Court rules manufacturers can set minimum prices for products

The Supreme Court ruled manufacturers can set minimum prices for products sold by retailers without automatically violating antitrust law, setting aside a 96-year-old ruling that the cellular industry and others argued was outdated.
Michael Altschul, general counsel of cellphone industry association CTIA, agreed with the majority opinion’s that holding the line on minimum resale prices can foster competition rather than stifle it as some consumer advocates claimed. Altschul, however, noted the decision does not wipe out antitrust consumer protections, but rather rebalances the law insofar as determining when price fixing is proper and when it is not.
In a friend-of-the-court brief filed at the Supreme Court earlier this year, CTIA articulated why the case was important to wireless carriers and manufacturers as well as retailers that sell phones and service.
“Manufacturers and intermediate distributors, such as members of amicus CTIA, limit intra-brand retail price competition for legitimate and pro-competitive reasons in a wide range of industries,” stated the cellular trade group. “By guaranteeing a minimum gross margin between wholesale and retail prices, a manufacturer or intermediate distributor can enlarge the number of retailers that are willing to sell the product and create and preserve retailers’ incentives to invest in valuable non-price competitive behavior, such as advertising and promoting the product. Retailers’ incentives to provide such costly services are severely undermined when a competitor offers lower prices without providing them and without incurring the associated costs. Manufacturers and intermediate distributors have legitimate interests in preventing this free-riding behavior, and consumers benefit from receiving the services that vertical price restraints can promote.”
The decision could hurt wireless discounters.