This article appeared in The Wall Street Journal,April 28,2009
This my help clear up some of the reasons,but may not change any minds on the subject.

By JOSEPH PEREIRA

In a move that could lead to lower prices for consumers across the country, Maryland has passed a law that prohibits manufacturers from requiring retailers to charge minimum prices for their goods.

The law, which takes effect Oct. 1, takes aim at agreements that many manufacturers have been forcing on retailers, requiring them to charge minimum prices on certain products. The practice has surged since a controversial 2007 U.S. Supreme Court ruling that no longer makes such agreements automatically illegal under federal antitrust law.

Under the new state law, retailers doing business in Maryland -- as well as state officials -- can sue manufacturers that impose minimum-pricing agreements. The law also covers transactions in which consumers in Maryland buy goods on the Internet, even when the retailer is based out of state. That could potentially affect manufacturers throughout the country.



Maryland stores can now sue manufacturers that impose minimum-pricing agreements.


Minimum-pricing agreements keep retail profit margins higher, which in turn keeps retailers from pressuring manufacturers to lower the wholesale prices they pay for those goods. Suppliers also think that eliminating pricing competition can help retailers spend more money promoting their products to consumers. But certain retailers -- particularly online ones -- that attract customers because of low prices say the agreements stifle competition and gouge consumers.

Maryland's legislation is one of a series of recent initiatives aimed at circumventing the Supreme Court decision. A congressional subcommittee is scheduled to hold a hearing today in which several opponents of minimum-pricing agreements are expected to testify, including eBay Inc. and Federal Trade Commissioner Pamela Jones Harbour.

Hearings are expected next month in the U.S. Senate on a bill called the Discount Pricing Consumer Protection Act. Introduced by Sen. Herb Kohl (D., Wis.), it is aimed at circumventing the Supreme Court's ruling and making minimum-pricing agreements between manufacturers and retailers illegal under federal law once again.

In a 5-4 decision, a majority of Supreme Court justices said such agreements, which previously had been illegal, must be reviewed on a case-by-case basis -- a leniency that legal experts say has emboldened manufacturers over the past two years to require retailers to enter into the agreements.

"Today there are an estimated 5,000 companies that have implemented minimum-pricing policies, much of it happening in the wake of the Supreme Court decision," said Christopher S. Finnerty, a Boston attorney who advises manufacturers on pricing issues.

Charles Shafer, a University of Baltimore law professor and president of the Maryland Consumer Rights Coalition, said: "The Supreme Court has basically abandoned the consumer, and now the states and the federal government are finding they have to step into the breach."

One company with a minimum-pricing policy is Kolcraft Enterprises Inc., a Chicago-based supplier of bassinets and strollers sold by Wal-Mart Stores Inc. According to a copy of a pricing agreement obtained by The Wall Street Journal, Kolcraft requires retailers to charge a minimum price of $159.99 for its Contours Classique 3-in-1 Bassinet. Wal-Mart's price is $169.88. The price dictated by Kolcraft for its Options Tandem Stroller is $219.99; Wal-Mart charges $219.98.

The agreement states that the policy is intended, among other things, "to protect all Kolcraft and Kolcraft-licensed brands from diminution." Kolcraft also sells products under the Sealy and Jeep brands. Eileen Lysaught, Kolcraft's general counsel and vice-president of operations, declined to comment, as did Wal-Mart.

The Maryland bill won the support of the Maryland Retailers Association, whose members include Wal-Mart, Target Corp. and Sears Holdings Corp. Wal-Mart did not take a position on the Maryland bill. But Rhoda M. Washington, Wal-Mart's regional senior manager for state and local government relations, says, "Wal-Mart customers expect competitive, reasonable prices, and the Maryland legislature is seeking to ensure that we can deliver on that promise." Target and Sears declined to comment.

The association's president, Tom Saquella, said high-end retailers initially expressed reservations about the bill, while mass merchandisers favored it. But eventually "we got a majority" supporting it, he said. "Basically our merchants don't want manufacturers telling us what we can sell our merchandise at."

Maryland already has an antitrust law that bans price fixing. But because Maryland is one of a number of states where federal-court interpretations take precedent over state law, the Supreme Court's ruling essentially nullified state law. By creating a new law that explicitly bans all minimum-pricing agreements between manufacturers and retailers, state legal experts say, Maryland is now able to pre-empt the high-court ruling. Legal experts say more than 30 other states that filed briefs with the Supreme Court could join Maryland in enacting such a law.

"We're making it clear to the judges in this state that Maryland was not adopting the Supreme Court decision," said State Sen. Brian Frosh, who introduced the bill.

Allan P. Hillman, an antitrust attorney who helped to draft the Maryland bill, said that without such legislation, retailers had little hope of prevailing against a manufacturer who requires minimum pricing. "One must show that a manufacturer basically has greater than a 30% market share," he said. Few manufacturers wield such market power in the U.S.

Earlier this month, a federal judge in Marshall, Texas, citing the Supreme Court decision, dismissed the case of a leather-handbag retailer, Kay's Kloset, that sued a manufacturer, Leegin Creative Leather Products Inc., over its enforcement of a minimum-pricing agreement.

The retailer alleged that Leegin cut off its supplies of handbags after Kay's Kloset discounted them. U.S. District Judge T. John Ward stated that Kay's Kloset had failed to define Leegin's market power. Thus "the court cannot assess the alleged price fixing agreement's anticompetitive effect," he wrote.

Write to Joseph Pereira at joe.pereira@wsj.com
Printed in The Wall Street Journal, page D1

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Mor

If there is so much interest and concern about this topic and how it pertains to
the bowling industry,then we should have more info on the subject.Here is one more
 article that makes a vital point  about pricing of the retail products.



 The Government's Iron Fist Is Not the Consumer's Friend
by  Steve Chapman
03/29/2007


If we have learned anything from the failures of socialism and the achievements of capitalism, it's that if you want to protect consumers, relying on the wisdom and benevolence of government is not the way to do it. America has the most dynamic environment for retailing because we let rival companies fight it out hammer and tong in the marketplace, using their own judgment about how to satisfy the customer.

But sometimes even we Americans forget that crucial lesson. This week, some Supreme Court justices indicated they think the iron fist of federal law is superior to the invisible hand of the market.

The issue in this case is whether a manufacturer can dictate to retail stores what they can charge for its goods. You might think that if you take the risk of making a product, you should be able to contract with sellers on terms you think will enhance its chances of success. If stores don't want to go along with your preferences, they can carry someone else's products, and you can look for other retail outlets.


But under our strange antitrust laws, that's not always how it works. For a manufacturer to make an agreement with retailers to sell only at a specified minimum price is illegal -- even when it promotes competition and offers benefits to consumers.

The practice, called resale price maintenance, is at the heart of a dispute between Leegin Creative Leather Products, which makes high-end purses and shoes for women, and Kay's Kloset, a suburban Dallas boutique that cut prices on these items below those it had agreed to. When Leegin ended its shipments, the store owners sued, claiming antitrust violations. A jury awarded them $3.6 million, in keeping with established federal law that treats resale price maintenance agreements as invariably malignant.

This view stands up under scrutiny like butter under a hot sun. The assumption is that if you let manufacturers control retail prices, they'll hose consumers for their own profit. But if they wanted to hose consumers, they could just raise the wholesale price they charge to retailers. That way, they would get the full proceeds of the rip-off, instead of sharing them with stores. So it's reasonable to assume there is some motive besides price-gouging at work.

A friend-of-the-court brief filed by 24 economists, including several who have occupied the top antitrust jobs under Democratic and Republican presidents, portrayed the ban on resale price agreements as a relic of economic superstition. Such contracts, they argued, often enhance competition, and there is no evidence they usually harm consumers.

During oral arguments, Justice Stephen Breyer suggested that allowing resale price maintenance agreements would have "massive anti-consumer" effects. What he overlooks is that manufacturers already have all sorts of legal methods to penalize unwanted discounts. Though they may not enter an explicit contract requiring a store to charge a minimum price, they may announce a "suggested" minimum -- and then cut off any retailer that charges less.

The difference between the permissible and the forbidden may make sense to Martians or lawyers, but the economics are identical. Yet in spite of the many ways manufacturers have to set retail prices for their wares -- or because of them -- American consumers have access to a vast array of low-priced goods.

Why would a company making purses or televisions or running shoes want to keep prices at a certain minimum? Maybe to induce stores to offer exceptional service or technical assistance. A store can afford to do that only if it can charge a commensurate price.

But a service-oriented store can't charge a commensurate price if a consumer can come in, get lots of help and then go across the street to Discounts Galore and buy the item at 30 percent off. By setting a floor, the manufacturer can prevent "free-riding" by bargain outlets.

In our hypercompetitive retail environment, if the strategy doesn't serve customers, manufacturers who use it won't survive. Consumers who can't get one brand at a discount price will defect to other brands.

Is it possible for resale price maintenance deals to be used for nefarious purposes? Possibly, in rare circumstances. But dropping the current ban wouldn't affect those cases. It would merely obligate the complaining party to show an actual anti-competitive effect.

That's the right policy. You think the manufacturer is trying to stop competition? Fine -- prove it. Otherwise, we'll rely on the robust interaction of many buyers and many sellers to protect the interests of consumers. For that purpose, government intervention is usually a poor substitute.

Mr. Chapman is a columnist and editorial writer for the Chicago Tribune.