By  on March 19, 2010

WASHINGTON — The Senate Judiciary Committee approved a bill Thursday that would supersede a landmark 2007 Supreme Court decision that gave apparel brands the ability to set minimum prices.

The legislation would reinstate an almost-century-old ban on minimum pricing agreements and shift power on setting prices from apparel brands back to retailers and discounters.

Discount retailers, off-pricers and online auction sites such as eBay, which support the legislation, were hopeful the panel’s approval, in a voice vote, will set the stage for the bill to be considered by the full Senate. The House Judiciary Committee passed the same legislation in January, but the House has not acted on it.

The bill would negate the 5-to-4 Supreme Court decision that struck down a 96-year-old legislative ban on minimum pricing agreements, giving apparel brands the ability to enforce the lowest price at which their products could be sold.

The case pitted Leegin Creative Leather Products against PSKS Inc., which operated the now-defunct Kay’s Kloset boutique in a Dallas suburb. Kay’s Kloset took Leegin to court when it disagreed with a policy that required adherence to a minimum price and won the original case. Leegin appealed the decision.

In effect, the Supreme Court ruling allowed manufacturers to restrict how much a retailer can discount a product, creating challenges for off-pricers, Internet retailers and discounters. The decision gave lower courts the flexibility to determine, on a case-by-case basis, whether minimum pricing agreements were anticompetitive based on several factors. Previously, such agreements were illegal on their face.

Sen. Herb Kohl (D., Wis.), the lead sponsor of the Discount Pricing Consumer Protection Act, said Thursday the bill is “essential to ensure that consumers can continue to obtain discount pricing on every product, from electronics to clothing to groceries. Our bill will restore the nearly century-old rule that makes it illegal under antitrust law for a manufacturer to set minimum retail price for its products.”

Before his election to the Senate in 1988, Kohl helped build his family-owned business, Kohl’s grocery and department stores, and was president of the company from 1970 until 1979, when it was sold.

Since the Supreme Court decision, Kohl said he has heard reports of manufacturers “demanding an end to discounting engaged in by all types of retailers, from mom-and-pop stores to giant Internet retailers.”

The majority opinion, written by Justice Anthony Kennedy, acknowledged minimum pricing agreements could be abused by powerful manufacturers or retailers, but argued they also could spur competition.

In the dissenting opinion, Justice Stephen Breyer wrote the decision “will likely raise the price of goods at retail and…will create considerable legal turbulence as lower courts seek to develop workable principles.”

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