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Fair Trade Is Back — But No One, At Least In CE, Seems To Care

It’s been several months since the U.S. Supreme Court issued its precedent-breaking decision, on a 4 to 3 vote, making it legal for the first time in more than 30 years for a manufacturer to set the price at which its products may be sold at retail. While the press treated the news with dire warnings of pending major price hikes, the fact is that at least in our industry, price competition continues to rage.

Frankly, that should come as no big surprise since within the CE business, to its credit as well as to its shame, retail price finagling (downward with discounts, rebates and negotiations, and upward with variations of bait-and-switch) has always been the rule rather than the exception.

In the heyday of so-called Fair Trade laws, which ran from the 1930s into the 1960s, such price fixing was standard for many products in states adopting them. They were enacted across the country during The Depression as a way of protecting smaller retailers from their large discounting competitors for the very limited amount of dollars then in consumer hands.

Now my industry history only goes back 40 years, but my recollection is that Fair Trade pricing was never really a big factor in the consumer electronics business. It may well be that some of the regional companies, such as Curtis Mathes in the South and Packard Bell on the left coast, had firm resale pricing policies, and so did some of the upper crust audio companies.

But on a national level, it was only Magnavox, through its rigidly controlled roster of Magnavox Showcase Dealers, that actually set and policed prices. To be a Showcase Dealer you had to either stock Magnavox products exclusively (except, of course, for those categories Magnavox didn’t offer), or have a store large enough that the line was housed in a very separated area. When Fair Trade ended so did Magnavox’s absolute power over its dealers.

That end, however, didn’t totally disarm manufacturers. They still had (and have) a degree of control exercisable through agreements covering standards for such things as exclusive franchising, customer service and co-op ad payments.

In his opinion for the majority, Justice Anthony Kennedy implied that in most instances price fixing should really be used only as a last resort. As a veteran industry observer who today is totally lost in the sea of low-price, no-name and retread brands that now dominate retail shelf space for some of our most advanced products, I did get a chuckle out of his honor’s contention that the ability to fix retail prices is a way to help newcomers and new technologies break into the market.

The precedent that any form of price fixing is illegal dates back to 1911, and was partially set aside by act of Congress in 1931 to permit states to allow vertical price control by manufacturers. In 1975, by which time most states had eliminated their individual Fair Trade statutes, Congress itself repealed its law. On a strictly logical basis, it’s hard to argue with Justice Kennedy’s opinion that the world of business has changed some over the last 96 years and that some aged hard and fast rules should be revisited and possibly modified.

But in my opinion someone should investigate why gasoline marketers are free to raise and lower retail prices in lockstep.