Thursday, June 28, 2007

Supreme Court send US back 100 years: Price fixing now legal

Supreme Court OKs retail price fixing by manufacturers - Los Angeles Times

Manufacturers are now allowed to prohibit retailers from discounting their products. This will have two immediate effects.

First, retailers will be less inclined to "take a chance" on something that may not sell. This will have the market effect, I think, of less choice for the consumer, leading, of course, to lowered supply and higher prices. Score one for big manufacturers.

But here's another one: What about gasoline stations? If Chevron forbids an independent dealer from selling below cost (gasoline, after all, for the dealer, is a loss-leader or very close to a loss-leader), this may effectively send the dealer to another line of business. Again, supply is driven down, raising prices.

It makes sense. If you put a floor on prices, which this ruling does, prices cannot deflate beyond that floor. So, the Supreme Court sent our market-based economy packing, in favor of already-dominant manufacturers.

SCOTUS is deeply out-of-touch with the real world and how it works. Adam Smith believed that people, acting out of their own self-interest, would keep the market humming along.

Leave it to the government to f--ck it all up.