Great News for Specialty A/V: Supreme Court OKs Minimum Prices

The U.S. Supreme Court ruled last week that manufacturers could set minimum pricing for their resellers, ending a 96-year-old ban on the practice.

That's great news for specialty A/V retailers, where sales and profits have plummeted
as the big boxes – and even the desperate boutiques – slash prices to draw business and clear inventory.

In the past, manufacturers have been able to set minimum advertised prices (MAP), but retailers could sell the products for as little as they wanted, as long as they didn't advertise the price.

But that doesn't work either, especially online where resellers flout the spirit of MAP by having the customer "add to cart" to see the actual price.

With the recent ruling, manufacturers can choose to set specific floors for pricing, ensuring that retailers maintain the integrity of the brands.

Too bad, so sad, consumers.

In the antitrust case Leegin Creative Leather Products v. PSKS, Inc., the high court found that manufacturers can agree on minimum prices, so long as they promote competition. The 5-4 ruling overturned a nearly century-old precedent, which had stood since the court’s 1911 decision in the case of Dr Miles Medical Co. v. John D. Park and Sons that price floors violated antitrust law.

The Supreme Court decision does not expressly OK every case of minimum pricing, but held that the 'rule of reason' will apply to manufacturer pricing decisions. Previously, every instance of price maintenance was deemed illegal.

The Consumer Electronics Association praised the court for its ruling. CEA president and CEO Gary Shapiro said in a statement. “In the consumer electronics industry, where sales training, industry marketing, and after-sales service are highly valued by manufacturers and reputable retailers, it makes perfect sense to consider these factors when evaluating a manufacturer’s requirement that threshold prices be maintained.”

The current case involves Leegin Creative Leather Products Inc., based in City of Industry, Calif.

The AP sums up the case like this:

The company [Leegin] entered agreements with retailers setting minimum prices for the Brighton brand of women's fashion accessories.
Leegin said that by maintaining price consistency among niche retailers it sells to, businesses can offer improved customer service. This enables smaller stores to compete against rival brands sold by discounters, Leegin argues.

Several retailers in Dallas selling Leegin's products lowered prices below the minimum. Family-operated Kay's Kloset said it followed suit to stay competitive. Phil and Kay Smith say that when they refused to raise prices back up, Leegin cut off their supply.

Kay's Kloset sued and the Smiths won a $3.6 million judgment following a trial that laid out details of the price floor arrangement between Leegin and many of its retailers.