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High Court Gives Manufacturers More Power to Set Prices

Reuters
Thursday, 28 Jun 2007 | 2:11 PM ET

The Supreme Court on Thursday overturned a nearly 100-year-old precedent that some price-setting agreements between manufacturers and retailers are automatically illegal under federal antitrust law.

By a 5-4 vote, the justices overturned a 1911 Supreme Court ruling that minimum prices set by manufacturers on what dealers can charge customers for their products are unquestionably illegal.

Antitrust authorities at the Justice Department and the Federal Trade Commission also had urged the top court to overturn the precedent, while 37 states and a leading consumer group had urged that the precedent be preserved.

The ruling stemmed from an appeal to the Supreme Court by a company called Leegin Creative Leather Products, the manufacturer of the Brighton brand of women's accessories.

In 1997, it adopted a policy stating it would do business only with retailers that followed its suggested retail prices and would not sell to retailers that discounted its products.

PSKS, operators of a retail store known as "Kay's Kloset" in Lewisville, Texas, placed the entire line of Brighton products on sale below the suggested price in 2002. Leegin then stopped all shipments of its products to the store.

PSKS sued under the antitrust law, alleging illegal price fixing. A jury awarded PSKS $3.6 million in damages and $375,000 in attorney fees, an award upheld by a federal appeals court.

The Supreme Court's majority opinion, written by Justice Anthony Kennedy, reversed the appeals court's ruling. Justices John Paul Stevens, David Souter, Ruth Bader Ginsburg and Stephen Breyer dissented.

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