During oral arguments, Justice Stephen Breyer suggested that allowing resale price maintenance agreements would have "massive anti-consumer" effects. What he overlooks is that manufacturers already have all sorts of legal methods to penalize unwanted discounts. Though they may not enter an explicit contract requiring a store to charge a minimum price, they may announce a "suggested" minimum -- and then cut off any retailer that charges less.
The difference between the permissible and the forbidden may make sense to Martians or lawyers, but the economics are identical. Yet in spite of the many ways manufacturers have to set retail prices for their wares -- or because of them -- American consumers have access to a vast array of low-priced goods.
Why would a company making purses or televisions or running shoes want to keep prices at a certain minimum? Maybe to induce stores to offer exceptional service or technical assistance. A store can afford to do that only if it can charge a commensurate price.
But a service-oriented store can't charge a commensurate price if a consumer can come in, get lots of help and then go across the street to Discounts Galore and buy the item at 30 percent off. By setting a floor, the manufacturer can prevent "free-riding" by bargain outlets.
In our hypercompetitive retail environment, if the strategy doesn't serve customers, manufacturers who use it won't survive. Consumers who can't get one brand at a discount price will defect to other brands.
Is it possible for resale price maintenance deals to be used for nefarious purposes? Possibly, in rare circumstances. But dropping the current ban wouldn't affect those cases. It would merely obligate the complaining party to show an actual anti-competitive effect.
That's the right policy. You think the manufacturer is trying to stop competition? Fine -- prove it. Otherwise, we'll rely on the robust interaction of many buyers and many sellers to protect the interests of consumers. For that purpose, government intervention is usually a poor substitute.
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