Supreme Court OKs Price Fixing

In an absurd 5-4 ruling the US Supreme Court reversed a 96 year old ban on price fixing.

The lawsuit arose when Leegin Creative Leather stopped shipping its Brighton tooled-leather accessories to Dallas-area shop Kay's Kloset because the store was selling the goods more cheaply than Leegin wanted. After Leegin cut the store off, PSKS, parent of Kay's Kloset, filed an antitrust lawsuit.

Burlington Coat Factory, which filed a brief supporting PSKS, worries about the impact on the off-price chain. Burlington attorney Stacy John Haigney called the decision "an open invitation to manufacturers and full-price retailers to fix retail prices at a higher level. It will be detrimental to our business, but I really can't tell how much."

The Consumer Electronics Association says it supports the court decision because, it says, "sales training, industry marketing and after-sales service" are what many TV and audio gear buyers look for in electronics stores.

Bill Gates, of golf equipment maker Ping, says, "Not every consumer is a bargain shopper. Some consumers are looking for quality, innovation, personalization and customer service when they shop."

Richard Doherty of technology market researcher The Envisioneering Group agrees, saying the price ruling could lead retailers to use more free products and better service as sales incentives. "It's sure to be to consumers' benefit this summer and through Christmas."

Findlaw discusses the case in High Court Eases Ban on Minimum Prices.

Manufacturers will have greater leeway to set minimum prices at the retail level without violating antitrust laws under a Thursday Supreme Court ruling that could hurt consumers and small merchants.

By allowing minimum price agreements, the court's 5-4 decision could lead to higher prices, dissenting justices said, as it becomes more difficult for smaller stores and Internet retailers to offer lower-priced goods.

The court said agreements on minimum prices are legal if they promote competition, meaning accusations of antitrust violations will be evaluated case by case.

[Mish comment: This is the crux of the stupidity. The court has now decided that it can decide if price fixing promotes competition or not, on a case by case basis. I hope they get flooded with cases. Let me state that price fixing never promotes competition by definition.]

In a 1991 decision, the Supreme Court had declared that minimum pricing agreements always violate federal antitrust law. But Justice Anthony Kennedy wrote in the majority opinion that the principle that past decisions should be left alone "does not compel our continued adherence" in this instance.

Minimum price agreements can benefit consumers, Kennedy wrote, by enabling retailers to invest in greater customer service without fear of being undercut by discount rivals. The agreements also could make it easier for new products to compete, he added, because a retailer could recoup the costs of marketing a new good by charging a higher price.

[Mish comment: What absurd logic by Kennedy. For starters it is highly doubtful that price fixing can ever benefit consumers. Furthermore, even if by some miracle price fixing did benefit some consumers in some cases, what gives a panel of judges the wisdom to decide in what cases consumers really benefited or not? Only consumers acting in conjunction with free market forces can decide that. Price fixing is the antithesis of free market forces. Finally, what possible interpretation gives a strict constitutionalist the authority to make such decisions in the first place?]

Dissenting from that view, Justice Stephen Breyer wrote: "The only safe predictions to make about today's decision are that it will likely raise the price of goods at retail."

[Mish comment: Actually the only safe prediction is that this decision will backfire in undetermined ways, perhaps a multitude of them. We could see a flood of litigation, we could see fewer consumer goods on the shelves, we could see lower profits because of lower sales, etc. We could see reduced innovation. Other than that, the initial impact is likely to be higher prices and reduced competition.]

The Consumer Federation of America said in court filings that the ban on minimum price agreements allowed "innovative retailers to continually enter the market, offering new and lower priced alternatives to consumers."

[Mish comment: What nonsense. We do not need innovative price fixing rules to allow what the free market does already.]

But Roy Englert, an antitrust attorney at Robbins Russell, said the court's decision does have boundaries that will protect entrepreneurs. The ruling only allows minimum price agreements between manufacturers of a single brand of a product and retailers, Englert said, while other brands of the same product can still compete on price.

Moreover, if only one brand is available, retailers and consumers can still sue manufacturers for anticompetitive conduct, Englert said. The courts will now evaluate such suits on the merits, rather than automatically finding them illegal.

[Mish comment: Lovely. Consumers will have to sue to get a free market, and when they do sue they will be at the mercy of the court, a court that is likely to make as inane rulings as this one.]

I scoff at what Richard Doherty of technology market researcher The Envisioneering Group says: "It's sure to be to consumers' benefit this summer and through Christmas." Instead I ponder how anyone can seriously propose that the short term effect of this would be to lower prices.

With every passing day, government strips away rights of citizens. We have now gone down the path that says wiretaps, spying, and torture are condoned, as are holding people without charging them with crimes. Even kidnapping is condoned, so is search and seizure. Preemptive warfare is OK (but only for the US of course). The latest absurdity is government sponsored price fixing.

What right does the government have to tell anyone what they can or can not charge for goods and services? That is the heart of the issue but you might not know it from reading the ruling or even the dissenting opinions.

Want to stop this nonsense?



Vote for Ron Paul.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/