such vertical price fixing agreements were typically referred to euphemistically as fair trade laws. most states enacted various forms of these laws.
with the passage of the consumer goods pricing Act in 1975, which repealed the Miller-Tydings and McGuire acts, the legal basis for exempting state fair trade laws from federal antitrust legislation no longer existed. Consequently,most state fair trade laws were no longer legal.
although the demise of fair trade laws removed the legal underpinnings for the practice of price maintenance in the marketing channels, the practice has by no means disappeared many manufacturers still try to influence the prices charged by their channel members. they do so for a variety of reasons, such as to protect the image of their products, reduce the likelihood of price wars and provide channel members with sufficient profit margins to enable them to offer adequate pre- and post-sale service. channel members who provide little service themselves and sell at low prices by feeling off the service provided by full-service channel members could be dropped as so-called free riders, as sometimes occurs when full-service channel members complain about the adverse effects of the low-price free riders on their businesses.
Until recently, a manufacturer 's dropping of price-cutting channel members was often viewed by the courts as being anticompetitive and as such in violation of the antitrust laws. but the precedent established by a recent supreme court decision may have swung the pendulum back in favor of allowing manufacturers to enforce price maintenance agreement with retailers. in June of 2007, the Supreme Court issued a ruling involving Leegin Creative Leather Products Inc., a manufacturer of women's purses and accessories, and Kay's Kloset, a Dallas retailer, that could give manufacturers greater leeway in enforcing price maintenance policies whereby manufacturers stipulate to retailers the minimum price at which their products can be soldat retail. the court's ruling allows for such minimum pricing agreements to be examined on a case by case basis to determine if they are anticompetitive. in the case, Key's Kloset filed a lawsuit against Leegin Creative Leather alleging that it was cut off from receiving Leegin products because it discounted its retail prices below the minimum price set by Leegin. The Supreme Court's 5-4 decision, written by justice Anthony Kennedy, stated that minimum-pricing agreement between manufacturers and retailers are not necessarily anticompetitive and could actually benefit customers under certain circumstances. Justice Kennedy argued , for example that such agreements could foster competition by providing retailers with enough profit to promote a brand or offer better service. Based on the precedent established by this Supreme Court decision, it would appear that any given manufacturer now has more freedom to set and enforce minimum pricing agreements with retailers as long as it can show that its particular price maintenance agreements with retailers is not anticompetitive.
Refusal to Deal In general, suppliers may select whomever they want as channel members and refusal to deal with whomever they want. This right is based on the precedent established in a classic Supreme Court Case of 1919 (United States v. Colgate and Company) and is often referred to as the "Colgate doctrine ." The court argued as follows: The Sherman Act does not restrict the long recognized right of a trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to the parties with whom he will deal. And, of course, he may announce in advance the circumstances under which he will refuse to deal.