Price fixing now legal in the US? (1 Viewer)

[Jeff Ulmer]

For the past 96 years, the practice of price fixing (ie. fixing the minimum price) was illegal in the US, but apparently this has now been overturned (was a while ago), meaning that companies can now force their dealers to not discount products anymore. I have already seen the effects of this, which has meant up to a 50% increase in some of the products I was buying. I can't see how this is in any way good for the consumer.

http://www.nytimes.com/2007/06/29/bu...-bizcourt.html

Obviously there can be no political discussion on this here, but I wasn't aware that this long standing law had been negated until I saw notices posted from several retaillers that stated that their supplier was restricting their minimum selling prices, so items that could be had for $30-40 are now being listed at $60+. Has anyone heard whether this new ruling is being appealed or overturned?

 

[Brian Perry]

I don't call what you describe as price-fixing...to me, that is when sellers collude to keep prices high (or wages low).

What you are describing has been around a long time (think Bose, Apple, etc. for brands that rarely go on sale). I can understand the logic in not wanting to "cheapen" the brand image, though it does result in higher prices.

 

[Jeff Ulmer]

Of course manufacturers would like to (artificially) maintain the "value" of their products, but until this ruling it was illegal to force distributors/retailers to refrain from selling below MAP (which is defined as price fixing when there is an agreement in place to do this). If this ruling stands it is going to do considerable damage to the economy, as there will be no more discounts to be found as companies restrict pricing in their favor, basically eliminating market forces.

 

[DaveF]

I'm no fan of minimum pricing, but this is nothing new and the results have not been dire as you predict.

A simple example is digital audio players: iPods seem to have minimum allowed prices. But in the larger market of DAPs, there are plenty of options, many far below the price of the iPod. And these then keep price pressure on the iPods so they are not fixed at exhorbitant prices.

What products are you finding pricing problems with?

 

[Jeff Ulmer]

An example is a friend of mine who collects Breyer horses (plastic models). Breyer has told their authorized resellers that they now must follow MAP, which has raised the price across the board by at least 25%. There is no competition from other products, you either buy Breyer or you don't, and now you will not be able to buy new product for anything less that Breyer's dictated minimum price.

The major record companies lost a price fixing case not that long ago, so to see this overturned is a bit of a shock considering this law has been on the books for almost a century.

For something a little closer to home for folks on this board, imagine if the studios decided they were going to fix the minimum price on DVD/HD media. You would no longer be getting 20-50% discounts online, every store would have the same minimum price which would likely be a lot higher than it is now. Great for retailers, bad for consumers, especially when this moves into necessities and not just luxury items.

 

[BrianB]

Mayfair Games is using this ruling too, in the boardgame market. They now only work with online retailers that will limit their discounts to 20% on their products. They're best known for Settlers of Catan.

 

[RobertR]

Actually, Government has regularly violated that. I remember so-called "fair trade" laws that prevented mail order companies from discounting audio goods. And there are plenty of examples of "price supports" to keep goods from being sold "too cheaply".

 

[DaveF]

Then I would buy fewer DVDs than I already do. As it is, I've decided $20 is too much for DVDs now and generally only buy DVDs from the five dollar bin. If prices are increased on a non-essential luxury item, then basic supply-demand curve applies. If profits can be maximized this way, then prices were previously too low.

I may not like it; but if a luxury item costs too much, I don't buy it. That's the risk companies face when applying MAP to their products -- losing customers.

(I'm more directly concerned about collusion and monopolistic price-fixing.)

 

[BrianW]

I'm not a lawyer, but I'm pretty sure that a company merely establishing a minimum price within its own dealership network has never qualified as price fixing. Price fixing is where two or more companies in competition with one another collude with one another and agree not to sell competing products below a certain price.

EDIT: I don't know what happened, but when I replied a moment ago, there were no replies to this thread, and now I see that everyone has beaten me to the punch by half a day. Must be a localized space-time distortion or something. Anyway, sorry to be redundant. Carry on.

 

[BrianW]

Okay, now that I've actually read this thread, I have something mildly relevant to say. What you describe simply won't happen, because each studio would have to act unilaterally to set minimum prices for DVDs in order not to face price fixing charges. (In other words, the studios can't agree amongst each other to set a minimum price, because that would be price fixing. They would have to independently set a minimum price within their own distribution network.) If you ran a studio, and one or even all of your competing studios decided not to sell DVDs below, say, $23, would you then decide not to sell your DVDs below $23? Of course not! You'd allow discounts, undercut your competition, and sell trillions of DVDs! More money for you!

The competition that is fostered by the anti-collusion laws completely eliminates the possibility of “en-mass” unilateral price hikes like you describe.