The Supply Side

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In "The Right to Compete" (Speaking Out, December 1983) Jerome S. Lamet asserts that resale-price maintenance (suppliers dictating resale prices) "subverts a fundamental principle of the marketplace -- the right to compete" because it infringes on the freedom of retail businesses to set their own prices. Nothing could be further from the truth. The right of suppliers to enter into contracts with their distributors is fundamental to the free enterprise system. Mr. Lamet defends his position by maintaining that "[suppliers] can refuse at the outset to sell to discounters." What about the fact that distributors have the right, "at the outset," to refuse to buy from a company requiring price maintenance?

Manufacturers may decide that their prices must remain high to enable their distributors to uphold product image or provide special services. If a clothing manufacturer, for instance, determines that sales are improved by maintaining an "expensive" image, that company should be free to enter into price-maintenance agreements with its distributors. A computer manufacturer should be free to enter price-maintenance agreements so its dealers will be able to supply crucial backup to buyers. If such suppliers are wrong about their pricing strategy, competitors will soon erode their market.

Contrary to Mr. Lamet's assertion, the freedom to enter into such private agreements is a protector of competition which is not restricted to prices, but often involves image and service as well. Companies cannot force others to buy their products or enter into contracts with them. Unlike companies, governments have the power to use force. It should not be used to negate voluntary agreements. The sanctity of the free market should be protected by declaring it illegal for the government to restrict resale price maintenance agreements.