eBay, Burlington Coat Factory, and the US Federal Trade Commission are pressuring the US Senate to pass a law banning vertical price-fixing, effectively overturning a 2007 Supreme Court decision.
Manufacturers and retailers actually call it vertical “retail price management” (RPM). The practice entails setting a minimum price retailers can sell specific items for. Remember last Christmas, when you spent hours online comparative shopping only to find out everybody who carried it was selling it for exactly the same price?
That was likely because of RPM, which for the previous 95 years had been considered illegal under antitrust law. The Supreme Court didn’t actually declare RPM legal in its 5-4 landmark decision, but the court did say it wasn’t always illegal. Though the ruling made way for antitrust claims to be considered on a case-by-case basis, it also made way for big retailers to collude with manufactures to drive prices up while disincentivizing purchasing from smaller, perhaps lesser-known retailers.
For example, while Store A and Store B have offer the same required minimum price on a certain toaster during a busy shopping period, Store B is much bigger and has the means to add incentives to buying from them that Store A can’t match. This could come in the form of additional services, freebies, discounts on other items, or discount partnerships with other major players.
Proponents of RPMs argue minimum pricing sometimes actually boosts competition, a viewpoint SCOTUS obviously agreed with in 2007. But eBay, Burlington, and the FTC are arguing that not only does minimum pricing hurt competition, it is also anti-consumer because the result is artificial price inflation—a guarantee the customer always pays too much and has no competition to turn to for remedy.
eBay goes as far as to say manufacturers and retailers use RPM to ramrod smaller players.
“There is evidence that small and midsized Internet retailers are the primary target of aggressive RPM policies,” eBay veep Tod Cohen told IDG. “Many eBay sellers have been targeted by manufacturers and large retail partners with various tactics to take down their listings and discredit their sales.”
Herbert Kohl
Senator Herbert Kohl (D-WI) has taken up the cause, introducing the Discount Pricing Consumer Protection Act, which is to serve as an amendment to the Sherman Antitrust Act. To that act, the legislation adds this sentence:
“Any contract, combination, conspiracy or agreement setting a minimum price below which a product or service cannot be sold by a retailer, wholesaler, or distributor shall violate this Act.”
The bill currently has been referred to the Senate Judiciary Committee for review.
