The radio blared, “SUNDAY, SUNDAY, SUNDAY!!! Come on over to Appliance Liquidators where our prices are so low, the manufacturers won’t even allow us to say them on the radio!”
Or, from another perspective, have you noticed how regardless of where you go, Apple products are the same price?
Aren’t these examples of anti-competitive, antitrust controls exercised by the makers of popular products? Isn’t this almost like a monopoly? Can these companies legally stop their customers from selling at whatever price they want?
In California, the Cartwright Act prohibits every trust, defined as “a combination of capital, skill or acts by two or more persons” for specified anticompetitive purposes.
Federal law is very similar. As the California Court of Appeal said in 2001, “The federal Sherman Act prohibits every ‘contract, combination . . . or conspiracy, in restraint of trade.’”
So, is it OK for a manufacturer to prohibit a retailer from advertising prices of its products if those prices fall below a certain level? Can a manufacturer tell a retailer that the retailer must sell the manufacturer’s products at a minimum price? Are such actions tantamount to violations of law?
Essentially, as you’ll find in most areas of the law, the answer is, “It depends.”
The first basic premise, as stated by the Court of Appeal in the 2014 decision in Crown Imports, “Barring law to the contrary, a manufacturer has the ‘right to select with whom to do business and on what terms.’”
So long as a manufacturer is not controlling the marketplace, it can set certain conditions upon the sale of its products.
There are levels to which a manufacturer can exert influence over retail prices.
Ford can have its MSRP, or Manufacturer’s Suggested Retail Price. That’s OK because Ford is merely “suggesting” how much its cars should sell. It’s not telling the dealers, “You must sell the Focus for x amount.”
Likewise, a manufacturer can recommend that its products should sell for at least a certain amount. This, like the MSRP, is only a recommendation, not a mandate.
What about a rule that a retailer cannot advertise below a certain level? Or that it must sell the manufacturer’s products for a minimum price?
In reviewing these situations, courts have kept in mind today’s reality and the concept that a manufacturer can pick and choose who it wants to do business with.
How many of you go to something like Best Buy and pick the brain of the guy in the computer or television departments about what to buy, just to go online and get it from Amazon or some other retailer that does not have a brick and mortar store?
Manufacturers want knowledgeable sales people providing the retail customer with accurate information about their products. They know that some folks go to a Pacific Sales and ask the sales attendant which one of a certain product, such as a washing machine, is the best.
The manufacturers want to support these efforts and discourage price shopping. So often they will tell the retailers that they cannot advertise (or post online prices) below a certain level or that they must sell the products for a minimum price.
The Court in Chavez v. Whirlpool (2001) ruled that so long as a manufacturer treats retailers similarly it could require that their chosen retailers sell the Whirlpool products at a minimum price. The rationale is that it’s OK to set prices to “help ensure that retailers promote products and offer services.”
So don’t expect to see discounted iPads anytime soon. ©