Suppose that Mark Manufacturer produces a widget that Sam Supplier sells to Connie Customer.  Can Mark’s contract with Sam specify the minimum price that Sam will charge Connie?

Until today, few people in Mark’s situation were willing to do so.  Instead, people in Mark’s situation negotiated their price with Sam.  Then, Sam and Connie negotiated the price between themselves.     

As a result of the Supreme Court’s ruling in LEEGIN CREATIVE LEATHER PRODUCTS v. PSKS dba KAY’S KLOSET, Mark may be able to negotiate with Sam regarding the price that Sam will charge Connie.  A balancing test will be used to decide if the price that Mark and Sam negotiate and the use of provision itself is reasonable.  The Court said:

Factors relevant to the inquiry are the number of manufacturers using the practice, the restraint’s source, and a manufacturer’s market power….

The rule of reason is designed and used to eliminate anticompetitive transactions from the market.

It may be sometime before people in Mark’s situation engage in large scale negotiations over minimum prices.  Perhaps, it will be a situation where the restrictions occur in franchise and licensing situations.  In such situations, the manufacturer often exercises more control than in other types of business relationships.

What do you see as the future of pricing?  What will it mean for your business?  What will it mean for you as a consumer?

Is this part of a general trend in the US Supreme Court?  If so, what does this mean for you?

Filed by Coleen Davis at 8:27 pm under Business Acumen, Business Trends, Customers, Negotiations, New Ideas