NCPA - National Center for Policy Analysis

Letting Producers Set Prices

October 17, 1997

The Supreme Court has before it a case which could give back to producers the right to set maximum retail prices on their goods -- a right which was taken away from them in a 1968 decision. Many economists contend that the restoration of this right would benefit both producers and consumers.

Here's why:

  • Producers who are anxious to build goodwill among consumers want the assurance that an unscrupulous retailer will not gouge a buyer with an unreasonable price for his product.
  • Thus, maximum price-setting tends to hold down prices consumers pay.
  • Free-market advocates reason that a producer should be able to include a provision in his contract with a retailer or franchisee to honor a maximum price, if the producer so wishes.
  • Only with this assurance can manufacturers and franchisers launch cut-rate promotions, secure in the knowledge that the lower price is being offered wherever their product is sold.

Under current law, a producer must insert the caveat "at participating outlets." It is also the reason why so many promotions contain the phrase "suggested retail price" rather than the actual retail price, according to marketing and legal experts.

Source: Gary M. Galles (Pepperdine University), "Court Should Put Consumer First In Antitrust Case," Investor's Business Daily, October 17, 1997.

 

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