WASHINGTON -- Manufacturers may set a fixed price for their products and forbid retailers from offering discounts, the Supreme Court said today, overturning a nearly century-old rule of antitrust law that prohibited retail price fixing.
The 5-4 ruling may be felt by shoppers, including those who buy on the Internet. It permits manufacturers to adopt and enforce what lawyers called "resale price maintenance agreements" that forbid discounting.
Until today, the nation has had an unusually competitive retail market, in part because antitrust laws made it illegal for sellers or manufacturers to agree on fixed prices. The Supreme Court, in a 1911 case involving Dr. Miles and his patented medicines, had said that price-fixing agreements between manufacturers and retail sellers were flatly illegal.
The rule's practical effect was to discourage a manufacturer from setting a price, leading, for instance, to stickers on the windows of new cars that list the "manufacturer's suggested retail price."
However, in today's opinion, the high court described this rule as outdated and out of step with modern economics.
Manufacturers of products ranging from watches and computers to golf clubs and tennis rackets compete with other brands, so competition will not suffer, the court majority said. Moreover, manufacturers should be free to control how their products will be marketed and sold, it said.
"Resale price maintenance can increase inter-brand competition by encouraging retailer services that would not be provided ... absent free riding," said Justice Anthony M. Kennedy said for the court.
He noted that retailers that offer displays and service for customers can be undercut by discounters.
But lawyers for the Consumers Union said that abandoning the rule against retail price fixing will result in higher prices for a variety of products.
The decision is a victory for a Los Angeles-area maker of women's handbags and other leather products. Leegin Creative Leather Products, based in the City of Commerce, makes handbags under the Brighton brand. Owner Jerry Kohl has insisted that shopkeepers sell his bags at prices he sets.
He was sued by the owner of a women's clothing shop near Dallas on the grounds that his pricing policy violated antitrust laws. A jury agreed with the shopkeeper, and the decision led to a nearly $4-million judgment.
The Supreme Court reversed the verdict today in Leegin vs. PSKS. Chief Justice John G. Roberts Jr. and Justices Antonin Scalia, Clarence Thomas and Samuel A. Alito Jr. also were in the majority.
The decision, coming on the last day of the court's term, was the 15th this year that benefits business and corporations by shielding them from lawsuits and legal claims.
The dissenters, led by Justice Stephen G. Breyer, faulted the majority for overturning a long-established rule that had benefited consumers.
"The only safe predictions to make about today's decision are that it will likely raise the price of goods at retail and that will create considerable legal turbulence," Breyer said.
The ruling leaves open the possibility that price-fixing agreements can be attacked under antitrust laws, but only when a manufacturer's brand dominates the market. This is rarely true with common retail products.
