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FTC Studies Minimum Price Rules

Feb 1, 2009

The Federal Trade Commission has announced that it will hold a series of four to six workshops to gather information on the impact of a controversial court decision that makes it easier for manufacturers to set minimum prices; policies that are largely aimed at online retailers that sell at steep discounts. The decision, known as Leegin and reached in June 2007, says each minimum price policy imposed by a manufacturer should be considered on its merits. Prior to that decision, it was automatically illegal for a supplier to require a retailer to sell at or above a certain price.

FTC commissioner, Pamela Jones Harbour, announced plans for the workshops at a recent press conference, called by opponents of minimum price policies. Among those participating were consumer group, Consumer Federation of America, web auction giant, eBay Inc., online retailer, BabyAge.com Inc. and multichannel retailer, Costco Wholesale Corp.

Following the press conference, about 30 individuals met in a closed door meeting to discuss forming a coalition to oppose minimum price policies, according to Bert Foer, president of the nonprofit American Antitrust Institute that organized the event. Such a coalition would likely lobby for a bill introduced by U.S. Senator, Herb Kohl, that calls for reversing the June 2007 decision that opened the door for broader application of anti discounting policies by manufacturers.

While Kohl's bill never emerged from committee in the current Congress, it will be reintroduced this year, and supporters are hopeful it will gain the support of the Obama administration. "The co sponsors of the Kohl bill were Senator Joseph Biden and Senator Hillary Clinton."

The Kohl bill would roll back the impact of the Supreme Court's decision. Since that June 2007 decision, the number of suppliers to BabyAge.com imposing minimum price rules has increased from about a dozen to nearly 100, said Jack Kiefer, CEO of the online retailer. He said organizations participating in yesterday's meeting now must decide how much they can commit to lobbying and research efforts in opposition to price setting rules. "It all comes down to the ability to fund these initiatives," Kiefer said.

At the press conference, the American Antitrust Institute distributed examples of how the implementation of minimum price rules, often called minimum advertised price or MAP policies, has increased prices on affected items by 20 to 40 percent and resulted in many websites selling popular toys, such as the Leapfrog Leapster and Elmo dolls, at nearly identical prices.

While manufacturers have largely focused enforcement of MAP rules against online retailers that sell at a discount, not all eretailers are opposed to these minimum price rules. "What happens on the Internet when there's not a MAP policy in place, it takes retail prices down to unacceptable margins," said David Craig, CEO of Rugs Direct, which, like BabyAge, also sells only online.

Topic: Wholesale News

Related Articles: FTC  retail 

Article ID: 911

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