WASHINGTON — The House Judiciary Committee approved a bill Wednesday that would overturn a Supreme Court decision giving apparel brands the ability to set minimum prices.
This story first appeared in the January 14, 2010 issue of WWD. Subscribe Today.
In a landmark case in 2007, the Supreme Court struck down a 96-year-old legislative ban on minimum pricing agreements, giving apparel brands the potential to enforce the lowest price at which their products could be sold.
In effect, the ruling allowed manufacturers to potentially restrict how much a retailer can discount a product, creating challenges for off-pricers, Internet retailers and other discounters. The decision gave lower courts the flexibility to determine, on a case-by-case basis, whether minimum pricing agreements are anticompetitive based on several factors. Previously, such agreements were illegal on their face.
Watched closely by the fashion industry, the Supreme Court case pitted Leegin Creative Leather Products against PSKS Inc., which operated the Kay’s Kloset boutique in a Dallas suburb. The court sided with Leegin.
In the majority opinion, the Supreme Court justices, while acknowledging that minimum pricing agreements could be abused by powerful manufacturers or retailers, argued such agreements could also spur competition.
But the legislation now before Congress, called the “Discount Pricing Consumer Protection Act of 2009,” would restore the ban on minimum pricing agreements, shifting power back to retailers and discounters in setting prices on the brands they sell.
The bill would “restore the rule that agreements between manufacturers and retailers, distributors or wholesalers to set the price below which the manufacturer’s product or service cannot be sold is illegal.”
Consumer groups and retailers, including eBay Inc., have lobbied federal officials for help to remedy the impact of the Supreme Court decision, saying it’s damaging their ability to do business and also hurts the consumer. The groups have alleged that some unidentified large brands have used the precedent to target companies offering discounts and low prices to shoppers.
The bill would go next to the full House for a vote, but it is uncertain whether Democratic leaders will place it on the calendar. A companion bill in the Senate has not yet moved through committee.