from HERE
I’m not very familiar with the original law other than a few cases that have been brought against companies for “Price fixing”. Isn’t this the same thing and isn’t over turning this ruling akin to saying that price fixing is now legal? Tell me I’m missing something PLEASE and that the supreme court has blown a gasket on this one.
~Matt
So I’m not missing something? This looks to me like a license to steal. Honestly companies are getting busted for this all the time. Recently there was a issue with PC memory if my memory serves. This is BAD news. Honestly what’s to keep every major producer in the country from calling up 2 or 3 main competitors and saying “Hey listen, I figure we’ve been bustn’ each others chops for 96 years now. How bout we agree on a price and add 15% to…nahh let’s add 25% to that. We’ll make sure that no one sells for less than that.”
~Matt
this has come up before the court many times over the last 50+ years … hello price fixing once again
but another BIG big 5-4 decision this week, are we heading back to racially segregated schools?
http://www.buzzle.com/articles/sharply-divided-supreme-court-votes-5-4-on-schools-integration.html
With these and other decisions, and the monies stolen out of the US Treasury to ‘fight terrorism. wink wink’, it’s going to take generations to get the US back on track.
Well, that would be actual price fixing. For a manufacturer to set minimum prices for their products is not necessarily price fixing, as you always have the option of using someone else’s product.
e.g. GM may say that the Pontiac G6 can be sold for no less than $15,000 to all of their dealers. There is nothing to stop you, as a consumer, from purchasing a different manufacturers product.
Of course, this assumes that the manufacturer is not a monopoly.
but another BIG big 5-4 decision this week, are we heading back to racially segregated schools?
I have no problem with that ruling and in fact agree with it. In our district we have already moved away from racial quotas and moved to regional quota’s. Basically each school has to have a certain percentage of students from each region. This of course causes diversity but is not based on race as anyone from that region can go to a different regions schools.
I doubt that this ruling will have much if any impact on desegregation.
~Matt
For those who would rather get their info from the source instead of the NYT, here is a link to the actual opinion http://www.supremecourtus.gov/opinions/06pdf/06-480.pdf
Basically, since the early 1900’s the rule has been that a manufacturer/wholesaler could not tell a retailer what price to charge. Hence all the “suggested retail price” references you may have seen. The rule was absolute. If a company set a price or set a minimum price for its retailers it was a “per se” violation which means, no questions asked, you are guilty no matter what.
The case handed down yesterday changed that per se rule and overturned the case that had established it. Now, courts faced with such claims must apply a “rule of reason approach” which means courts will now actually look at teh facts of individual cases and decide whether the setting of a price or price floor by the manufacturer/wholesaler actually hurts customers. sometimes it will, sometimes it won’t. All this case does is help keep the folks whose actions do not hurt consumers from getting ground up and bankrupted by anti trust suits.
If you read the opinion, it has a pretty lenghty discussion of the changes in basic ecomominc theory on this issue over the last 100 years that leads most economists now days to beleive that “verticle price fixing” is not always damaging to consumers. Manufacturers who can not guarntee some level of profit by their retails will be driven out of business, thus actually reducing competition.
Here is a brief summary of the holding from the opinion’s sylibus:
Notwithstanding the risks of unlawful conduct, it cannot be stated with any degree of confidence that retail price maintenance “always or almost always tend to restrict competition and decreaseoutput,” Business Electronics, supra, at 723. Vertical retail-priceagreements have either procompetitive or anticompetitive effects, de-pending 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. Such rules can be counterproductive, increasing the antitrust system’s total cost byprohibiting procompetitive conduct the antitrust laws should encour-age. And a per se rule cannot be justified by the possibility of higherprices absent a further showing of anticompetitive conduct. The anti-trust laws primarily are designed to protect interbrand competitionfrom which lower prices can later result. Respondent’s argumentoverlooks that, in general, the interests of manufacturers and con-sumers are aligned with respect to retailer profit margins. Resale price maintenance has economic dangers. If the rule of reason were to apply, courts would have to be diligent in eliminating their anti-competitive uses from the market. Factors relevant to the inquiry are the number of manufacturers using the practice, the restraint’s source, and a manufacturer’s market power. The rule of reason is de-signed and used to ascertain whether transactions are anticompeti-tive or procompetitive. This standard principle applies to vertical price restraints. As courts gain experience with these restraints byapplying the rule of reason over the course of decisions, they can es-tablish the litigation structure to ensure the rule operates to elimi-nate anticompetitive restraints from the market and to provide moreguidance to businesses.
Two things here. First this *The decision will give producers significantly more leeway, though not unlimited power, to dictate retail prices and to restrict the flexibility of discounters. *This is not about GM selling to a dealer but about how much that dealer can discount it. IOW an internet seller will not be able to sell it any cheaper than a brick and mortar reseller. This in essence will seriously effect many internet sales.
Second “Price fixing” will naturally take place as soon as one company puts a price tag on a known “retail price” all the competitors will know that that price will be equal across the board. Assuming two fairly equal products why wouldn’t they set the price higher and match?
~Matt
All that the decision does is remove the ipso facto anti-trust violation for minimum pricing agreements. Minimum pricing agreements can still be an anti-trust violation but it must be proven on a case by case basis. Yes, this will mean that minimum pricing agreements will come back but not as among competitors because that is price fixing. I would think the WalMart haters would love this.
The retail industry is a funny business. Lots of new products may not see the light of day because they can not get shelf space or any agreement from retailers to advertise, etc. Minimum pricing agreements can help give retailers the confidence that they won’t be stuck with product that is being sold for less elsewhere.
But doesn’t this simply shift the “Burden of proof”? For instance prior to this ruling you simply did not tell the retailer a price to set your product at. If you followed this rule you were safe. If you broke there rule there was no question and you were busted.
Now the case is that you can tell the retailer what price to sell at. Now you have to deem whether you’re acting within the “Spirit” of the law. Seems to me that the later will be next to impossible to prove and thus no one, or very few, will be breaking the law.
In the mean time the door is flung wide open for price gouging and potential price fixing all the while limiting teh freedoms of the retailers, no?
~Matt
Second “Price fixing” will naturally take place as soon as one company puts a price tag on a known “retail price” all the competitors will know that that price will be equal across the board. Assuming two fairly equal products why wouldn’t they set the price higher and match?
That isn’t price fixing. That is how the marketplace operates today.
**First this The decision will give producers significantly more leeway, though not unlimited power, to dictate retail prices and to restrict the flexibility of discounters. This is not about GM selling to a dealer but about how much that dealer can discount it. IOW an internet seller will not be able to sell it any cheaper than a brick and mortar reseller. This in essence will seriously effect many internet sales.
Of course it does, and I’m not making an argument that this ruling is good or bad. I simply don’t have enough information to make that call. But in my opinion, it may affect internet sales for companies who choose to restrict the ability of internet-based sellers, while those who do not restrict internet based sellers ability to discount products may experience an increase in sales. In still other cases, it may increase sales and help consumers, as it gives manufacturers a way to protect the interests of their brick and mortar distributors while still expanding their reach. There are a significant number of businesses today who do not allow their products to be sold over the internet (e.g. Trek) This may allow them to open up that avenue of distribution.
In general, I am in favour of less regulation, not more. This ruling is a move to less regulation, so it may be a good thing. But at this point, I don’t have enough information to say that for sure.
I’d like to know how this will even work. If Wal-Mart is selling the same thing at the same price as Target, K-Mart and my local stores, what’s the point? Competition amongst retailers is instantly eliminated and a good deal of that power is shifted to the producer.
Competition amongst producers is easily eliminated when compared to retail as the prices are not seen by the public. In essence I see next to no safety nets to prevent price fixing. In short I see a whole bunch of downsides and next to no upsides.
~Matt
A company like Wal Mart has enough clout to tell the manufacturer of most products what the “minimum retail price” of a particular product should be.
maybe people will finally smarten up and realize they don’t need half the shit that is lying around their house. The amount of crap we buy in NA is truly astounding.
Mark
That isn’t price fixing. That is how the marketplace operates today.
Yes, expect with the exception of individual retailers. Today even if a company does involve themselves with price fixing individual retailers will sell at varying price. This variation in price drives the market. I might pay 20$ for something but I won’t pay 25$. If I buy it at 20$ because a retailer decided to sell it at that price it may influence another retailer to sell at that price.
With a fixed retail price I will have no option except to not buy if the price is 25$. This will eliminate the entire “hopping around” mentality as there is no reason to shop around.
In general, I am in favour of less regulation, not more. This ruling is a move to less regulation.
I agree about less regulation but without doubt no regulation is not a good thing either. In the end you have to weigh whether the regulation promotes or hinders freedom. In this case without doubt taking away this regulation promotes the producers to “Self regulate” at a far stricter level than the regulation itself. In essence the produces with completely eliminate competition among retailers.
As far as this *There are a significant number of businesses today who do not allow their products to be sold over the internet *The percentile of producers that do not allow their product to be sold over the internet is very small. In fact bikes are the only one I can think of versus everything from cars and houses to toys that CAN be. Personally I believe this is because bike companies are afraid of the competition and know that in a real price war many of them would end up going out of business.
~Matt
You are neglecting the fact that retail shelf space is a finite resource. Assume that WalMart sells Levis and Wrangler jeans. You have a new brand of jean that you want WalMart to sell. WalMart must decide whether to sell your product or not. Because of this ruling, WalMart can safely stock your product at a price that it can make money on because it can get an agreement that you won’t allow any of its competitors to sell for less than x price. There is no automatic price fix. Under the current law, try finding an Apple computer at any retailer for less than what they sell them for at the Apple Store or on line. You won’t. Why?
Your concern about price fixing is legitimate but it is not automatic. It can still be an anti-trust violation but not an automatic one.
But if we stop buying so much stuff, haven’t the terrorists won?
We could play this game all day but lets use a completely unrealistic, hypothetical example:
You have 1 retailer (WMart) with $1,000,000 cash in the bank, and they sell one product (widgets) at $10 apiece. Their cost is $5 apiece.
A new retailer (TMart) comes on board, saying that they can sell the widgets for $9 apiece. their cost is $5 apiece. Being a new retailer, they are saddled with significant debt, and no cash in the bank.
WMart decides to lower their price to $4 apiece. TMart cannot match that price, and goes out of business. After TMart goes out of business, WMart raises the price back up to $16 apiece to recoup the lost profits.
A price floor at $7 would have allowed both businesses to be profitable, and consumers would have been better off.
Sure, but what’s the point if all of their negotiations will benefit their competition unless it is an expressed attempt to put their competition out of business?
As far as I can tell this ruling does not regulate the price the producer sells at, only what the retailer sells at. So Walmart makes a deal to buy 1 gagillion and “hints” that the retail price should be X. Of course since Walmart is buying a gagillion they are going to get deep discounts and have a decent profit margin at X. However local store is only buying 500K and thus don’t get a discount and thus has a very low profit margin. So despite the fact that people WANT to buy at the local store and would pay a bit more for the better service the local store has to charge the same price.
In the other case of Walmart negotiating a price that they can make a good profit at, why would they if this will also benefit their competitors?
~Matt
My point is that you won’t see the minimum pricing be an issue in everyday goods, especially not in markets where the big-box stores operate. It will continue to operate the exact same way it is today, the big box stores will have the ability to dictate lower prices to their suppliers and they will be able to offer lower prices than their competitors. You won’t see Walmart raise their prices overnight as a result of this ruling.
This ruling deals with setting minimum retail prices, not the retail price you actually see on the shelf. Your local convenience store will still sell laundry detergent for $3 more than Walmart sells the same detergent.
Personally I believe this is because bike companies are afraid of the competition and know that in a real price war many of them would end up going out of business.
Actually, its the retailers who have the most to lose from internet sales. I don’t know about bikes, but in many other industries it is the retailers who tell the manufacturers that if they allow internet sales, they will drop their products like a hot potato and leave the manufacturer without a brick and motar retail pipeline to consumers.
Here’s how this works. Trek would make money in the short run if it allowed Madone’s to be sold to you and me internet only sellers. We’d pay lower prices since the low overhead internet seller could still make a decent profit at a low markup. But, the LBS who counts on those Madone sales to help keep the lights on would eventually go out of business. Now, Trek will lose all those $300 mountain bike sales because it has no stores and most of the folks buying those bikes want one now and are not going to order one off the net. Trek would then have to jack up the Madone prices. We’d pay alot more for our next bike and there would be no LBS to go to to get our bike fixed or to even buy a new tube. Worst of all, the kid down the street would be riding a Huffy from Wal-Mart instead of a Trek 3500 and would end up dissolutioned and never getting hooked on cycling, further driving down demand for high end bikes over time and further raising prices for you and me. Our world would totally suck. But, thanks to yesterday’s Supreme Court decision, we will not have to face that ugly reality.