Monday, July 23, 2007

Will Court Rulling Help or Hurt Consumers?

Recently the Supreme Court ruled 5-4 that certain pricing restrictions placed on retailers by the manufacturers is not necessarily illegal, and now must be evaluated on a case-by-case basis.
The ruling ends a 96-year-old ban on manufacturers setting minimum retail prices for their goods.

Writing for the majority, Justice Anthony Kennedy wrote that while it can reduce competition between retailers, it could promote competition between rival brands.

"A single manufacturer's use of vertical price restraints tends to eliminate intrabrand price competition; this in turn encourages retailers to invest in tangible or intangible services or promotional efforts that aid the manufacturer's position as against rival manufacturers."

Meaning discounters won't be able to undercut the service providers.
In addition, Kennedy argued,

"Resale price maintenance also has the potential to give consumers more options so that they can choose among low-price, low-service brands; high-price, high service brands; and brands that fall in between."

As the film "Is Wal-Mart good for America," which was produced by Frontline a few years points out Wal-Mart (and perhaps other deep discounters) demand that manufacturers are not going to tell them how much they will charge. Instead they will tell the manufacturer how much they will pay for their product. Thus forcing manufactures to go to China in order to compete thus dumping American workers on the unemployment line. Perhaps, if I am reading this ruling correctly, manufacturers will now be able to continue operating in America and thus keep Americans working. Which in my opinion is good for all Americans. The downside? It may end Wal-Marts dominance and in a few years we may see them struggling like Kmart was a few years back, before Kmart came back with high profits and announcing they were buying Sears. Now that combined company is known as Sears Holdings.
Maybe Wal-Mart won't struggle that bad. However, I can see them struggling if they are no longer able to push the manufacturers around, as has been their history.


and that's my view, what's yours?

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