RPM: still risky business for manufacturers - retail price maintenance - Washington Report - column

RPM: Still Risky Business for Manufacturers

The ability of discounters to control their own shelf prices and the right of consumers to purchase products at a discount are suddenly hot issues in Washington.

On Capitol Hill, Congress is bearing down on legislation that will dismantle several recent U.S. Supreme Court rulings that have virtually short-circuited private litigation against resale price fixing manufacturers.

Meanwhile, at the Federal Trade Commission, antitrusters are crowing about that agency's long-overdue resumption of resale price maintenance enforcement.

One of the FTCers calling attention to the Commission's born-again interest in RPM is Competition Bureau director Kevin Arquit.

Like FTC itself, Arquit isn't taking any formal position on the discount industry-supported RPM legislation pending in Congress. But it's clear from his remarks at a recent gathering of antitrust lawyers that FTC's top antitrust enforcer doesn't think there's much need for Congress to clarify the rules of evidence in RPM cases.

Clearly, he maintained, the Supreme Court rulings permit manufacturers to announce a policy of refusing to sell to discount retailers, and to terminate sales to discounters who fail to maintain "suggested" price levels.

However, the law "does not permit supplier to persuade the discounters, through pressure or otherwise, to stop discounting," Arquit said. "Once the discounters comply with that persuasion, we have a meeting of the minds" (i.e., an illegal conspiracy to fix resale prices).

On the surface, the implications of Arquit's analysis may appear comforting to discounters and others affected by anti-competitive RPM conspiracies. In effect, he's arguing that despite the Supreme Court's attempts to weaken the restrictions against resale price fixing, RPM continues to be risky business for manufacturers.

Indeed, he said, "a supplier is taking a significant risk if it does more than communicate its price policy to dealers."

Upon further analysis, however, Arquit's views on the legal standards governing resale price maintenance should add worry lines to the face of discount retailing.

Although instigators of illegal RPM activities may face some risks, the victims of these practices are in an even worse situation.

Discounters who resist a supplier's "persuasion" to charge artificially inflated prices to consumers may be summarily terminated by the manufacturer - and this would be perfectly legal under Arquit's reasoning.

But discounters who bend to the pressure and raise prices to avoid termination by the supplier are suddenly co-conspirators in an unlawful RPM agreement.

Damned if you do, damned if you don't.

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