The Brouhaha On Resale Prices

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Sen. Howard Metzenbaum (D-Ohio) was in high dudgeon. Before him in the congressional hearing room this past September sat William F. Baxter, assistant atttorney general of the Antitrust Division of the Department of Justice. At issue was the question of how vigorously the Reagan Justice Department had pursued violations of resale price-maintenance (rpm) regulations, cases in which a manufacturer tries to dictate to retailers what to charge for its products. Although Congress and the courts alike have ruled that rpm is illegal, Baxter has conceded that he is loath to prosecute, believing that the ban is often detrimental to consumers.

The senator was enraged. Charging that Baxter had "abdicated his responsibility to uphold the law," Metzenbaum demanded that he resign. Two issues were behind Metzenbaum's choler: the value of the current antitrust attitude ban of rpm, and the freedom of the executive branch to shift the emphasis in the law by choosing which cases to prosecute. Both issues are likely to remain controversial throughout the Reagan Presidency.

Rpm had seemed a dead issue. Supreme Court cases since 1919 have banned the practice on the federal level, and a 1975 congressional action banned rpm in the states. The consequence has been the flowering of discount stores, with retailers offering lower prices to consumers because of a competitive edge in service, amenities, or location.

Assistant Attorney General Baxter was one of the first in the Administration to revive the issue. Current antitrust law labels rpm "per se" illegal, a view Baxter calls "perverse" and "an outrageous generalization." Instead, he argues, the "rule of reason" should apply. Some rpm may harm the consumer; more often, Baxter feels, it will help. Cases, he says, should be prosecuted on the basis of the harm they inflict. Already, The Wall Street Journal reports, "antitrust law specialists note [that] the Antitrust Division has stopped bringing cases against the practice." While conceding that the "per se" rule remains the law, Baxter told the Senate committee that the Supreme Court is "likely to abandon it soon."

Policymakers at the Federal Trade Commission share Mr. Baxter's attitude against enforcing rpm. In a speeeh to the American Bar Association last April, FTC chairman James Miller also argued for deciding which cases to prosecute based on "economic criteria" rather than a "per se" ban. In a recent case involving Russell Stover Candies Inc.'s attempts to set dealer prices, however, Mr. Miller suffered a setback when the commission voted 3-1 against the candymaker.

According to Alan Chvotkin, Senate Small Business Committee minority chief counsel, "There has always been a split in the small business community about rpm." But there was no split over the consequence of members of the executive branch announcing publicly that they disagreed -- and would put a low priority on what is unarguably the law.

"If the FBI were to announce that kidnapping was no longer of great harm to society," Sen. Sam Nunn (D-Ga.) pointed out, "and that they were going to put kidnapping at the bottom of their enforcement list, we would have, in effect, a change in the law by the FBI."

Rpm has yet to be debated seriously in Congress. Instead, this fall has seen a storm over whether the FTC and the Justice Department should enforce the law as written by Congress and the courts or as interpreted by Assistant Attorney General Baxter and the FTC.