Introduction of the Discount Pricing Consumer Protection Act of 2009
INTRODUCTION OF THE DISCOUNT PRICING CONSUMER PROTECTION ACT OF 2009 -- (Extensions of Remarks - July 13, 2009)
BREAK IN TRANSCRIPT
Mr. JOHNSON of Georgia. Madam Speaker, today I am pleased to introduce the Discount Pricing Consumer Protection Act of 2009. I am joined in my efforts by the honorable Chairman of the Judiciary Committee, Representative JOHN CONYERS of Michigan.
The purpose of this bill is to undo the harm to consumers posed by the Supreme Court's 2007 decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc. In Leegin, the Supreme Court overturned 95 years of antitrust jurisprudence by reversing its 1911 decision in Dr. Miles Med. Co. v. John D. Park & Sons, Co., which had expressly prohibited agreements between manufacturers and distributors on a minimum retail price for their products. Under the precedent set by Leegin, manufacturers are free to pursue this type of anticompetitive price fixing. This bill would negate the Leegin decision by making any such agreements a violation of Section 1 of the Sherman Act.
The philosophical foundation of our nation's antitrust policies is simple: competition benefits consumers. When competitors have no choice but to compete aggressively with one another, it is the customer who benefits from lower prices, better service, increased variety, etc.
The Leegin decision runs contrary to that philosophy. Consumers do not benefit from price fixing. In his dissent in Leegin, Justice Breyer writes that even if only 10 percent of manufacturers implement minimum price fixing policies, the average annual shopping bill for a family of four would increase by between $750 and $1000 annually. In this time of economic hardship, preserving competition and delivering value to consumers is as important as it has ever been.
Retail price competition is essential to promoting this country's culture of entrepreneurship. Small businesses often get their start by offering consumers something they're not getting from more established retailers. In the Internet space, this frequently involves selling goods available in retail locations at lower prices. Here again, where there is competition among retailers, the consumer wins.
The Leegin decision undermines retail competition by making it possible to set a floor price on goods sold in every conceivable outlet. Thus, the retailer who operates with lower overhead or a better cost structure is prevented from passing those cost savings on to consumers. The Supreme Court decision gives manufacturers the cover to strong-arm discount merchants into sustaining artificially high retail prices. True, the Leegin decision doesn't make every such agreement legal; it simply removes the prohibition that made any such agreement illegal on its face. But, as practicing antitrust attorneys will tell you, the enormous evidentiary burdens that a plaintiff faces post-Leegin makes litigating such cases cost-prohibitive. The real-world effect, then, of Leegin is to make such agreements legal.
The benefits of the Leegin decision are dubious. Supporters claim that the decision prevents the ``free riding'' problem, in which customers do their research at higher-priced bricks-and-mortar outlets but then purchase the product at a lower-priced online retailer. In this manner, the bricks-and-mortar outlet, which invested in the customer service, is denied the benefit of the sale; the online retailer thus ``free rides'' off of its competitor. But I question this presumption. My children will search out all of the information they can find on high-priced gadgets before going to a store to check them out. Sometimes they buy them on the spot if they don't want to wait for shipping. Which begs the question: who is free-riding off of whom?
A second argument that crops up frequently is that minimum retail prices benefit new entrants. This is so reasonable-sounding that even supporters of the Dr. Miles decision will acknowledge it somewhat apologetically as an exception. But for the 95 years that Dr. Miles controlled, we saw innovation and new entry in every industry. Supporters of Leegin say that minimum retail prices give big retailers the security they need to take a chance on promoting a new product. But many of these concerns can be addressed contractually, in the form of contracts for services, contracts for buybacks, etc. There is no need to overturn settled antitrust law to accomplish indirectly what may be contracted for directly.
The harms of minimum retail price fixing are real and proven. In 1937, Congress passed the Miller-Tydings Act to shield from the federal antitrust laws so-called state ``fair trade'' laws that permitted manufacturers to set minimum retail prices for their goods. The results were bad for competition and bad for consumers. Studies conducted by the DOJ found that minimum retail price fixing on average increased prices for the affected goods by between 18 and 27 percent, and that elimination of the practice would save consumers $1.2 billion. Congress responded by overturning Miller-Tydings with the passage of the Consumer Goods Pricing Act of 1975. In doing so, Congress examined and rejected various justifications for minimum retail price fixing, finding that the practice served little purpose other than to raise prices for consumers.
The bill I introduce today takes a stand for the consumer. It challenges manufacturers to remain innovative and aggressive, and not rely on side agreements with retailers to guarantee their own profits at the expense of a working family's paycheck. The federal antitrust laws are not an administrative inconvenience, to be done away with when threatened by the challenges of the free market. They are the greatest protection consumers have against the dangers that corporate greed, left unchecked, can pose.
BREAK IN TRANSCRIPT
Source