By  on August 1, 2007

WASHINGTON — Democrats in Congress considered moves Tuesday that would counteract Supreme Court decisions involving minimum pricing agreements and pay discrimination that have broad implications for the fashion industry.

A Senate panel listened to testimony at a hearing on the fairness of the High Court's decision overturning an almost-century-old law setting minimum pricing agreements between retailers and manufacturers.

In the House, lawmakers passed a measure that would override a decision that placed time limits on employees filing pay discrimination lawsuits.

The Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights reviewed the ruling on Leegin Creative Leather Products Inc. v. PSKS Inc. The decision gives lower courts the flexibility to determine, on a case-by-case basis, whether minimum pricing agreements are anticompetitive based on several factors. It supplanted a law that held minimum pricing agreements between retailers and manufacturers were illegal.

While the fallout in the industry is still being assessed, many opponents of the court's ruling argue that off-price retailers and discounters could be adversely affected and consumers will be forced to pay higher prices.

In the majority opinion, the Supreme Court justices, while acknowledging that minimum pricing agreements could be abused by powerful manufacturers or retailers, argued that they could also spur competition.

Subcommittee chairman Herb Kohl (D., Wis.), whose family founded Kohl's department store in 1962, said: "I am particularly worried about the effect of this new rule permitting minimum vertical price-fixing on the next generation of discount retailers, the next Sam Walton. If new discount retailers can be prevented from selling products at a discount at the behest of an established retailer worried about competition, we may imperil an essential element of retail competition so beneficial to consumers."

Marcy Syms, chief executive officer of Syms Corp., an off-price retailer with 33 stores in 13 states, testified at the Senate panel hearing about the "undesirable effects" retail price maintenance [RPM] agreements will have on her business and on off-price and discounting business as a whole.

"The prohibition on RPM agreements has, I believe, kept in check serious threats to Syms' ability to sell merchandise," she said. "That may well change as manufacturer-oriented RPM policies become more prevalent in the clothing industry."Syms said the Court's ruling could affect the off-price and discounting industry in several ways, including: facilitating illegal horizontal price-fixing agreements among manufacturers, lowering a retailer's ability to sell end-of-season or out-of-season merchandise by discounting and further restricting the supply of discounted merchandise.

Pamela Jones Harbour, a member of the Federal Trade Commission, broke ranks with other commissioners and argued for congressional intervention.

"Absent congressional action, I envision a post-Leegin world where there is no effective check on minimum vertical price-fixing," Harbour said, adding that consumers will pay higher prices as a result.

On the other side of the debate, Janet McDavid, who spoke on behalf of the American Bar Association, argued that the 96-year-old law "made no business sense" and often subjected manufacturers to litigation because there was such a fine line between how a manufacturer and retailer could set prices without actually making an agreement, which was automatically illegal. She also said the overturned law was "cumbersome" and impractical and tied the hands of the manufacturers.

Addressing McDavid's argument, Kohl said: "Another way of saying it is it would make it easier and less cumbersome for manufacturers to dictate price. I don't think you can make the argument that it serves the American consumer. Clearly it serves the interest of manufacturers."

Sen. Orrin Hatch (R., Utah) said the central question is whether the "positive effect on the manufacturer outweighs the negative effect on the discount retailer."

In the House action, representatives overrode a Supreme Court ruling in a case of a Goodyear Tire & Rubber Co. employee who sued the company for wage discrimination. The court stated that workers cannot sue for wage discrimination more than 180 days after the alleged act took place.

The House approved a bill, 225 to 199, that would allow employees to sue for pay discrimination based on when a paycheck is issued. As long as workers file their charges within 180 days of a discriminatory paycheck, their charges would be considered timely, since the discrimination would be considered ongoing and in violation of the Civil Rights Act. However, the House bill caps the back-pay discrimination at two years.

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