Why would the below scenario be subject to antitrust pricing issues?

Asked about 1 year ago - San Diego, CA

We are evaluating offering retailers an eCommerce store that will be fully stocked from manufacturer’s products we have sourced on their behalf. By giving them our ecommerce platform we allow them to more effectively serve their customer base. Some may want to alter product pricing though for our business model (commission on product transactions) we need to ensure that any product transaction is done at a minimum price that we set & control. Retailers will have pricing flexibility above the price set but not below per our terms of agreement for using the solution we are offering. They can offer pricing promotions via coupons and sell below the minimum commissioned based price but the price displayed on the store remains the price we have set, in effect being a minimum advertised price.

Attorney answers (3)

  1. Pamela Koslyn

    Contributor Level 20

    4

    Lawyers agree

    Answered . Because your minimum price is "price-fixing," which is disadvantagous to consumers.

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  2. Stephen Joseph Cipolla

    Pro

    Contributor Level 13

    4

    Lawyers agree

    Answered . Under a recent Supreme Court decision, called Leegin, minimum resale price agreements can be justified against antitrust attack if they can be shown, on balance, to be pro-competitive or competitively neutral. The court looks at the business justifications for the arrangement and balances them against any negative effects on competition to determine whether the federal antitrust laws have been violated. The analysis is fact specific and intensive. Prior to the Leegin decision, such agreements were absolutely prohibited under federal antitrust law. Many business people remain under the impression that the previous rule remains in effect. You must also be aware that several states have moved to amend their state antitrust law to, in effect, repeal the conclusion reached by the US Supreme Court in Leegin, and restore prohibition on this kind of pricing agreement. You need to consult an antitrust expert to determine whether the facts of your situation would pass muster under the standard set in the Leegin decision and whether your business is exposed to liability under any state laws. Violation of antitrust laws is a felony, carrying both criminal and civil penalties enforceable by federal and state authorities, and it exposes a violator to very severe monetary damages (known as treble damages), so it's a good idea to get advice in this area before you move forward or invest substantial resources.

    In addition to antitrust law exposure, this pricing could potentially be attacked as an unfair business practice or deceptive trade practice under state law.

    Please feel free to contact me if you wish to discuss this further. I have been practicing antitrust law for 28 years, and I am very familiar with this area of the law.

  3. Bryant Keith Martin

    Contributor Level 18

    2

    Lawyers agree

    Answered . This is “retail price maintenance” which cannot be enforced by Agmts among retailers or between retailers and wholesalers or manufacturers. There has been a long history of indirect enforcement by refusal to deal by the wholesaler: “Unless you sell at my prices, I won’t sell you any product.” At times this was permissible. I don’t practice antitrust anymore, so I can’t tell you the current rules on that. You should consult an antitrust lawyer before you spend much money setting this up.

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