Was the US Supreme Court right to allow manufacturers and distributors to create resale price agreements?

Yes

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by James Dreamer

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Was the US Supreme Court right to allow manufacturers and distributors to create resale price agreements?

I have some special insight into this subject I would like to share with you as I am the owner of a brick and mortar business. I for one say yes, the Supreme Court was right. Let me explain why.

For over twenty years we've sold a high end line of vacuum cleaners. They were the type that would not sell well at a typical discount store because of the price. They had to be demonstrated to the customer and you had to show them how different they were from the average machine. Once the consumer saw these differences they knew it was worth the money and we sold thousands of them.

Enter the internet. Slowly we started losing sales. We would demonstrate the machine, convince the customer of it's value, but they would leave without buying. When we saw them again they would have the machine and want us to service it or answer questions about its operation. What we discovered was a couple web sites operated by one or two people out of their home or garage. The had virtually no overhead and were selling the machine so close to our cost there was no way for us to compete and keep our doors open.

When we complained to the manufacturer they said there was nothing they could do. We knew this to be untrue as many manufacturers give dealers a territory. All their sales must be made in this geographical area. Failure to comply results in termination of the dealership. Our manufacturer would do nothing because they were enjoying extra sales from people who saw the machine at a brick and mortar dealer but did not want to pay the price and bought it on the net.

I explained to them this would be temporary. Why? Because the brick and mortar dealer who demonstrates the machine will stop carrying it if they cannot make a profit. Consumers do not know of the machines existence until it is demonstrated to them. Internet dealers cannot do this. In other words, once the brick and mortar dealers drop to zero, demand for the machine drops to zero, the internet sales drop to zero and the sales for the manufacturer drop to zero!

They did not listen until it hit them in the pocketbook. What I told them was exactly what happened. Sales of these machines dropped to an all time low. Suddenly, they could do something about the problem. Now each dealer signs a contract and is given a territory. Pricing is set by the manufacturer and must be adhered to. Failure to comply results in a termination of the contract and loss of dealership.

We all like to get our goods at the cheapest price (this includes me), but you can see from the above example there are times when some sort of price control is necessary for a product to remain on the market. Let's just hope this doesn't get abused making us have to pay more than what's fair.

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