The days of bargain shopping for designer or high quality items may soon be over. While it still lasts, take advantage of scouring the internet and clearance racks to find the best deals on the latest coveted electronics and accessories. The impending Christmas shopping season, which stores may have already begun to advertise even in July, could be lacking the usual cheer that comes from finding the perfect gifts at a marked-down price.
Previously, antitrust laws allowed retailers to set the prices on goods. When a store wanted to create space for new inventory, they had the freedom to clear out old items with slashed prices. Manufacturers, fearing that their depreciated items would cause their brand name to lose high-end appeal, have fought against these antitrust laws for the last century. On June 28, manufacturers had a breakthrough when the Supreme Court ruled, 5-4, that it will no longer be automatically illegal for manufacturers to set minimum retail prices.
Retail experts predict that groceries and other perishables will not be affected, but electronics, books, purses, watches, jewelry and pretty much anything else that can be gift-wrapped will be more expensive and less likely to be discounted. From store to store, luxury goods will begin to display identical price stickers. Without price competition, the item remains indefinitely overpriced until the manufacturer decides differently.
The United States Justice Department Antitrust Division enforces antirust laws to prevent monopolies that drive up prices and demolish competition. According to the Antitrust Division, “The historic goal of the antitrust laws is to protect economic freedom and opportunity by promoting competition in the marketplace. Competition in a free market benefits American consumers through lower prices, better quality and greater choice. Competition provides businesses the opportunity to compete on price and quality…”
Before the new ruling the Antitrust Division stated, “The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade, such as price-fixing conspiracies, corporate mergers likely to reduce the competitive vigor of particular markets, and predatory acts designed to achieve or maintain monopoly power.”
However, under the new ruling, manufacturers can legally use price fixing, an agreement between business competitors to see that the same product or service is sold at the same price. Price fixing typically yields greater profit for sellers but gouges consumers in the process. Without price competition, if an item is overpriced everywhere it is sold, consumers are only left with two options: buy or go without.
Not wanting to lose nationwide distributors such as Wal-mart and Target, manufacturers would be more willing to bend their price requirements in their favor. Therefore, even more consumers will flock to these merchants to purchase items that are still overpriced, but cheaper than at any other store. Meanwhile, Wal-Mart and Target will continue to absorb small businesses that are already struggling to compete with wholesale prices.
In the past few years, manufacturers had already discovered loopholes in the antitrust laws in order to fix prices, such as high wholesale prices or bartering with retailers to use suggested retail prices. Microsoft, Sony and Nintendo have been utilizing these tactics with their latest game consoles. Everywhere a consumer goes, the Xbox, PlayStation 3, and Wii cost the same. With this practice, corporate vendors such as Game Stop and Game Crazy have almost entirely annihilated their small-business counterparts. This is an astonishing feat considering the fast rate at which the video game market is expanding. According to the Entertainment Software Association, United States computer and video game sales reached $2.6 billion in 1996. A decade later, in 2006, computer and video game sales reached $12.5 billion.
If small businesses in a rapidly growing market are being snuffed out by price fixing, how are they to compete in stagnant markets or markets not experiencing rapid growth? Retail experts predict that small businesses, particularly small discount store chains, will suffer the most. The once-prevalent American dream of owning a small business continues to diminish. When will consumers take a stand against the Supreme Court? It has too much power if it can approve such an impacting change with such a close vote and without the voice of individual voters.