Supreme Court Upholds Resale Price Floor Maintenance Agreements Click HERE to Bring Up Full Post

The U.S. Supreme Court today upheld a minimum resale price maintenance agreement between a manufacturer and a retailer, overturning a precedent almost as old as the Sherman Antitrust Act itself. The Washington Post has a brief article on the case and Maryland Conservatarian (to whom HAT TIP) offers his comments as well.
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Kindly bear with the following discussion which is both oversimplified and yet annoyingly nitpicking nonetheless.

The Sherman Act prohibits "contracts, combinations and conspiracies in restraint of trade." Horizontal commercial restraints between competitors (e.g. price fixing between Coke and Pepsi) generally bear much nastier scrutiny than vertical restraints (e.g. price maintenance for Coca-Cola Classic between Coke and Wal-Mart, hypothetically speaking.) Many vertical restraints are acceptable if they meet the "rule of reason" i.e. appear to have more benefit than harm upon specific analysis. However, resale price maintenance has not been among those "rule of reason" restraints but rather a "per se" violation.

When you hear of a "manufacturer's suggested retail price," that's what it is. The manufacturer "suggests" a retail price to the retailer. The retailer need not follow it. However, most manufacturers will automatically cut off or otherwise sanction a retailer who fails to follow the suggestion. This instance is NOT a retail price maintenance agreement. Why? There is no agreement. What the manufacturer CANNOT (or could not, before today) do is to AGREE with a retailer to maintain a price at a certain level in exchange for continued product supply. In other words, unilateral suggestion, unilateral retaliation, no "chatting." Usually, the retailer also gets told that calling up the manufacturer to discuss or clarify the policy is also a violation of the suggested retail price in itself, resulting in a cut-off. Why? Because you don't want clarification, understanding, agreement. That's an antitrust disaster.

There also other prices called "manufacturer's advertised prices," which retailers must respect in order to get advertisement subsidies by the manufacturers for local media, etc. This is an example of a "rule of reason" restraint; acceptable if not unreasonable, however defined.

What the Court appears to have done is to treat MSRPs more like MAPs. I look forward to reading the opinion and dissent; certainly the opinion or its relevant holding will become a major topic of discussion in the antitrust document processing work that I do.

Some will ask why the courts were ever concerned about something relatively obscure like this, why something minor like whether someone pays too much for a fancy leather coat was really an issue, to cite Maryland Conservatarian's point. Within antitrust law, there is a spectrum of "theories" about the law. The "conservative" approach advocated by Robert Bork and others looks at antitrust law as being fundamentally about economic demand, supply and price levels, i.e. a "micro-economic" or "buyer protection" view. In this view, restraints other than hard-core horizontal price-fixing is the core of what antitrust law should prohibit. The more "liberal" approach derives from the concerns of Senator Sherman himself, who warned on the Senate floor of the threat of "the socialist, the communist and the nihilist" were corporate power and consolidation not reined in. This is a "macro-economic" or "ultra-economic" view, in the sense of going "beyond" economics to the protection of society as a whole.

I look forward to learning more about this case, starting with reading the actual opinion and dissent.