Supreme Court Ruling Could Raise CE Prices
By Doug Olenick and Steve Smith -- TWICE, 6/28/2007
Washington — The Supreme Court ruled Thursday in a 5-4 decision to make it easier for manufacturers to require retailers stick to minimum advertised prices (MAP), a move that could raise prices at retail, the dissenting justices said.
The high court’s decision over rules a previous anti-trust statute that said MAP agreements were illegal. In the future courts will decide on a case by case basis whether the MAP agreement violates anti-trust laws.
“It is a flawed anti-trust doctrine that serves the interests of lawyers,” Justice Anthony Kennedy wrote, adding the old legal standard required “manufacturers to choose second-best options to achieve sound business objectives.”
Dissenting justices said the ruling would likely drive up retail prices.
The original case stemmed from a 2002 decision involving a Texas clothing fashion retailer who had broken a MAP agreement with a manufacturer. The vendor broke off its relationship and retailer sued winning $3.6 million. A lower court upheld the decision, but it has since been overturned.
The CEA issued the following statement on the ruling. “CEA applauds the Supreme Court decision today reversing the per se rule against resale price maintenance. The Supreme Court holding that the “rule of reason” should apply to the legality of manufacturer pricing decisions, means simply that all the facts will be examined before a finding of illegality — replacing a black-and-white rule of illegality in every case. Reasonableness has come back to the antitrust laws, and in the consumer electronics industry, where sales training, industry marketing, and after-sales service are highly valued by manufacturers and reputable retailers, it makes perfect sense to consider these factors when evaluating a manufacturer’s requirement that threshold prices be maintained.”
Richard Glikes, executive director of the Home Theater Specialists of America (HTSA) buying group, commented, “I’ve been around long enough to remember [the] Fair Trade [law]... which was actually a wonderful situation for retailers since it guaranteed [retailers] full margin on the product. It created a very orderly market and the benefit was that everyone played on equal playing field.”
He noted, “Under Fair Trade consumers bought from the most knowledgeable retailers and not necessarily the one with the best price.” Glikes backed the Supreme Court decision as “a good thing for retailers.”
Dave Workman, executive director of the PRO Buying Group, doesn’t think the Supreme Court decision is a return of Fair Trade but that it will help enforce “the MAP laws that are already on the books. [Suppliers] will be able to further enforce MAP and can discontinue relationships with those retailers who break the rules. “
Workman noted that independent dealers “want compliance to MAP. Internet retailers should be the ones that get affected [by the decision] more than anyone.” And he added, “Today, when a national chain goes off MAP many suppliers now give them a slap on the wrist. With the ruling, you may be able to warn them more.”
Jim Ristow, general manager of Home Entertainment Source, the specialty A/V division of buying group BrandSource commented, that in the past two years “several suppliers who traditionally did not have a policy have gone to a firm MAP policy. The real issue will be execution and accountability at all levels, and will everyone have the discipline to live by the letter of the law.”
Rob Standley, merchandising and marketing director of Vann’s, said that for the Montana-based electronics/appliance retailer, “Since we are a specialty retailer and require a cost structure where we can hire the right people, train them and show some differentiation, we hope that this ruling will stick. We hope it could help improve margins, which would be a good thing. Of course if manufacturers don’t enforce this it doesn’t matter. But overall our outlook is one of measured optimism.”
Micro Center did not think the ruling would have a major impact. Kevin Jones, the retailer’s merchandising VP, said larger vendors already enforce some sort of MAP policy today. In most cases MAP is controlled more from ties to significant back end funding rather than the threat of pulling the business. He added, this could impact retailers whose primary differentiator is only price.
-
THIS IS A SAD DAY. I THOUGHT THIS WAS AMERICA, LAND OF THE FREE. GUESS NOT A FREE OPEN MARKET.
I WANT TO THANK THE SUPREME COURT, FOR UN-EMPLOYING THOUSANDS OF EMPLOYEES OF INTERNET COMPANIES WHOSE MAIN SALES ADVANTAGE WAS PRICE.
AMERICA IS ABOUT AN AMERICAN HAVING A CHOICE, IF YOU WANT TO PAY $10 LESS FOR AN ITEM AND WAIT A WEEK TO GET IT, GOOD FOR YOU. IF YOU WANT TO PAY RETAIL FOR SOMETHING, GO TO YOUR LOCAL DEALER AND PICK IT UP.
THE GOVERNMENT OF AMERICA, CHANGING ITS LAWS AND REGULATIONS TO SIDE WITH THE DEEPER POCKETS, INSTEAD OF THE SINGLE AMERICAN CITIZEN. GO FIGURE.
THANKS ALOT!
JOHN W. SMITH - 2007-5-7 14:39:00 EDT -
The return of Fair Trade is a major step backwards. Manufacturers should not be allowed to dictate what a retailer will sell his produts for in a competitive marketplce. In effect the manufactuerers are trying to create a marketplace to minimize competition and stick it to the end user (the consumer). Back in the 70's when Teac took Crazy Eddies to the New York State Supreme Court for the same reasons. Fair Trade was ended and DISCOUNTERS SPRANG UP ALL OVER AMERICA. to turn back the clock now is a horrendous decision. The big looser here is the consumer who will now not be able to shop price as easily.
Michael Cohen - 2007-3-7 09:50:00 EDT -
MAP Law? Where do I find it? In my market MI (Musical Instruments) MAP policies are all over the MAP! no pun intended. If the policies were consistent and evenly enforced then it may be okay. The problem, as I see it, are the vendors selection of resellers. They know going in who the offenders will be. All in all MAP is a form of price fixing and that is not good for the consumer.
Russ Jones - 2007-2-7 13:10:00 EDT -
This is excellent news. As a manufacturer, I have the right to determine
the selling price of my product. Consumers can then decide whether or
not they want to purchase my product at the established price. If a
manufacturer simply wants market share, and does not care how his
(or her) products are represented or whether his dealer network makes
a profit, that is his decision. By the same token, if a manufacturer
wants his products to be sold by retail network which actually provides
some level of service to its customers, and has a well-trained,
knowledgeable sales staff, then he needs to be able to establish the
selling price necessary to keep that retail network in business.
Consumers will not be gouged, they will simply have the option to
purchase value-added products. And, if the established prices are too
high, consumers will still have the option to buy other competing
products which have lower prices. Don''t worry, products like Vizio will
still be available at great prices.
Dave Gordon - 2007-29-6 11:40:00 EDT -
As seen with the TV manufactures price war last fall, who are we kidding? We constently are our own worst enemies. Not many retailers or vendors are profitable. I THINK IT IS A GREAT IDEA JUST TO GET US ALL THINKING ABOUT WHY WE ARE IN THIS BUSINESS. WE DESERVE TO MAKE A PROFIT. This is my 38th year. Business is brisk, but I have zero bottom line.We get brand new products at a great price point like the 37" Sony at $999, and right off the bat, it''s being advertised for $899.
Brad Bratton - 2007-29-6 00:01:00 EDT
No related content found.
VIEW ALL GALLERIES