Price Law Overturned

March 2007

Score one for manufacturers. In March, we wrote about an impending Supreme Court case that pitted manufacturers against retailers ["Who Gets to Say When the Price Is Right?"]. The case was an appeal by Leegin Creative Leather Products, a luxury leather goods maker that had been ordered to pay $3.9 million after it stopped shipping purses to a retailer that discounted the bags. The Supreme Court sided with Leegin, overturning a law intended to promote competition by barring manufacturers from engaging in price fixing. It was a limited ruling: Some "resale price maintenance" may now be legal if a court decides the manufacturer's pricing practices are not anticompetitive.

The National Association of Manufacturers, which filed an amicus brief in support of Leegin, praised the decision. Discounters diminish the perceived quality of brands like Leegin's, the NAM says, and hinder their ability to compete with global powerhouses such as Coach and Louis Vuitton. Still, manufacturers that deal with large discount retailers (read Wal-Mart) are unlikely to find themselves suddenly free to dictate higher prices. So who will benefit? Manufacturers with less powerful customers. Because of this, it's small boutiques and consumers that will be hurt by the decision, says Richard Brunell of the American Antitrust Institute, an advocacy group. Some consumer-rights groups are now lobbying legislators to reestablish a ban on all forms of price fixing.