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BizReport : Ecommerce archives : July 03, 2007

Supreme Court sets minimum price guidelines

In a change from their 1991 decision that minimum pricing standards violate US federal anti-trust laws, the US Supreme Court has mandated that minimum pricing standards can now be implemented. The change could hurt online retailers.

by Kristina Knight

The Court ruled that manufacturers can set minimum price standards that retailers must use. Without the ability to discount some items many e-tailers will see sales drop and the Internet will likely see many online stores close up shop.

The 5-4 decision, according to the dissenting justices, will likely be most difficult for e-tailers. According to Justice Anthony Kennedy minimum price agreement may actually benefit consumers because retailers will have to win on customer service not lower pricing. He also wrote that minimum pricing standards might make it simpler for new products to make it in today's tougher markets.

Not all of the justices agree with Kennedy's statements, however. Justice Stephen Breyer wrote, "The only safe predictions to make about today's decision are that it will likely raise the price of goods at retail."

Since the Internet became popular, online retailers have thrived by being able to offer products at much lower prices than their brick-and-mortar counterparts. The ruling will likely change that because e-tailers won't be able to set their own prices. Instead they will have to follow manufacturer's guidelines, hurting their bottom line.

Tags: e-commerce, e-tailers, online retail, online revenue

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