Wednesday, April 29, 2009

State Law Targets 'Minimum Pricing'

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.

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.http://online.wsj.com/article/SB124087840110661643.html

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