Pulling the Rug on Pricing
Pricing is a tricky issue for most retailers. No one wants to lose margins, but product discounts and sales are still one the best tried and true methods for getting people into the store. But this practice and other pricing strategies may be hindered by a recent U.S. Supreme Court ruling that allows manufacturers to set minimum prices. The question that remains for consumer electronics retailers is: Is this really going to matter?
The ruling was laid down on June 28 in review of “Leegin Creative Leather Products, In. v. PSKS, Inc., Kay’s Kloset, Kay’s Shoes,” when the country’s highest court ruled five to four in favor of reversing a 96-year-old ban on price maintenance agreements. The original ruling, laid out in the 1911 case, “Dr. Miles Medical Co. v. John D. Park & Sons Co.,” said that the minimum price agreements violated federal law, specifically the Sherman Antitrust Act.
The decision is a reflection of changing attitudes towards price bans. In the opinion of the court, Justice Anthony Kennedy writes, “Respected economic analysts, furthermore, conclude that vertical price restraints can have pro-competitive effects.” Economists, including those in the Bush Administration, have been arguing against the ban, as have economists at several institutions, including The Chicago School of Economics.