Thursday, July 12, 2007

Fashion on the High Court?

One of the many great comments I received in response to my Saying "Goodbye" to Discounted Designer Fashions post last week came from an anonymous reader who mentioned that there was a recent supreme court case that said manufacturers can set prices for their products, and that it could have a huge effect on discount designer stores. Curious and a bit embarrassed that I hadn't heard of the ruling myself, I consulted my boyfriend, a law student and resident legal expert in our relationship, to explain how this might effect all the budget fashionistas out there. He was kind enough to write out a response and let me post it, so I'm sharing it with you all:

In general, when manufacturers and distributors sell their products to a large group of stores, often one of their largest fears is that one of the stores will heavily discount their product, harming the brand strength of the product line and lowering retailers' demand for the item in the future.

To try to deal with this, many manufacturers have tried forcing retailers to agree to
resale price maintenance contracts, in which the retailers agree not to discount certain products below a certain price. So, a manufacturer might sell jeans to a number of stores for $30 each, with the agreement that, no matter what, the stores wouldn't discount the jeans below $65.

Until recently, this was probably illegal under US antitrust law because it was believed to hurt consumers by keeping prices high. Last week, though, the Supreme Court ruled in Leegin v. PSKS that these agreements weren't automatically unlawful.

So, how does this impact you as a fashion consumer? Well, like almost everything, there are good and bad aspects to what the Supreme Court did.

On the bad side, this has the potential to raise prices across the board. If retailers are forced to keep prices above a certain level, shoppers are going to find fewer and fewer bargains. Even worse, stores that often get a large share of their inventory from other stores as closeouts (like Bluefly) might find that many of their suppliers are restricted from selling to them at a deep discount. Because of that, there might be fewer bargains available to shoppers.

On the good side, forcing retailers to keep prices high hurts discounters, but helps stores that provide high quality service and good atmosphere. If stores can't compete on price, they're more likely to compete by offering better service.

It's hard to say what the overall effect of this ruling will be, but it will be interesting to see if this shakes up the fashion industry at all. I suppose we'll see if there are noticeably fewer deep discounts available next season.


ashley churchill said...

as a longtime lover of marshalls, filene's basement and the like, i am absolutely terrified. the supreme cort is sucking these days, and this latest ruling is no exception. i don't want "better service" i want "cheap designer clothes."

Anonymous said...

The case is a little unusual in that what the ruling actually does is change the analysis about whether the practice is illegal or not. Previously, the practice was automatically illegal. However, now it is supposed to be analyzed under the "Rule of Reason" (an antitrust law concept)that basically means that only combinations and contracts _unreasonably_ restraining trade are subject to actions under the anti-trust laws; it was used to hold, in some older cases, that size and possession of monopoly power were not illegal. Analysis under the Rule of Reason, however, focuses on the economic, and not social, consequences of a restraint -- so it's possible that requiring a retail price could still be illegal, it will just be much harder to prove than before, when plaintiffs could just say "this is automatically illegal." It makes an antitrust lawsuit more expensive and harder to win.

Beth said...

I agree with ashley. I don't want better service, beyond a quick checkout! I don't care about atmosphere, I'd actually rather be left to my own devices like at DSW and Marshalls. The markup on almost all manufactured goods is outrageous to begin with, now we can't even get discounts?? Does this also apply to places that sell their own brands, like Gap and Ann Taylor?

Anonymous said...

Nice to see you are concerned with legality in the apparel industry to the extent it affects you directly -- why don't you consider the labor practices of your beloved brands.

Anonymous said...

Atomosphere? You're not paying for atmosphere, you're paying for clothes. I really don't care if the walls are bare concrete and checkout is automated, I'd much rather pay lower prices for the item that I'm actually buying. Service? I personally despise being asking every 2 seconds if I need help, if I needed help, I'd have already asked someone.

btw - quite frankly, unless people are working somewhere against their will, actual slavery (not oh, you're only paid 50 cents an hour and you're not allowed to take breaks slavery), I really don't care about anyone's labor practices. People CHOSE to work at those locations/salaries/whatever, even if they don't have any other GOOD choices, they STILL have a choice.