Manufacturers Can Now Dictate Costs to Retailers

A recent Supreme Court decision will, for the first time in nearly 100 years, allow manufacturers to set minimum prices for retailers, a practice that was previously considered illegal price fixing. Analysts called it a blow to discounters and Internet resellers of branded products.

The Supreme Court ruled in 1911 that minimum-price agreements violate federal antitrust law. But in this new ruling, a 5–4 majority said that this kind of price fixing is not always anticompetitive, and that it can be evaluated on a case-by-case basis, instead of being ruled per se an antitrust violation. Which means, analysts said, it will now be harder—and costlier—to prove price fixing in court.

The ruling “will affect the jewelry industry in a major way,” noted industry attorney Peter Berger. “It means that large companies with deep pockets will be able to price fix, because an aggrieved party who complains will have to demonstrate the anticompetitive effect in a lawsuit,” he said. “Unless it is a very large discounter with very deep pockets, a manufacturer may string out a lawsuit long enough and make it expensive enough so that most small discounters will not be able to fight.”

Berger said the decision favors large trademark holders. “I suspect more jewelry companies will adopt intellectual property protection such as patents, copyrights, and trademarks to have a basis for price fixing.”