[CreativeSuiteDown]

well, those of you who believe that the US sets the standard for market based economic principles, or believe that Republicans are the standard bearers for capitalism, are invited to read the attached

A fundamental tenant of capitalism is that supply and demand dynamics not supply side collusion drive prices. Given the Republican public position on free and open markets, the positon the Bush Administration took as a friend of the court is curious.

Unless of course you believe their pro business orientation trumps any other idealogical consideration.

And the politcalization of the court is sickening.

http://www.nytimes.com/2007/06/29/bu...zcourt.html?hp
Justices End 96-Year-Old Ban on Price Floors
By STEPHEN LABATON
Published: June 29, 2007

WASHINGTON, June 28 — Striking down an antitrust rule nearly a century old, the Supreme Court ruled today that it is no longer automatically unlawful for manufacturers and distributors to agree on setting minimum retail prices.

The decision will give producers significantly more leeway, though not unlimited power, to dictate retail prices and to restrict the flexibility of discounters.

Five justices said the new rule could, in some instances, lead to more competition and better service. But four dissenting justices agreed with the submission of 37 states and consumer groups that the abandonment of the old rule would lead to significantly higher prices and less competition for consumer and other goods.

The court struck down the 96-year-old rule that resale price maintenance agreements were an automatic, or per se, violation of the Sherman Antitrust Act. In its place, the court instructed judges considering such agreements for possible antitrust violations to apply a case-by-case approach, known as a “rule of reason,” to assess their impact on competition.

The decision was the latest in a string of opinions this term to overturn Supreme Court precedents. It marked the latest in a line of Supreme Court victories for big businesses and antitrust defendants. And it was the latest of the court’s antitrust decisions in recent years to reject rules that had prohibited various marketing agreements between companies.

The Bush administration, along with economists of the Chicago school, had argued that the blanket prohibition against resale price maintenance agreements was archaic and counterproductive because, they said, some resale price agreements actually promote competition.


For example, they said, such agreements can make it easier for a new producer by assuring retailers that they will be able to recoup their investments in helping to market the product. And they said some distributors could be unfairly harmed by others — like Internet-based retailers — that could offer discounts because they would not be incurring the expenses of providing product demonstrations and other specialized consumer services.

A majority of the court agreed that the flat ban on price agreements discouraged these and other marketing practices that could be helpful to competition.

“In sum, it is a flawed antitrust doctrine that serves the interests of lawyers — by creating legal distinctions that operate as traps for the unaware — more than the interests of consumers — by requiring manufacturers to choose second-best options to achieve sound business objectives,” the court said in an opinion by Justice Anthony M. Kennedy and signed by Chief Justice John G. Roberts Jr. and Justices Antonin Scalia, Clarence Thomas and Samuel A. Alito Jr.

But in his dissent, portions of which he read from the bench, Justice Stephen G. Breyer said there was no compelling reason to overturn a century’s worth of Supreme Court decisions that had affirmed the prohibition on resale maintenance agreements.

“The only safe predictions to make about today’s decision are that it will likely raise the price of goods at retail and that it will create considerable legal turbulence as lower courts seek to develop workable principles,” he wrote. “I do not believe that the majority has shown new or changed conditions sufficient to warrant overruling a decision of such long standing.”

During the period from 1937 to 1975 when Congress allowed the states to adopt laws that permitted retail price fixing, economists estimated that such agreements covered about 10 percent of consumer good purchases. In today’s dollars, Justice Breyer estimated that the agreements translate to a higher annual average bill for a family of four of roughly $750 to $1,000

The dissent was signed by Justices John Paul Stevens, David H. Souter and Ruth Bader Ginsburg.

The case involved an appeal of a judgment of $1.2 million against Leegin Creative Leather Products Inc. after it cut off Kay’s Kloset, a suburban Dallas shop, for refusing to honor Leegin’s no-discount policy. The judgment was automatically tripled under antitrust law.

Leegin’s marketing strategy for finding a niche in the highly competitive world of small leather goods was to sell its “Brighton” line of fashion accessories through small boutiques that could offer personalized service. Retailers were required to accept a no-discounting policy.

After the United States Court of Appeals for the Fifth Circuit, in New Orleans, upheld the judgment and said it was bound by Supreme Court precedent, Leegin took the case to the Supreme Court. Unless it is settled, the case, Leegin Creative Leather Products v. PSK Inc., will now be sent down to a lower court to apply the new standard.

The Supreme Court adopted the flat ban on resale price agreements between manufacturers and retailers in 1911, when it founded that the Dr. Miles Medical Company had violated the Sherman act. The company had sought to sell medicine only to distributors who agreed to resell them at set prices. The court said such agreements benefit only the distributors, not consumers, and set a rule making such agreements unlawful.

Justice Kennedy said today that the court was not bound by the 1911 precedent because of the “widespread agreement” among economists that resale price maintenance agreements can promote competition.
“Vertical agreements establishing minimum resale prices can have either pro-competitive or anticompetitive effects, depending upon the circumstances in which they are formed,” he wrote.

But Justice Breyer said in his dissent that the court had failed to justify the overturning of the rule, or that there was significant evidence to show that price agreements would often benefit consumers. He said courts would have a difficult time sorting out the price agreements that help consumers from those that harm them.

“The upshot is, as many economists suggest, sometimes resale price maintenance can prove harmful, sometimes it can bring benefits,” he wrote. “But before concluding that courts should consequently apply a rule of reason, I would ask such questions as, how often are harms or benefits likely to occur? How easy is it to separate the beneficial sheep from the antitrust goats?”

“My own answer,” he concluded, “is not very easily.”

[Tamawaipsemek]

What a load.

You want to see what price collusion does? Just look at the price of media, such as movies and games. All other products available on the net vary in price drastically. Sometimes up to 200% (especially in consumer electronics), but games? 5% is the usual difference.

I know that thi sis not a very good example for all things, but it was meant only as an illustration of price fixing. You end up getting LESS competition and the big chains end up making more money because there is little reason to go to the small stores anymore.

This smells of a buyout from guys like WalMart who fear E-Bay et all.

/me wishes there was some way to overturn the decision...

[arrismVam]

This smells of a buyout from guys like WalMart who fear E-Bay et all.

/me wishes there was some way to overturn the decision...

... or even luxury manufacturers like Rolex who apply so much pressure on retailers to maintain list prices.

[smazibummigue]

Apalling.
Anyway, I lost all faith in this corrupt Supreme Court almost 8 years ago.
As for Antonin Scalia, I can only say,

"Vafanculo!"

[affozyBoomi]

Why are ALL websites either 100% lefty or rightwing? Are people unable/unwilling to actually look at the issue at hand?

1. Regardless of empty rhetoric, no particular party in the US has consistently sided with freedom of enterprise/competition. Both GOP and Dems have routinely sheltered/subsidized/coddled certain industries and even companies. Just think of farming and farm trade in the US. The same happens in spades elsewhere. There is no hypocrisy here, just realpolitik.

2. You need to understand a subject to comment on it intelligently. The Sherman antitrust act was a useful but flawed piece of legislation. The corpus of law built around it was, unfortunately, at times used to beat up any business that got ‘large’. This is counterproductive.

Modern antitrust law has moved toward legislating/ruling as if consequences mattered (Posner has been a major intellectual foundation of this), rather than based on abstract, fairly arbitrary principles like concentration %, etc.

The meat of the issue is in this quote:

“The court struck down the 96-year-old rule that resale price maintenance agreements were an automatic, or per se, violation of the Sherman Antitrust Act. In its place, the court instructed judges considering such agreements for possible antitrust violations to apply a case-by-case approach, known as a “rule of reason,” to assess their impact on competition.”

This is eminently reasonable and in line with the evolution of jurisprudence globally about this.

If people are willing to debate this intelligently and with facts, let’s go, otherwise, tacit stulti.

[panholio]

I was not commenting on the validity of the sherman anti-trust law which by the way I do have an understanding of.. I was commenting on the contradictory stance right-wing ideolgues take with regard to their position on capitalism and the role of free markets.

The same people who would propose to let marketplace dynamics regarding price equilibruim run rampant in areas like healthcare and higher education have no problem with allowing price collusion to occur on the supply side of consumer goods .

Allowing suppliers and dealers to collude on price setting runs completely counter to the basic tenets of capitalism. But I guess that is ok by some... afterall, those who complain about it cannot be anything other than extreme left wing advocates who know nothing about what they are commenting about.

You presume a lot.

[DuesTyr]

Eddhead, there's a big difference between being simply pro-free market and what you're talking about. You're saying it's wrong (and hypocritical) to be pro-free market while at the same time allowing price collusion. Yet, how pro-free market is it for the government to be telling firms they can't have agreements, they can't set their prices higher/lower than x, they can't have a larger market share than y%, etc?

This recent decision is proof that (hopefully), we're perhaps reversing another long trend of economic intervention that began post-Reagan. This is a good thing. Vaguely-defined antitrust laws that give incentives to federal prosecutors to extort almost limitless amounts of money from good companies is a bad thing.

[juyrett]

[Accecyncphory]

I understand your argument ... on one level it makes sense but from an overall perspective I do not agree.

One flaw of the Capitalist/Laisse Faire model is that while it provides for it 5 conditions tot be met (lack of collusion among these) for a free market to exist, it does not provide a governance mechanism to police these conditions. Most economists rationalize this by pointing out that Capitalism is a model, and social, political and economic models never exist in ther purest forms in the real world. And here is where we can have the debate. There is no dobut that there needs to be a governance process to protect market place rules and to ensure a fair playing field. People like me will suggest that that is where government needs to step in, i.e. to ensure the basic fundamental assumptions of a capitalist market are adhered to.

To illustrate this, without governance, how would we protect the public from collusion amongst healthcare providers who hypothetically move to discontinue care for cancer treatment or to raise prices to exorbitant levels. BEFORE EVERYONE GOES NUTS, I AM NOT SUGGESTING THIS LEGISLATION ALLOWS THAT. I am merely pointing out that governance is required to assure free-market principles and price equilibruim dynamics are adhered to and to protect consumers from supply-side collusion and predatory practices

So I understand your point, and I think it is well thought out, but I do not agree that a free market naturally implies an absence of regulation.

[nebrarlepleme]

July 26, 2009
Antitrust Chief Hits Resistance in Crackdown
By STEPHEN LABATON

WASHINGTON — President Obama’s top antitrust official and some senior Democratic lawmakers are preparing to rein in a host of major industries, including airline and railroad giants, moving so aggressively that they are finding some resistance from officials within the administration.

The official, Christine A. Varney, the antitrust chief at the Justice Department, has begun examining complaints by the phone companies Verizon and AT&T that their rivals — major cable operators like Cablevision and Cox Communications — improperly prevent them from buying sports shows and other programs that the cable companies produce, industry lawyers said.

At the request of some lawmakers, notably Senator Bernard Sanders, independent of Vermont, Ms. Varney is examining whether small agricultural operations are being hampered unfairly by large food processors, particularly in the milk industry, congressional aides said.

Ms. Varney has also challenged agreements that the Federal Trade Commission and consumer groups say discourage pharmaceutical companies from marketing more generic drugs. And she is examining a settlement between Google and book publishers and authors to make more books available online.

The more aggressive antitrust policy was described in interviews with officials at the White House, the Justice Department, other agencies and Congress. It is a major policy reversal from the Bush administration, which did not prosecute cases in which some dominant companies engaged in potentially anticompetitive behavior, often because those officials maintained such behavior was not harmful to consumers.

Democrats have spent years trying to gain the support of businesses, and the policy changes under way may have long-term political implications for their party. Some companies would like to see more aggressive antitrust enforcement against their rivals, while others could be hurt by it.

In some cases, though, the new approach is being opposed by administration officials. Some fear that the crackdown is coming at a bad time, as corporate America reels from the recession. Other officials embrace the Bush administration’s view that larger companies and industry alliances can provide consumer benefits by making their businesses more efficient.

One clash played out recently when the Transportation Department, rejecting many of Ms. Varney’s recommendations, approved an antitrust immunity request involving a global alliance of nine airlines; Continental Airlines wanted to join the alliance to share routes, marketing and revenue.

The antitrust division argued the immunity was unnecessary for approving the newly reconstituted alliance and that it could lead to rates rising from 6 to 15 percent for many routes, according to public filings. The Transportation Department rejected that analysis for most of the routes and instead endorsed a policy popular during the Bush administration that favored such industry agreements out of a desire for efficiency.

The disagreement became so heated that the president’s chief economic adviser, Lawrence H. Summers, was called in to mediate.

Administration officials said that Mr. Summers did not take sides in the dispute but urged the two agencies to reach an agreement as they sought to balance the interests of the industry against those of consumers.

In a second area, senior Democrats are proposing legislation to eliminate an exemption from antitrust law for commercial railroad companies. It would give the antitrust division the authority to scrutinize the railroads for anticompetitive practices.

The proposal, by Senator Herbert Kohl of Wisconsin, who heads the antitrust subcommittee, and Senator John D. Rockefeller IV of West Virginia, the chairman of the Senate Commerce Committee, has been sought by a coalition of railroad shippers. But so far the administration has not taken a position on the measure.

In a third area, a White House effort to overhaul financial regulation, officials weighed but rejected a significant antitrust role as a way to reduce the size of large companies considered too big to be allowed to fail.

“The struggles between the expert agencies and the Justice Department get to the heart and soul of exactly what the competition policy of the Obama administration will be,” said Mark Cooper, an antitrust expert and director of research at the Consumer Federation of America, an advocacy group.

He added: “Now you have an antitrust division that cares about competition, and it is running up against the expert agencies that haven’t changed their attitudes yet.”

Ms. Varney returned to government after working as a partner at Hogan and Hartson, a Washington law firm. During the Clinton administration she served in the White House as Cabinet secretary and a commissioner at the Federal Trade Commission.

The antitrust division under Ms. Varney scrapped the Bush administration’s monopoly guidelines, which had sharply limited the government’s ability to prosecute large corporations that used their market dominance to elbow out competitors.

Now the division has opened inquiries in the financial services and wireless phone industries. The division’s wireless inquiry is looking at, among other things, whether it is legal for phone makers to offer a particular model, like the iPhone or the Palm Pre, exclusively to one phone carrier. It is examining the sharp increase in text-messaging rates at several phone companies. And it is scrutinizing obstacles imposed by the phone companies on low-price rivals like Skype.

Though Ms. Varney has the backing and encouragement of senior Democratic lawmakers in the House and Senate, some agencies have been less open to the change in policy.

In the case of the airline alliance, the Justice Department and consumer groups had maintained that it was potentially harmful to customers to grant such immunity and that it would not promote the opening of new markets because the flights involved routes to countries that had already approved “open skies” agreements. But Transportation officials sided with the airlines for many of the routes and criticized the department’s antitrust analysis.

In its July 10 order, the Transportation Department criticized the approach of the Department of Justice: “Were we to suddenly change our antitrust immunity and public interest approach, as D.O.J. suggests, the credibility of the U.S. government with its international aviation partners would be significantly compromised and our ability not only to reach new Open-Skies agreements but also to maintain those agreements that we have already achieved would be undermined.”

Senior Democrats on the House Judiciary Committee, concerned that the order gave short shrift to rigorous antitrust analysis, are preparing to hold a hearing soon. A pending major expansion of a different airline alliance, involving American Airlines, British Airways and Iberia Lineas Aereas de Espana SA, is expected to provoke further disagreement between the agencies.

Justice Department officials have also been urged by major commercial shippers to examine the potentially anticompetitive practices of the highly concentrated commercial railroad industry. But the department’s authority to examine that industry is curtailed by a law that gives such authority to another agency affiliated with the Transportation Department. That agency, the Surface Transportation Board, has traditionally been sympathetic to industry concerns.

http://www.nytimes.com/2009/07/26/bu...antitrust.html