Jul 2, 2007

Supreme Court Hands Manufacturers Increased Leverage Over Retail PricingBy BicycleRetailer.com

Washington, D.C.–The U.S. Supreme Court’s decision last week to allow manufacturers and distributors to more effectively set and enforce minimum prices at retail overturns almost 100 years of pricing policy and could have some impact on the industry.

The decision could change the current relationship between suppliers and retailers. Its impact will take time to sort out after the Court’s conservative wing, in a 5-4 decision, gave suppliers significantly more legal leeway to dictate retail pricing and curb the pricing power of discounters.

In a one-page Client Alert sent to members of the Bicycle Product Supplier Association by its attorney, Brock Landry, the Court’s decision makes this key change: “This does not mean that resale price maintenance in now inherently legal. It simply means that it is no longer inherently illegal.”

The case before the Court involved a California manufacturer, Leegin Creative Leather Products, and its agreements with specialty retailers setting a minimum price for its Brighton brand of women fashion accessories. A Texas boutique, Kay’s Kloset, sued Leggin in 2002 after it was dropped as a dealer for violating a price agreement on the sale of Leegin’s handbags. A jury awarded the retailer $3.6 million in damages. That decision was upheld by the Fifth Circuit, but the Supreme Court reversed it.

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