Friday, June 29, 2007

Well, that's a start . . .

I haven't had a chance to read the whole opinion yet, but it seems that there was a positive outcome in the US Supreme Court's decision yesterday in Leegin Creative Leather Products, Inc. v. PSKS, Inc..

Striking down an antitrust rule nearly a century old, the U.S. Supreme Court has ruled that it was not automatically unlawful for manufacturers and distributors to agree on minimum retail prices.

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

Five justices, agreeing with the nation's major manufacturers, said the new rule could in some instances lead to more competition and better service. But four dissenting justices agreed with 37 states and some consumer groups that abandoning the old rule could result in significantly higher prices and less competition for consumer and other goods.

The court struck down the 96-year-old ruling that resale price maintenance agreements were an automatic, or per se, violation of the 1890 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 new rule is considerably more favorable to defendants. [Stephen Labaton, International Herald Tribune]
Compelling those who initiate antitrust suits to have make an actual case over merely alleging a per se violation of the Sherman Act is a nice step forward, but the Court continues to give the "Rule of Reason" a bad name. As most regular RoR readers understand in spades, a real rule of reason would lead to the outright abolition of antitrust.

1 comment:

Jason said...

I agree it's a step in the right direction, but there are miles left to go. Allowing price-setting issues to be reviewed by lawmakers on a case-by-case basis leaves the door wide open for arbitrary infringements of the rights of business owners, as well as the kind of selective corporate favoritism that gives capitalism a bad reputation. While I'd like the decision to go further, I'm glad that the issue of pricing - one of the most controversial in my industry - is, for the time being, settled.

Those of us in manufacturing establish minimum-advertised-price [MAP] policies regarding the sale prices retailers publish. It helps maintain a healthy variety of retailer types, as well as maintains the consumers' perception of product quality, since some box-mover online warehouse can't chase away all competition by selling the products at a far lower margin than independent "brick and mortar" retailers.