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Supreme Court Lifts Ban on MRP

Amidst the music product industry’s Federal Trade Commission (FTC) investigation, the U.S. Supreme Court overturned a 96-year-old antitrust law that prevents minimum retail price agreements. On June 28, the court reached the 5–4 ruling, which will give suppliers more power to dictate retail prices and restrict discounters’ pricing flexibility. It is unclear whether the ruling will affect the FTC’s investigation of the music product industry.

Supporters of the ruling said it could help increase competition and improve retail service. Critics argued it could lead to higher prices and make it more difficult for new retailers to enter the market.

In a 1911 decision, the Supreme Court had ruled that minimum pricing agreements were always in violation of the Sherman Antitrust Act.

According to a June 29 article in The New York Times, “Century-Old Ban Lifted on Minimum Retail Pricing,” the Bush administration and economists of the Chicago school have maintained that the blanket prohibition against resale price maintenance agreements was counterproductive because some resale price agreements promote competition.

“In sum, it is a flawed antitrust doctrine that serves the interests of lawyers — by creating legal distinctions that operate as traps for the unaware — more than the interests of consumers — by requiring manufacturers to choose second-best options to achieve sound business objectives,” wrote Justice Anthony M. Kennedy.

“The only safe predictions to make about today’s decision are that it will likely raise the price of goods at retail and that it will create considerable legal turbulence as lower courts seek to develop workable principles,” wrote Justice Stephen G. Breyer, a dissenter of the ruling. “I do not believe that the majority has shown new or changed conditions sufficient to warrant overruling a decision of such long standing.”