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

Well that sucks.

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.

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.

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.

Beautiful graphic BTW

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?

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!

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.

@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.

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...

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

@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.

@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.

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.

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

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.

@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.

smells like corporate socialism to me

Why does SCOTUS hate America?

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.

@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.

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

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?

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?

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.

@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?

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!

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.

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.

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

@PeeJay: Add "The Christian" to subheading #2.

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.

@PeeJay:

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

@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.

@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.

@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.

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.

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.

@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.

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.

@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.

EDIT: "Your position in the MIDDLE of the value chain..."

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

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!)

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.

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.

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

not so bad:

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

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.