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Bad news For Bargain Hunter - Supreme Court allows Minimum Selling Prices

Old 06-28-07, 03:25 PM
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Bad news For Bargain Hunter - Supreme Court allows Minimum Selling Prices

This is not a DVD bargain so it probably doesn't belong here but since people on this board look for bargains and this ruling may limit such bargains in the future
I thought it of interest to people looking at this board.

Per the NY Times

Justices End 96-Year-Old Ban on Price Floors

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By STEPHEN LABATON
Published: June 29, 2007
WASHINGTON, June 28 — Striking down an antitrust rule nearly a century old, the Supreme Court ruled today that it is no longer automatically unlawful for manufacturers and distributors to agree on setting minimum retail prices.

The decision will give producers significantly more leeway, though not unlimited power, to dictate retail prices and to restrict the flexibility of discounters.

Five justices said the new rule could, in some instances, lead to more competition and better service. But four dissenting justices agreed with the submission of 37 states and consumer groups that the abandonment of the old rule would lead to significantly higher prices and less competition for consumer and other goods.

The court struck down the 96-year-old rule that resale price maintenance agreements were an automatic, or per se, violation of the Sherman Antitrust Act. In its place, the court instructed judges considering such agreements for possible antitrust violations to apply a case-by-case approach, known as a “rule of reason,” to assess their impact on competition.

The decision was the latest in a string of opinions this term to overturn Supreme Court precedents. It marked the latest in a line of Supreme Court victories for big businesses and antitrust defendants. And it was the latest of the court’s antitrust decisions in recent years to reject rules that had prohibited various marketing agreements between companies.

The Bush administration, along with economists of the Chicago school, had argued that the blanket prohibition against resale price maintenance agreements was archaic and counterproductive because, they said, some resale price agreements actually promote competition.

For example, they said, such agreements can make it easier for a new producer by assuring retailers that they will be able to recoup their investments in helping to market the product. And they said some distributors could be unfairly harmed by others — like Internet-based retailers — that could offer discounts because they would not be incurring the expenses of providing product demonstrations and other specialized consumer services.

A majority of the court agreed that the flat ban on price agreements discouraged these and other marketing practices that could be helpful to competition.

“In sum, it is a flawed antitrust doctrine that serves the interests of lawyers — by creating legal distinctions that operate as traps for the unaware — more than the interests of consumers — by requiring manufacturers to choose second-best options to achieve sound business objectives,” the court said in an opinion by Justice Anthony M. Kennedy and signed by Chief Justice John G. Roberts Jr. and Justices Antonin Scalia, Clarence Thomas and Samuel A. Alito Jr.

But in his dissent, portions of which he read from the bench, Justice Stephen G. Breyer said there was no compelling reason to overturn a century’s worth of Supreme Court decisions that had affirmed the prohibition on resale maintenance agreements.

“The only safe predictions to make about today’s decision are that it will likely raise the price of goods at retail and that it will create considerable legal turbulence as lower courts seek to develop workable principles,” he wrote. “I do not believe that the majority has shown new or changed conditions sufficient to warrant overruling a decision of such long standing.”

During the period from 1937 to 1975 when Congress allowed the states to adopt laws that permitted retail price fixing, economists estimated that such agreements covered about 10 percent of consumer good purchases. In today’s dollars, Justice Breyer estimated that the agreements translate to a higher annual average bill for a family of four of roughly $750 to $1,000.

The dissent was signed by Justices John Paul Stevens, David H. Souter and Ruth Bader Ginsburg.

The case involved an appeal of a judgment of $1.2 million against Leegin Creative Leather Products Inc. after it cut off Kay’s Kloset, a suburban Dallas shop, for refusing to honor Leegin’s no-discount policy. The judgment was automatically tripled under antitrust law.

Leegin’s marketing strategy for finding a niche in the highly competitive world of small leather goods was to sell its “Brighton” line of fashion accessories through small boutiques that could offer personalized service. Retailers were required to accept a no-discounting policy.

After the United States Court of Appeals for the Fifth Circuit, in New Orleans, upheld the judgment and said it was bound by Supreme Court precedent, Leegin took the case to the Supreme Court. Unless it is settled, the case, Leegin Creative Leather Products v. PSK Inc., will now be sent down to a lower court to apply the new standard.

The Supreme Court adopted the flat ban on resale price agreements between manufacturers and retailers in 1911, when it founded that the Dr. Miles Medical Company had violated the Sherman act. The company had sought to sell medicine only to distributors who agreed to resell them at set prices. The court said such agreements benefit only the distributors, not consumers, and set a rule making such agreements unlawful.

Justice Kennedy said today that the court was not bound by the 1911 precedent because of the “widespread agreement” among economists that resale price maintenance agreements can promote competition.

“Vertical agreements establishing minimum resale prices can have either pro-competitive or anticompetitive effects, depending upon the circumstances in which they are formed,” he wrote.

But Justice Breyer said in his dissent that the court had failed to justify the overturning of the rule, or that there was significant evidence to show that price agreements would often benefit consumers. He said courts would have a difficult time sorting out the price agreements that help consumers from those that harm them.

“The upshot is, as many economists suggest, sometimes resale price maintenance can prove harmful, sometimes it can bring benefits,” he wrote. “But before concluding that courts should consequently apply a rule of reason, I would ask such questions as, how often are harms or benefits likely to occur? How easy is it to separate the beneficial sheep from the antitrust goats?”

“My own answer,” he concluded, “is not very easily.”

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Last edited by Classic Films; 06-28-07 at 03:29 PM.
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Old 06-28-07, 03:31 PM
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Between this and the Twomby decision, the AT laws have taken a huge hit this session.
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Old 06-28-07, 03:53 PM
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Anyone wanna dumb it down for me, please?
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Old 06-28-07, 03:57 PM
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Originally Posted by The Valeyard
Anyone wanna dumb it down for me, please?
Essentially, the ruling made it easier for manufacturers to demand that retailers sell goods at minimum prices
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Old 06-28-07, 04:41 PM
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I will be surprised if this hits the dvd category. In a sense Apple and other companies have already enforced MAP by cutting off supply to sellers who refuse to follow guidelines. I had heard that some retailers were challenging there ability to force it upon them. Maybe this is the result?

Very surprising ruling.

Last edited by BKenn01; 06-28-07 at 04:44 PM. Reason: add to post
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Old 06-28-07, 04:47 PM
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I find it even more surprising that it was the conservative members of the court responsible for this - seems counter-intuitive to alleged conservative economic policy (free markets, that is).
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Old 06-28-07, 04:48 PM
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Originally Posted by lxjenkins
I find it even more surprising that it was the conservative members of the court responsible for this - seems counter-intuitive to alleged conservative economic policy (free markets, that is).
I think the opposite - it protects business interests by allowing a price floor.
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Old 06-28-07, 04:52 PM
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Originally Posted by DVD Josh
I think the opposite - it protects business interests by allowing a price floor.
It may protect some business - but will definitely hurt others. Price floors would essentially prohibit the bargain pricing schemes used to gain entry into a market.
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Old 06-28-07, 04:53 PM
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This is insane. And these hacks claim that they are there to interpret law? Tyrants, it's what they are.

E
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Old 06-28-07, 05:01 PM
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Originally Posted by DeltaSigChi4
This is insane. And these hacks claim that they are there to interpret law? Tyrants, it's what they are.

E
I dislike the ruling - but you're taking it a bit far. haha.
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Old 06-28-07, 05:01 PM
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Didn't some companies like UnderArmour already have agreements that fixed their prices?
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Old 06-28-07, 05:02 PM
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Originally Posted by DVD Josh
Essentially, the ruling made it easier for manufacturers to demand that retailers sell goods at minimum prices
Yes, but they also said it would depend on the case at hand...it doesn't give manufactuers carte blanc...in fact, it's little change in the law at all. They basically just said it's warranted in SOME circumstances - the case they reviewed being one of them.
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Old 06-28-07, 05:04 PM
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Where's Wal-Mart when we need them?
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Old 06-28-07, 05:05 PM
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Originally Posted by Shannon Nutt
Yes, but they also said it would depend on the case at hand...it doesn't give manufactuers carte blanc...in fact, it's little change in the law at all. They basically just said it's warranted in SOME circumstances - the case they reviewed being one of them.
Yes, it is to be applied on a case by case basis - however, before it was per se unlawful. That's a big change in my opinion.
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Old 06-28-07, 05:27 PM
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Seems to me this will help to stop Wal-Mart from "predatory pricing." Pricing the good under their cost, just to drive out their competition who can't afford to do that. Manufacturers don't want to see that happen, because then they're at the beck and call of Wal-Mart, taking orders from them on how or what goods should be made.

BUT, it will also stop an upstart internet company from offering a lower price because they found a way to lower their overhead. The manufacturer could say, nope, you have to charge a price comparable to what the B&M retailer does, even though your costs are lower.

And bottom line, this decision WILL lead to a lot more legal wrangling in the courts. It's going to take a lot of lawyers to decide which cases will and will not apply to the law now, whereas before it was a cut-and-dry blanket application. The courts will now have to be more active on this issue. Seems like it will take a lot more smaller court decisions to ascertain just exactly what the impact of this will be in the long run.
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Old 06-28-07, 05:32 PM
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Seems counter-intuitive for this ruling in the face of a court that believes in letting free trade reign without hardly any restrictions. Now they show no regard for the consumer (no surprise since they are pro business) and earlier have felt little concern for employees (the recent ruling against workplace discrimination by a female worker) so what's next: abolishing the anti-dumping laws? I say we outsource the Supreme Court in favor of a more open minded country.
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Old 06-28-07, 05:59 PM
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Will have little to no effect on DVDs. Sales of DVDs are on the decline - manufacturers won't jack up prices. Perhaps some of the cheepo loss leader DVDs might disappear, but, then again, the retailers are in cahoots with the studios on those anyway - so even those are probably safe.
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Old 06-28-07, 09:17 PM
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I would say with DVDs it would most likely effect new releases of major motion pictures. Where Target, Best Buy, or Wal Mart might offer a new release at a very attractive price, perhaps now they won't be able to if the studio objects. Older releases such as Fox's $19.99 or less TV season sets are offered by the studios to the retailers to move stock. These I am sure will continue.
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Old 06-28-07, 10:09 PM
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Originally Posted by DVD Josh
Essentially, the ruling made it easier for manufacturers to demand that retailers sell goods at minimum prices

Oh!

Thanks.
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Old 06-29-07, 08:20 AM
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Originally Posted by DeltaSigChi4
This is insane. And these hacks claim that they are there to interpret law? Tyrants, it's what they are.
You mean REPUBLICANS are what they are.

In terms of internet startups, I wonder how that will work. Say you sell everything at the floor, but offer coupons to reduce overall prices (like $5 off any DVD). You're technically selling the item at floor, but then offering a discount off the total sale (the $5 is good PER ORDER so you'd have to place multiple orders to get it off multiple titles).
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Old 06-29-07, 08:24 AM
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Good thing the Bush adminstration took such a great stance against "activist judges" rewriting laws.

Nice one guys!
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Old 06-29-07, 08:38 AM
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Originally Posted by Lastdaysofrain
Good thing the Bush adminstration took such a great stance against "activist judges" rewriting laws.

Nice one guys!
LOL! I was thinking the same thing.

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Old 06-29-07, 08:41 AM
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Oh-oh...political discussion breaking out!
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Old 06-29-07, 01:08 PM
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Ah, another great move by our government. I'm so glad that they're always looking out for the little people, and not giving nudges and winks to their buddies in the skyscraper offices.
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Old 06-29-07, 01:17 PM
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Originally Posted by Greg613
Where's Wal-Mart when we need them?
http://www.walmart.com/

Hope this helps!
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