Colleagues,

I read Kahn as retaining per se analysis of minimum prices and applying
rule of reason only to maximum prices. On the other hand, a unilateral
termination of a dealer selling below SRP if not characterizable as an
agreement would appear to still be legal.

Connie Bagley



At 12:44 PM 03/27/2000 , you wrote:
>Robert, Pat and all,
>
>Thank you both.  In response to Robert, your point of image/brand
>protection was precisely the context of the question.  My marketing
>brethren's class project has a manufacturer concerned that discount
>retailers will undersell its suggested retail price, so high end retailers
>will be unable to compete and will stop selling the product, and the
>product will become publicly associated with the discount market and suffer
>inferior warranty service.  Refusing to sell to those discounters or
>raising wholesale prices to all retailers don't seem like realistic
>business options.  From my market clueless view, I would assume this
>situation very commonly occurs and call for price agreements as the best of
>very few choices for manufacturers who sell direct to retailers.
>
>My question for Robert, also raised by what Pat wrote, is the role of
>intent here.  Does the rule of reason allow antitrust defendants to escape
>price-fixing liability by simply patching together evidence of a
>procompetitive purpose?  Would not most manufacturers be able to justify
>price floors using the above concerns and thereby solidify their margins?
>Pat, is this where the courts must separate pretense from reality using
>objective evidence, not just the manufacturer's subjective state of mind?
>
>Brad
>
>Date: Mon, 27 Mar 2000 11:59:09 -0500
>From: Pat Cihon <[log in to unmask]>
>Subject: Re: manufacturer price-setting issue
>To: Brad Sleeper <[log in to unmask]>
>X-Mailer: Mozilla 4.7 [en] (Win95; I)
>X-Accept-Language: en
>Original-recipient: rfc822;[log in to unmask]
>
>Brad -- one possible situation where resale price maintenance may not be
>anticompetitive was discussed in the Khan v. State Oil decision -- where a
>dominant reatiler is using its market power to charge a higher price for a
>product, the manufacturer/supplier could use a ceiling price to ensure that
>the
>retailer didn't overly exploit its market power.  If a franchisee is price
>gouging for the licensed or trademarked item -- the local Pizza Hut
>franchise is
>charging extremely high prices and faces little competition in the pizza
>market
>-- it gives the trademarked or franchised good a negative image, and may
>hurt the
>supplier (Pizza Hut) in other markets where there is competition among pizza
>outlets.  So instituting a ceiling price may benefit the franchisor (Pizza
>Hut)
>and the consumers.  Is that a realistic situation -- or is it more likely that
>the ceiling price becomes the basic price, and there is no price
>competition --
>which is much more likely to be the case.  At least the rule of reason
>analysis
>should allow the court to differentiate between the two.
>      Hope this helps.  Pat Cihon
>
>
>Date: Mon, 27 Mar 2000 11:19:43 -0500
>From: "Storch, Robert" <[log in to unmask]>
>Subject: manufacturer price-setting issue
>To: "[log in to unmask]" <[log in to unmask]>
>X-Mailer: Internet Mail Service (5.5.2650.21)
>Original-recipient: rfc822;[log in to unmask]
>
>I am of the opinion that setting price minimums is legal if it is done to
>protect an image of value for the manufacturer's product.
>
>Robert
>-----------------------------------------------------------------------------
>Brad Sleeper                            Professor of Business Law
>BB 307                                  email:  [log in to unmask]
>St. Cloud State University              telephone:  (320) 255-4227
>St. Cloud, MN  56301-4498               fax: (320) 255-4061
>
>To laugh often and much. To win the respect of intelligent people, and the
>affection of children.
>To earn the appreciation of honest critics and endure the betrayal of false
>friends.  To appreciate beauty. To find the best in others. To leave the
>world a bit better, whether by a healthy child, a garden patch, or a
>redeemed social condition. To know even one life has breathed easier
>because you have lived. This is to have succeeded.      - Ralph Waldo Emerson
>
>----------------------------------------------------------------------------



Constance E. Bagley
Senior Lecturer
Harvard Business School
Soldiers Field Road
Boston  MA 02163
ph. (617) 495-6963
fx.  (617) 496-5859