Supreme Court Anti-Trust Ruling Threatens Higher Prices for Consumers
From 1911 until last month, a manufacturer couldn’t enter into agreements with retailers to set minimum re-sale prices. A 1911 Supreme Court ruling said such “vertical price restraints” were per se illegal under the Sherman Act. That meant the manufacturer couldn’t argue that really it was a good idea and somehow good for consumers or the economy to impose such restraints. It wasn’t allowed, period.
Some of the justifications offered included the idea that vertical price restraints would increase inter-brand competition, and that being unable to compete based on price, retailers will be forced to invest in other tangible or intangible services or promotional efforts to corner their share of the market.
In other words, since every retailer will be equally expensive and consumers won’t be able to hope to find a better price, retailers will have to offer them something else in order to capture their business. The idea that most consumers would prefer lower prices to having tea served in the boutique seems to have escaped these noted legal scholars.
It seemed inevitable from the moment this ruling was published that consumers could expect to start paying more. The Consumer Law & Policy Blog warned, in particular, that the ruling would have negative consequences for internet shoppers. Consumers used to using the internet for quick price comparisons on identical items may now find the answers startlingly similar. And, of course, the ease of online price comparisons will also make it very easy for manufacturers that insist on minimum-price agreements to monitor internet sales prices.
Although the full impact of the ruling remains to be seen, the Southern District of Florida alone has already seen two cases in which corporations have invoked the Leegin reasoning in defense of various restraints on re-sale of specific products. All in the interests of promoting competition, of course.
