Supreme Court: High Prices are Good for Consumers

Another in a series of unfortunate decisions out of the SUpreme Court today, again flexing it’s Bush-crafted “pro-business”/anti-individual muscles in it’s decision to overturn the 96-year old ban on price floors. Essentially, the Supremes declared that rather than being a blanket evil for consumers, price fixing between producers and retailers can sometimes help consuermsr, and it’s up to lower courts to decide the difference. Some of the logic used in the decision has to be read to be believed:

“In sum, it is a flawed antitrust doctrine that serves the interests of lawyers — by creating legal distinctions that operate as traps for the unaware — more than the interests of consumers”

Right. Because a bright-line standard like ‘price floors are always illegal’ requires so much more explanation and lawyering than the vague, meaningless standard that the court gave today. There seemed to be little or no guidance provided to lower courts on how to decide which floors hurt consumers, and which ones help them in some vague, nebulous way.

For example, they said, such agreements can make it easier for a new producer by assuring retailers that they will be able to recoup their investments in helping to market the product. And they said some distributors could be unfairly harmed by others — like Internet-based retailers — that could offer discounts because they would not be incurring the expenses of providing product demonstrations and other specialized consumer services.

So- let’s require Internet discounters to charge the same rates as brick-and-mortar retailers, even though they’ve created a more efficient business model that results in lower costs. That sounds like healthy competition. Wouldn’t want to let the market decide if it preferred higher-priced, higher-overhead shopping for itself.

The case involved an appeal of a judgment of $1.2 million against Leegin Creative Leather Products Inc. after it cut off Kay’s Kloset, a suburban Dallas shop, for refusing to honor Leegin’s no-discount policy. The judgment was automatically tripled under antitrust law.

Leegin’s marketing strategy for finding a niche in the highly competitive world of small leather goods was to sell its “Brighton” line of fashion accessories through small boutiques that could offer personalized service. Retailers were required to accept a no-discounting policy.

Let me summarize the origin of this suite. Leegin, realizing that they can compete neither on quality nor price, opts to fix their prices high in the hopes of attracting well-healed idiots who like bragging about the exclusivity of their latest purchase. The decision of a retailer to sell them for what they’re worth in the marketplace to any plebe who walks through the door threatens their branding. Thus, the overturning of a century-old piece of consumer protection.


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