Price-Fixing Makes Comeback After Supreme Court Ruling
Manufacturers are embracing broad new legal powers that amount to a type of price-fixing — enabling them to set minimum prices on their products and force retailers to refrain from discounting.
For the better part of a century, punishing retailers for selling at cut-rate prices was an automatic violation of antitrust law. However, a Supreme Court ruling last year involving handbag sales at a Dallas mom-and-pop store, Kay’s Kloset, upended that original 1911 precedent, potentially altering the face of U.S. discount retailing.
Retailers say an array of manufacturers now require them to abide by minimum-pricing pacts, or risk having their supplies cut off. Jacob Weiss of BabyAge.com, which specializes in maternity and children’s gear, says nearly 100 of his 465 suppliers now dictate minimum prices, and nearly a dozen have cut off shipments to him. “If this continues, it’s going to put us out of the baby business,” he says.
BabyAge is now suing about a half-dozen major baby-gear makers and retailers alleging price collusion.
The new rules mean “it’s becoming a nightmare operating a business,” says Brian Okin, founder of WorldHomeCenter.com Inc., a home-improvement retailer. The company is suing lighting maker L.D. Kichler in New York state court alleging that L.D. Kichler’s minimum-price policy caused the retailer to miss out on substantial profits. “It just makes it so difficult to compete,” Mr. Okin says.
Manufacturers like the policies partly because discounts can tarnish a brand’s image. “We don’t want consumers to think we’re the cheapest guys in the world,” says Ray Minoff of L.D. Kichler, the lighting maker. Retailers also have more of an incentive to heavily market price-protected goods, manufacturers say.
Critics argue the policies undermine the free market by limiting shoppers’ power to decide for themselves whether to, say, buy at rock-bottom price from a no-frills outlet, or pay full price to someone offering better service or other benefits.
