Groundbreaking Decision Effecting Minimum Advertised Price Is Handed Out By The Supreme Court
The Supreme Court of the United States has recently issued a large scale decision that could have a positive effect on consumers, retailers and manufacturers. In Leegin Creative Leather Products vs. PSKS, Inc., the Supreme Court overruled the case that established vertical price fixing as per se illegal for almost 100 years (Dr. Miles Medical Co. vs. John D. Parker & Sons). The Leegin case has made it possible through a rule of reason analysis for a manufacturer and reseller to legally agree on a resale price through vertical price agreements.
The Court found that stable reseller pricing can be beneficial to the manufacturer, reseller and consumer. By giving the reseller a stable and reasonable margin, the reseller can invest more fully in the manufacturer’s brand through education of its employees and advertising of the manufacturer’s products. This brings about a more competitive marketplace because resellers are competing on service, quality and features rather than price alone.
In today’s marketplace, it is important for resellers to be protected from other resellers who are not committed to the brands that they sell. Highly recognized brand names with attractive margins are often sought after by unauthorized discount shops who often attempt to resell the products online at a huge discount. Without contractual regulations, these unauthorized dealers free load off the investments of the manufacturer and other authorized dealers. If not handled properly by the manufacturer, this leads to a diminished value of the manufacturer’s brand.
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