A Senate subcommittee today took up the issue of whether a recent Supreme Court decision that allows manufacturers to set minimum price restrictions violates antitrust principles.
The Supreme Court, in a 5-4 decision in June, overturned nearly a century of precedents that made all minimum-price-setting illegal. The ruling allows for minimum-price-setting agreements to be judged on a case-by-case basis.
Sen. Herb Kohl, Wisconsin Democrat and chairman of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, spoke strongly against the Supreme Court’s decision in favor of Leegin Creative Leather.
The ruling makes it less cumbersome for manufacturers to set their prices, said Mr. Kohl, whose family founded the Kohl”s department stores. I don”t think you can make the argument that that serves the American consumer. It serves the interest of the manufacturer.
However, some on the panel said manufacturers already were setting minimum prices by working around the rules.
Before the Leegin ruling, manufacturers would stop selling to a retailer if the retailer dropped the manufacturer’s goods below the stated price, said Janet L. McDavid, an antitrust attorney at the District law firm of Hogan & Hartson and representing the American Bar Association.
The manufacturer would risk antitrust violations if it told the retailer the retailer was being dropped because of price or tried to talk the retailer into raising prices. Contracts fell through because the retailer and manufacturer couldn”t talk about it.
One argument for the Leegin decision is that freeriders hurt high-quality retailers by going to a high-end store, such as Nordstrom, to learn about products, take advantage of services and select a product, but then purchase the product at a discount store, such as Marshall”s.
Robert Pitofsky, a Georgetown University Law School professor who specializes in antitrust, said the freerider theory doesn”t apply to all products.
What are the services in connection with men”s underwear? he asked, adding that products such as toothpaste or shampoo don’t require services, either.
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