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Ban On Price Floors Abandoned, Internet Prices May Rise
Posted by
kdawson
on Thu Jun 28, 2007 04:44 PM
from the 96-year-old-precedent dept.
from the 96-year-old-precedent dept.
paro12 and i_like_spam informed us of a 5-4 decision by the US Supreme Court which abandons a 96-year-old ban on manufacturers and retailers setting price floors for products. The Slashdot community discussed the issue when the case was argued back in March. The ruling means that anti-competitive complaints based on price-fixing will have to be argued case-by-case and will be harder to prove. Discounts and discounters in all venues may be under pressure, with internet sales possibly the hardest hit. "Importantly, this case points a dagger at the heart of the most consumer-friendly aspects of the Internet. The Internet has shifted power to the consumer in two ways. First, it allows consumers to search for and gather information in a cost-effective, efficient manner. Second, it provides a low-cost means of retailing, making it easy for discounters to offer products to the public. This combination squeezes excess profits and inefficiencies out of product prices. Retail price maintenance seeks to short circuit this extremely consumer friendly process. By setting minimum prices, manufacturers can build in excess margins for themselves and for their favored retailers -- prices that consumers have no choice but to pay."
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News: SCOTUS Case May End Sale Prices 527 comments
An anonymous reader writes "If you own a mom & pop store and can't get rid of some of your inventory, you can always clear out some shelf space by holding a sale. If the Supreme Court sides with business interests in a case they heard today, however, such sales may no longer be possible. Since 1911 it has been illegal for manufacturers to force retailers into setting a price floor for products — individual retailers get to decide how much they sell products for. But today the Supreme Court heard oral arguments in a case seeking to overturn this longstanding rule. Should the Court do so, it would drive up consumer prices across the board. This case is particularly salient in the era of Internet shopping: consumers are now easily able to shop around to multiple retailers to find the best price. The Court could wipe out this advantage." From the article: "Should the Court abandon the... rule against minimum resale price maintenance... it would send a signal that the Roberts Court will continue to narrow the application of the antitrust laws and that the Court may disregard settled precedent and Congressional will in other areas of the law as well."
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News: Battle Over Minimum Pricing Heating Up 272 comments
The Wall Street Journal is covering developments in the gathering battle between manufacturers and retailers / discounters, especially online ones, over minimum prices. Earlier this year the Supreme Court upheld the right of manufacturers to enforce price floors for their products. Since then, manufacturers have increasingly been employing service companies like NetEnforcers to snitch on discounters who offer goods below "minimum advertised prices" (or MAPs), and to send DMCA takedown notices to the likes of eBay and Craigslist for below-minimum offers. Separately, the Journal reports that a coalition of discounters and retailers is using eBay as a stalking-horse in a campaign to get consumers, and then politicians, fired up enough to pass legislation outlawing MAPs.
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Let me guess... (Score:5, Insightful)
Re:Let me guess... (Score:5, Informative)
Justice Breyer wrote the dissent [supremecourtus.gov]. Here's a piece:
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Re:Let me guess... (Score:5, Insightful)
We'll live. The U.S. Supreme Court has done a lot of good, especially in reigning in the worst excesses of the legislature, and one result of an independent judiciary is sometimes they're going to do things you don't like.
I feel sorrier for the people in those countries where the courts simply apply the law, and are never allowed to challenge it.
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Re:Let me guess... (Score:5, Informative)
To summarize:
Prior to this decision, any price floor set by a manufactorer was automatically considered a violation of anti-trust laws designed to increase competition.
Apparently there are some specific situations where a price floor would lead to more competition, not less. The specific cases in question included some of those situations. The argument was that since they led to more competition, not less competition, they didn't violate the relevent anti-trust laws.
Therefore the court took another look and said "You're right, there are some specific situations where a price floor wouldn't violate the law against being anti-competitive, since in those situations it actually leads to more competition". As a result, you may now set a price floor and not have the Feds come after you as long as you are able to show a federal judge that your price floor actually leads to more competition, not less.
If your price floor leads to less competition, then you still can do it as it's still a violations of the relevent anti-trust laws designed to encourage more competition.
So, having read that summary, why the hell does anyone think there is anything wrong with that decision? True, now people who can justify their price floor on more competition grounds might have to defend that in court, but how is that worse than those same people being not able to encourage competition that way in the first place?
For specifics on exactly how a price floor may in rare cases lead to more competition, please read the actual court briefs and decision.
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Re:Let me guess... (Score:5, Informative)
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Re:Let me guess... (Score:5, Insightful)
Maybe instead of directing anger towards the few voters that actually exercised free will, you should instead point it towards (a) the sheep that stick to party lines, and (b) the fucked up voting process that forces you to vote for 'who you think can actually win' rather than who you actually want to represent you.
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Re:Let me guess... (Score:5, Interesting)
Talk about a fantasy world. That's the one where we 3rd party voters only need to make the imperfect choice "sometimes." Give me a break. I make this imperfect choice every election. Yes, it pisses me off. But what happens if 3rd party voters vote instead for one of the big two parties? Nothing. The two big parties are equally corrupt, just in different ways.
And it sure doesn't make sense to convince otherwise reasonable voters that Gore and Bush were fungible.
Hindsight is 20/20, the grass is greener on the other side, and you can't predict the future of America if Al Gore had won. Perhaps instead of dumping our money into the war, we'd be dumping it on further social security and medicare waste, and imposing draconian environmental laws to curb greenhouse gases, economy be damned. You know, people die due to bad economies as well as wars.
In my view, the big parties are one giant party designed to increase their power and decrease ours. One side wants to limit what you. The other side wants to limit what you can do with the money you earn. Both increase taxes and spending and the size of government. Both parties want to infantilize the citizens so that they rely on bigger and bigger government -- which provides them with more power.
So yes, I do blame Nader as a spoiler, and the nuckleheads who helped him along.
You can continue to blame them all you want. I'll continue to vote my conscience. That means I'll be voting for Ron Paul. If he doesn't win, I don't care who wins.
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Re:Let me guess... (Score:5, Informative)
You do realize that the US ranks 45th in the world [cia.gov] in terms of life expectancy, right below Saint Helena and right above Cyprus, right? The average life expectancy in Cuba, an impoverished nation which is under an embargo that covers much medical technology is only one year less than that in the US, the wealthiest nation on the planet. Meanwhile, we spend twice as much as anyone else [typepad.com] for this worse care. Check out all of the cited studies linked from that page, too.
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Re:Let me guess... (Score:5, Interesting)
Competition reduces prices. What we have here is a case of market manipulation by insurance companies and pharmaceutical companies (among others) which drives up prices and in fact reduces the quality of care because it limits available treatments (insurance companies decide by fiat what they will or won't cover, and most Americans who do have health care get it from their employer and can't afford their own insurance.)
I can actually get dental work done in Mexico, with a reputable dentist who people I know have patronized, for less than the cost of my fucking co-pay here in the states. That includes my round trip flight (sacramento to san diego), and all the week's expenses including booze, transportation, and lodging. And I'm talking about minor work here.
If I get my major work done, I can probably squeeze a month's vacation in Thailand out of the deal (getting the work done there) and still come in under my co-pay. I have two impacted wisdom teeth and they are very large. And that price will include at least an hour of massage every day :P
The health care system is broken here in the US, plain and simple. It has been broken in the name of profits, due to illegal business practices (price fixing, but not this kind of price fixing) engaged in by health care providers, insurance companies, and pharmaceutical companies (the latter being one of the most morally bankrupt industries in existence, probably second only to the military-industrial complex.)
You can tell yourself any lies about it you want, but the fact is that the quality and availability of health care in the US have gone down while prices have gone up.
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Re:Let me guess... (Score:5, Interesting)
Read the links on the page that I provided; it goes into treatment of specific diseases and looks at how they fare in the US versus other countries.
Second, we live i.a competitive country and world.
Competition lowers prices.
Paying twice as much as other countries for medical care doesn't surprise me in the least, since we typically pay more than that for just about everything else. Do you think people in Cuba all buy $200,000 houses? I don't think so. Yet that's common here.
Have you priced living expenses in Europe lately? Europe, east Asia, and Canada are the nations we're comparing to, so let's look at the world's most expensive cities [finfacts.ie]. London is number two (after Moscow). Copenhagen 6th, Geneva 7th, Zurich 9th, Oslo 10th, Milan 11th, and so on. Seoul is #3, Tokyo #4, and Hong Kong #5. The most expensive city in North America is NYC, and it's only #15. LA, our only other in the top 50, is #42.
American *salaries* are higher than European salaries (although that's changing), but as far as expenses go, Europe is more expensive. The simple fact of the matter is that our healthcare system is overpriced and under-effective, and there are countless studies out there on the subject. Start reading them.
What we need is a system like France's (yes, I know France is a dirty word, but hey
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Re:An Original Idea! (Score:5, Insightful)
Sorry. Doesn't work that way in the real world. Those cheap t-shirts they sell at Wal-Mart are often not the same ones you buy in another store, for one thing. Thus, this ruling has little impact on their products. In addition to often carrying products by different manufacturers, they also quite frequently get special sourcing of custom, cost-reduced versions of products (particularly in electronics). Such products won't be affected in any way.
Even ignoring that, though, the Wal-Mart chains of the world, however, who have huge buying power, will still be able to do what they do now: say "You don't like it, fine. We're not carrying your product." Most manufacturers can't cope with the sudden drop of revenue when this occurs, and basically keel over and die. Thus, Wal-Mart is pretty much insulated from strong-arm tactics by nearly all manufacturers.
The people this will hurt most, contrary to the opinion of five SCOTUS justices, are the mom and pop shops. Now, the manufacturers will be able to tell those stores that they have to meet a minimum price while other manufacturers of similar products are still caving to Wal-Mart's price demands. The result will be that the disparity between Wal-Mart prices and prices at smaller stores will increase, driving those smaller stores even more quickly out of business.
There is simply no way to not see this as a serious blow to consumers.
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Please explain. (Score:5, Insightful)
Re:Please explain. (Score:5, Insightful)
The way equipment vendors of all kinds have gotten around the previously illegal activity was to set up "Authorized Dealer" agreements. Most corporations at the top of their respective food chains use them. Authorized dealers have pricing sent to them. Pricing includes regular, msrp, and promotional pricing. Big retailers normally do deals above and beyond those offered by the brand in question thereby crushing the small retailer.
Look at Apple as an example. Every retailer's price is about the same except for the unauthorized dealer that got some units somehow.
Just because the Supreme Court handed down a decision some people don't like doesn't mean it's unchanging. That's what the legislature is for. That's what your democratically elected officials are for.
Oh wait, most Americans don't vote so, they got exactly what they put in. If you are that angry, get involved.
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Cuts out savings if you know what you want. (Score:5, Insightful)
For example, a few years ago, I decided on a specific LCD HDTV (an extravagant purchase that I still regret to this day). At the time, MSRP for the set was $8999. All retail outlets sold it for that price. However, I was able to go online and buy it for only $5499. Had the price floor been set at MSRP or something else favorable to the big retailers, I could've lost thousands of dollars in the purchase.
As an internet shopper, I am pleased by this decision because this will also mean the end of the stupid bargain/rebate/shoparound/missed discount remorse routine.
Yeah, well to nuts to that, my friend. I'd rather know that I missed out on the best deal possible than to know that I never had the opportunity to avoid getting gouged because of legalized price fixing. Besides, price comparison search engines will let you easily get pretty close to the best possible prices out there if you look right. Froogle exists for a reason.
Also, if you're going to argue that the existence of alternate products makes this irrelevant, then you should consider that having to compare alternate products negates the advantage of not having to look around for the best discount. I seriously can't believe, though, that you'd rather everyone be gouged than you feel the remorse of missing out on a sale.
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I thought price floors already existed ... (Score:5, Interesting)
Could somebody elaborate?
Re:I thought price floors already existed ... (Score:5, Interesting)
But some people seem to think that's okay ...
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Doesn't matter. There's Wal-Mart. (Score:5, Interesting)
It doesn't really matter. Retail price maintenance was an issue when manufacturers were big and retailers were little. Today, it's the other way round. Wal-Mart can dictate prices to manufacturers.
Might matter for some luxury goods, like the iPhone, but that's about it.
competition on quality and service, not price (Score:5, Insightful)
I'm not sure I buy this argument, no pun intended, but the race to the bottom has got to stop. I know it's in Walmart's interest that I need to buy a new tv every two years, but it's not in mine.
(Sidenote: I've never entered Walmart/Sam's Club due to this policy and the way they mistreat their employees. Costco, baby, Costco!)
Shortsighted "sky is falling" (Score:5, Interesting)
1. Internet seller sells Item by Manufacturer below MDBP (Manufacturer Demanded Base Price).
2. Manufacturer "bans" this. Since they do not have legal power, they'd ask distributors to stop distributing to that silly sod.
3. Distributors that disobey risk never getting shipments of Item anymore, so they comply.
4. Internet seller doesn't get Item anymore and can't sell them at Low Low Prices (tm).
Hmm... assuming that's how it'd work...
5. Progressive Manufacturer Alpha makes a competing product for Item: Item Alpha. They don't have an MDBP.
6. Distributors carry Item Alpha.
7. Internet seller gets a few lots of Item Alpha.
8. Item Alpha now gets sold at Low Low Prices.
9. Item loses market share to Item Alpha.
If you accept the above as not being very farfetched, then you accept that manufacturers act in their own disinterest by colluding for minimum prices. And that by lifting the ban it doesn't automatically follow that everyone's going to do it.
Even if I'm completely wrong about this, that's still always going to be the grey market from overseas, so, don't get your cheetos in a huddle,
Not that big of a deal... (Score:5, Informative)
For the most part, manufacturers don't want to impose price maintenance -- they BENEFIT when their dealers sell at low prices. Why? Well, here's an example: say Apple sells iPods to dealers for $100, sets a retail price of $200, and 5 people buy it. Apple now has $500. Let's say they don't set a retail price, and (because of competition), the retail price stabilizes at $130, and 7 people buy it at the lower price. Apple now has $700. Which one is better for Apple? Both manufacturers and consumers want dealers to make as little profit as they can.
Here's an example why vertical price restraints should not all be illegal: Suppose that you build sailboats, which are somewhat complicated, not many people know a lot about them, and there are a lot of first-time buyers. Your dealers, then, spend a lot of time and money educating the customers, maintaining showrooms, teaching "what to know before you buy your boat" classes, and so on. These things are very expensive, and consumers benefit by having them. The problem, though, is that if one of your dealers does all the education, and another doesn't, the second one will undercut the first one's prices. As a result, customers will go to the first dealer, look at the boats and take the classes, then go buy the cheap boat from the second dealer. Eventually, the first dealer either goes out of business or just stops offering all those extra services. If the manufacturer can set a minimum retail price, he can stop the second dealer from doing this free-riding. Now, the two dealers are still competing with each other, but they're doing it on something other than price -- they're doing it on service. So, consumers may get longer dealer warranties, or dealers may offer free storage or maintenance.
Read the decision (Score:5, Informative)
What it says is not all price flooring is automatically illegal (per se). If the pricing is used to generate services or differentiate the product within a market to be competitive then why not.
What SCOTUS is arguing is that price flooring needs to be decided on it's merits (rule of reason). They say, it is still illegal to have price flooring within a manufacturing cabal. It is also illegal to have price flooring for a monopoly (as if that makes any difference). Generally price flooring is illegal if it is anticompetitive and legal of it is pro-competive.
As to the sale of handbags, anyone can make a handbag and thousands do. In this case the manufacturer had floor pricing to maintain marketing material and consumer cache. This manufacturer wanted a small botique feel to the sale of their products and not a Walmart experience. The retailer in question just wanted to boost sales by under cutting smaller shops and make their margin on volume. The retailer had signed agreements to price floors.
In this case, I too favor the manufacturer. SCOTUS has not thrown out the Sherman act, but merely noted that price flooring in certain circumstances can be OK. I'll still buy handbags at WallyWorld.
Granular decision making: Good
Re:Boo Conservative-Majority Supreme Court... (Score:5, Insightful)
Let's look at this week (which isn't even over yet).
* Can't sue the government for using your money to fund religious groups, effectively overturning the 1968 precident allowing it -- all under the loophole that it wasn't spending specifically approved by congress, but by the executive branch via funding granted by the congress.
* Corporate ads supporting candidates are free speech, and are protected unless "the ad is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate."
* "Bong Hits For Jesus" isn't free speech, and isn't protected (meaning that schools can now kick people out for saying almost anything that the school doesn't like).
* Efforts to desegregate schools can't look at the race of students. In other words, while a school can't officially be "whites only", it effectively can't be stopped from actually being whites only because the district can't consider race in school assignment and, more critically -- if you go by the majority's wording -- cannot even be monitored to know if they're unofficially skewing a school towards racial segregation. All this despite racial integration proving to be one of the few things in education that significantly improves the average academic scores of an area without a significant increase in funding.
And now, this -- effectively saying, "welcome back, collusion" and gutting the effectiveness of antitrust legislation.
Depressing, depressing.
(I think I missed one of the frustrating early-week ones, too)
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Echoes of this administration for years to come. (Score:5, Interesting)
Roberts is a pretty traditional conservative in most (but not all) ways, which can be bad enough, but Alito is just an out and out fascist who believes strongly in no restraints on executive or corporate power. We're going to be feeling the aftershocks of this administration for decades thanks to the both of them.
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Re:Boo Conservative-Majority Supreme Court... (Score:5, Informative)
Basically, it allowed large developers to lower their land acquisition costs. If you want too much for your little slice of heaven, the guys with guns will come and take it away. An erosion of one of the most basic rights in Western civilization.
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Re:No choice? (Score:5, Insightful)
This is affecting small groups that cannot negotiate prices directly and can harm them on BEHALF of wal-mart.
Wal-Mart can demand a lower price, something they already do, but smaller groups cannot demand lower prices.
This makes it so that everyone just goes to Wal-Mart because Wal-Mart now has the ability to severely undercut prices while smaller, local groups have to sell them at high prices or not sell them at all. At worse they will even be forced to keep stock that they cannot return because they cannot sell the stock. That is the reason you have sale prices in the first place, it is to get rid of stock that you can't sell at the regular price.
Now they will just have to burn the stuff or something, not sure exactly, but in the end the company that sold it to them got their money already.
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