Maryland Ban on Minimum Pricing Takes Effect Oct. 1

Manufacturers selling consumer electronics to retailers, wholesalers and distributors in the state of Maryland will likely need to check their pricing policies.

A new law goes into effect October 1 that prohibits agreements that establish minimum resale prices for goods or services.

Senate Bill 239 (pdf) was passed in Spring 2009 by an overwhelming margin as an amendment to the Maryland Antitrust Act. The law states that minimum advertised pricing (MAP) is an "unreasonable restraint of trade."

Meanwhile, on a national level, legislation is pending in the U.S. Senate that would overturn the Supreme Court's Leegin case in October 2006 (pdf) that allowed manufacturers to establish MAP. The bill, entitled the Discount Pricing Consumer Protection Act, was introduced by Sen. Herb Kohl (D-Wis.) and is aimed at "once again making the setting of minimum retail prices illegal," says Kohl.

In the Leegin decision, the Supreme Court overturned a nearly century old antitrust rule forbidding vertical price fixing — the practice of a manufacturer setting a minimum price below which a retailer cannot sell the manufacturer's product. Consumer rights advocates contend that MAP increases costs for consumers.

Establish Unilateral Pricing Programs

Industry veteran and CE Pro contributor Bill Johannesen of Vision Werks Consulting has formed a new partnership with a veteran consumer electronics lawyer, Andy D'Amico, to assist manufacturers. The duo is advising manufacturers to establish unilateral pricing programs (UPP) that enable factories to lawfully manage pricing variability.

UPPs were found to be legal in 1919 in the case of U.S. vs. Colgate. A UPP enables manufacturers to legally establish minimum resale prices, providing their resellers with sufficient margins for hiring and training staff to present and demo their brand attributes and unique product benefits.

"Economic conditions, seismic changes in consumer behavior and contracting markets have driven many manufacturers to turn to expanded distribution to offset declining volume," says Johannesen. He cautions, however, that simply "bolting-on pricing and/or advertising agreements" to existing sales and marketing strategies is merely a stop-gap measure.

"This will not fully counter their channel's reliance on price as the primary sales tool," Johannsen says.