so much “false consciousness” happening (google that if you don’t know what it is) that I wonder.
    It links to the immigration debate too. And I can see why Bush promoted “amnesty” for – what did they say – 12 million illigal immigrants? I don’t like Bush’s policies, but I also see why his party apposed him. Imagine 12 million more US citizens on the side of poeple just trying to get by! Without the racist ideology we have been taught, this sector could be a powerful componant. With racism and nationalism, they will divide people interested in the same thing. And the media plays this well.
    And another thing – KEEP YOU IDEOLOGY STRIAGHT! If you believe in the “free market” then quit making these centralized decisions. I mean, what I am saying is that there never has been a free market, and the people in power who promote this idea are some of the biggest hypocrits around.

    Nathan Levans

    nathanlevans@yahoo.com

  74. nathanlevans says:

    I have a few initial thoughts as to the economic motives and situational factors that this influences.
    First, I think about how income inequity has risen sharply under Bush. That meaning that the rich are getting richer and the poor getting poorer at a much higher rate than previously. So this means that some people have more money to spend while a lot of others have less. And when you have less you aren’t worried about getting a new DVD player or other retail based items. You are worried about paying the rent and utilities, and not having to go to the food bank. So in this sense, the decision makes sense becasue as long as this gap increases, you might as well get more out of those who can afford to buy these products. After all, they have the money to do so. In neo-classical economic theory this might relate to a concept known as the point of marginal returns. In other words, at some point making another “widget” at the factory will decrease profits. Capitalists want to maximize this without going over that point, because then they take a loss for each additional “widget” made.
    This law plays into this way of thinking about economics mass. It totally raises the returns on each widget and substantially expands the territory between maximum profit for each item and entering into the point of marginal returns. In short, it gives the owners of capital a lot of wiggle room. Of course I reject the whole model. But these are the concepts that mainstream economists use.
    Second, to me it does seem to increase competition. But the real question is who does it increase competition for. Obviously, it increases the competition for retailers to bend over for manufacturers. A term that capitalist critics often use here is the “race to the bottom.” In other words, what other expenses can retailers decrease (this almost always means raising rates of exploitation and usery – but does rarely come into effect with innovation) And the retailers that can do this most are the big ones. It gives the owners of capital substantively more leverage in negotiating and bargaining at the expense of the retailer and the consumer. Even using neo-classical economic reasoning, it’s seems totally false to say that this will increase customer service.
    Or does it? Given that the rate of income inequality is increasing right now at a faster rate than since the pre-depression era market, it seems that owners of capital are simply changing the rules to fit a new paradigm of the “consumer market.” Which really means that they will have to get more out of fewer “consumers” if they are to maintain profit margins. In terms of customer service, it probably is trie that those who can afford these items might get better service. But remember, if you can’t afford something you are not considered a consumer. So, if you understand the jargon and what it means, this is probably true. But it only tells a slice of the story.
    Third, even thought this initially will only affect manufactured products like DVDs etc, – it seems that it would soon spill over into all sectors, thus further increasing income inequality. After all, even those producing/selling flour or oranges will need to increase their profit margins to keep in the game and maintain their class status. So the mid-term outlook looks bad too.
    In terms of the long run – whoa. I don’t know if it will – but it seems like it paves the way for a two-class system in some regards – if you want to graph it out and run with it. But isn’t this what Bush’s whole “ownership society” is really about anyway? That seems to be the vision they are going after.
    I look at old National Geographics I have from 1929, 1930, 1931 and 1932. You would never know that the depression was happening. Vacations and luxury items are what is being advertised. The articles are about domestic elites and foreign “savages.” But most people in the US were suffering hardcore.
    Looks like that is the direction the “Supremes” are forging.
    Perhaps a “two class” system is what it will take for the vast majority to confront oppresive systems. That is the hope I have here. But these are clever fucks – and they will try and divide people as much as possible. And – even within this blog – there is so much “false consciousness” happening (google that if you don’t know what it is) that I wonder.
    It links to the immigration debate too. And I can see why Bush promoted “amnesty” for – what did they say – 12 million illigal immigrants? I don’t like Bush’s policies, but I also see why his party apposed him. Imagine 12 million more US citizens on the side of poeple just trying to get by! Without the racist ideology we have been taught, this sector could be a powerful componant. With racism and nationalism, they will divide people interested in the same thing. And the media plays this well.
    And another thing – KEEP YOU IDEOLOGY STRIAGHT! If you believe in the “free market” then quit making these centralized decisions. I mean, what I am saying is that there never has been a free market, and the people in power who promote this idea are some of the biggest hypocrits around.

  75. hop says:

    what more can one say????the robed dorks have struck again….

  76. lonelymaytagguy says:

    Maybe this will evolve to something like prescription drugs. Every weekend there will be shopping excursion buses to Canadian electronics stores.

  77. RokMartian says:

    It isn’t like the Supreme Court overturned anything. So, this has been going on for a while, and will continue to do so.

    Smaller companies will now be able to compete with the likes of Best Buy and Walmart, because they will not be able to sell something at a loss or less than a smaller competitor.

    A manufacturer will not raise the prices – the big box companies will still get a better rate based on volume purchased.

    What I do see happening is that Best Buy will be able to “discount” the products by increased store based rebates or free incentives like free dvds with purchase of a player.

  78. synergy says:

    And now people will see what will happen when neo-conservatives were voted into the legislative and executive branches – nominations and appointments of neo-conservatives into the SCOTUS which so far have passed medical legislation that doesn’t include health/death clauses and junk like this where consumer protection is removed.

  79. Big Poppa Pimp says:

    @bluegus32
    Great analysis. Thanks for actually reading the decision. I agree that a per se rule (which was a court-mandated common law doctrine dating back to Miles) is inappropriate in cases where competition may not be harmed. I think the court was on solid ground here. It’s a shame that people are reading things into this decision that aren’t there- I think if the names of the justices in the majority and dissenting opinions were reveresed, we would have the same commenters praising the decision.

    I am not 100% sure I love the court’s economic analysis but I definitely agree that the per se rule was wrong.

  80. JustAGuy2 says:

    @trai_dep:
    “This is much different than mfr’s setting prices amongst themselves, which in reasonable minds would constitute price-fixing. Which is now (whee! God bless Republicans!) the Courties just made legal.”

    No, they didn’t do anything of the sort. This case has NOTHING to do with all the DVD player manufacturers getting together and saying “we’re not going to sell our DVD players for less than $100.” The decision stated that an arrangement where the manufacturer of a given product (say Hermes neckties) tells retailers of that product “you can’t sell these ties for less than $100,” isn’t automatically illegal. It has nothing whatsoever to do with collusion among manufacturers.

  81. bluegus32 says:

    You know what amazes me? My comment is the 81st so far. Of the other 80, it appears that 50 or more have to do with people saying “stupid courts” or “stupid Republicans” or some such nonsense. One friggin’ misinformed headline erroneously informs these people that price fixing is now legal and the majority of people believe it.

    They say the mind is a terrible thing to waste. I guess you can’t waste it if you don’t have one to begin with. It never ceases to amaze me how people will believe whatever is put in front of them.

    Here’s a clue everyone — the Consumerist is a very well informed and generally reliable blog. However, it is not infallible. I highly suggest that when ANYONE tells you something that doesn’t sound right, that maybe you go check for yourself rather than blindly believing the misinformation.

  82. azntg says:

    I’ve skimmed through the 55 pages of the Supreme Court docket. And I don’t think the headline nor the article is misinformed. And I think it’s perfectly reasonable for people to be skeptical of the ruling and the court, given recent current events and whatnot.

    I think you’re right about the Supreme Court not being able to “overturn” their rulings, except in the intervention of Congress. But then again, they did in essence overturn their previous rulings of Dr. Miles vs. Park with this latest case, even if that isn’t the precise term that we want. Who’s to say that they won’t do it again in the near future? Unless the manufacturers take great care to avoid stepping in the wrong person’s toes (which I hope, but I’m inclined to believe that it’s not going to happen in the long term), I think the justices or their successors will have to eat their own words again. Gee, maybe we did do something right, with our ideal capitalism world lead the way to “enhanced customer service” and affordable prices… for the beneficiaries?

    A mind is a terrible thing to waste, indeed. I’m happy to say I agree with you wholeheartedly. While I can’t waste mine since I don’t have already have one, I can tell you that you’re doing great with wasting your own by repeatedly trying to push your opinion and trying to villify all who thinks otherwise.

  83. bluegus32 says:

    AZNTG: I only try to villify those who blindly follow and take as gospel truth those things for which they have no rational basis. I’m glad that you read the entire opinion and I’m glad that you disagree with me. Despite your antagonism, it is clear that you DO have a mind and that it is not being wasted.

    But note that you are one of maybe two or three people (out of 82 comments) who read the court’s ruling and then disagreed with my opinion. Everyone else against this ruling simply disagreed based upon an article with a one paragraph citation from a 55 page ruling.

    We live in a world where the majority of people form an opinion first before ever educating themselves on what their opinion is actually based upon. Each of those persons’ votes in elections count just as much as yours and mine. I don’t think it’s too much for me to ask that people educate themselves before having a say on important political matters.

    I’m not trying to villify those who think other than me. I’m only trying to villify those who don’t think.

  84. MarkNS says:

    The rationale given for this ruling doesn’t make much sense but I see nothing wrong with end result. Manufacturers and retailers should be free to enter into business contracts regarding price. This is not the same as a cartel of competing manufacturers colluding to fix prices. There is nothing to stop competing manufacturers from producing similar products and entering into different (or no) agreements with retailers. Competition will be alive and well. If retailers don’t like the deal, they should not carry that manufacturers product.

  85. TheBigLewinski says:

    What FCK’N idiots we have as Supreme Court Justices. These scumbags don’t live in reality and are in the pockets of the big manufacturers playing with their balls.

    There is NO WAY this will drive better competition or customer service.