A federal civil suit, brought by a retailer and opposed by a number of manufacturers and the Bush administration, seeks relief under a 1911 antitrust ruling that allows stores to sell products for less than the “manufacturer’s suggested retail price.”
If the defendants prevail in the U.S. Supreme Court, which heard arguments on the suit last week, retailers now famous for discounts could end up having to raise their prices. Some analysts say it could even mean the end of all discount retailers.
While that may or may not hurt an individual store’s sales and could even boost retail profits, there’s one guaranteed class of losers: consumers.
The case involves a boutique that was forbidden to sell a line of accessories at less than the manufacturer’s list price because that decreased the “brand value” of the items. After discounting them anyway, the manufacturer dropped the store from its client list. The store’s corporate parent sued, saying it suffered harm due to a violation of the Sherman Antitrust Act under a 96-year-old Supreme Court precedent that permitted discount pricing. The suit was supported by 37 state attorneys general.
After the retailer prevailed at a trial and on appeal, the manufacturer appealed to the Supreme Court, which now could overturn its precedent.
It shouldn’t. While a higher price could increase a store’s profit on each sale, it would mean consumers would be paying more on a regular basis.
Some economists say higher prices could mean better service, and they predict competitors will offer equivalent products for less money, preserving consumer choice.
But those outcomes are problematic. Consumers have plenty of choice now and shouldn’t lose any of it. This policy has stood the test of time. It deserves to withstand this legal test, too.
— Portland (Me.) Press Herald
