Retail price maintenance means higher prices

NY Times:

Striking down an antitrust rule nearly a century old, the Supreme Court ruled on Thursday that it was not automatically unlawful for manufacturers and distributors to agree on minimum retail prices.

The decision will give producers significantly more, though not unlimited, power to dictate retail prices and to restrict the flexibility of discounters.

Five justices, agreeing with the nation’s major manufacturers, said the new rule could in some instances lead to more competition and better service. But four dissenting justices agreed with 37 states and some consumer groups that abandoning the old rule could result in significantly higher prices and less competition for consumer and other goods.

The dissent is right on this case. Retail price maintenance is used to benefit the high end retailer and take away the competitive advantage of discounters. Rather than let the market decide whether the services of the high end retailer are worth the higher price, retail price maintenance steps in on the side of the high cost sellers.

While there is a pretension that this is of some advantage to the manufacturer, the real advantage is to the retailers who will begin insisting that the manufacturers set higher retail prices to make the retailers business more profitable to the disadvantage of the consumer who sho shops for the best price.


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