Supreme Court Approves Price Fixing

Sure, our headline might be a bit of an exaggeration, but the Supreme Court really did make a decision that will result in higher prices for consumer goods (including CDs): Justices End 96-Year-Old Ban on Price Floors:

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.

Elections have consequences. Like many of the Supreme Court’s recent decisions, this one passed with a 5-4 margin, two of those five put there in the second term of the current president. Heck of a job, Bushie!

7 thoughts on “Supreme Court Approves Price Fixing”

  1. I didn’t read the article link but read your synopsis. I may be missing something but how will prices go higher if they remove the floor? Price floors prevent prices from going below a certain point regardless of supply/demand factors. Usually, these types of floors help farmers, etc. Any clarification would be appreciated.

  2. Freep:

    Some economists worry that allowing manufacturers to set minimum prices for their products will hurt upstart discounters and Internet resellers seeking to offer new, cheaper and less expensive ways to distribute products.

    Especially online distributors:

    Some believe it will be harder for online sellers to acquire overstock/liquidation items from local businesses, a source of inventory for many.

    But who knows?

  3. Yes, and there’s a reason it was law for 96 years. Many big box retailers could do all sorts of loss lead “specials” to run out local, specialty shops, thus violating what used to be standard anti-trust rules. Now, Walmart can undercut anyone in town until all the competition is gone and then jack the price to whatever they want. Great.

  4. Derek,

    I don’t understand your response. Until this ruling it was illegal for manufacturers to require minimum prices from retailers on their goods. That meant that for the past 96 years Walmart was allowed to set retails at whatever price they deemed appropriate in their stores. Which they do.

    This ruling allows companies like P&G (Tide, Folgers, Gillette) to tell retailers what the allowable minimum retail on their product can be. The ability to dictate pricing retards the market. It’s bad for consumers.

    As far as “price leading” it’s not Walmart that is the biggest culprit. Walmart practices “Every Day Low Pricing.” Which means that on most products they set their retail based on a base margin (on groceries 10%-15%). On most boxes of breakfast cereal at Walmart, this means that you pay about 15% above the price that Walmart pays for the product.

    However, supermarkets like Jewel, Safeway and Kroger will price breakfast cereal 30-40% above cost everyday. But they’ll run it on special BELOW cost repeatedly throughout the year. Those SALE prices in traditional supermarkets are typically BELOW the WalMart Every Day Low Price.

    If P&G decides that the allowable minimum retail on Folgers Coffee will be 15% above cost, it probably won’t hurt Walmart. Walmart’s retail pricint is in that neighborhood already. But it will hurt traditional supermakets, which regularly offer specials on Folgers at or below their cost. In other words, Walmart keeps their Every Day Low pricing, but traditional Supermarkets are screwed.

    This is a very very bad ruling.

  5. It will be interesting to see in reality WHICH manufacturers will set minimum prices to prevent “loss leading.” I might never purchase soda again if I have to pay the retail price for that shit.

    I wonder if this will affect used CDs? What about craigslist and ebay?

  6. Soda, or “CSD” companies encourage loss leader pricing on carbonated soft drinks. They do it with trade programs to retailers in the forms of promotional incentives.

    In other words, Coke calls-up the Jewel buyer and says “We’ll give you an extra $200,000 next week if you run Coke on the front page of your circular at a ‘hot’ retail.”

    You’ll never see Coke or Pepsi stick to any kind of minimum price structure. They are driven by volume. One bad week of sales at big national chain and they’re in the hurt locker.

    My guess is that you WILL see some attempt by media companies to control pricing on CDs and maybe even DVDs (at least new releases).

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