WASHINGTON — In a decision that could lead to lower prices for everything from hamburgers and gasoline to cars and computers, the Supreme Court ruled Tuesday that manufacturers and wholesalers can set retail price ceilings for their products.
In its 9-0 ruling, the court overturned a long-standing doctrine that gave retailers the freedom to charge as much as the market would bear.
Until now, advertisements promoting discounts, whether a 99-cent hamburger or a $1,000 auto price break, had to include the warning "at participating stores only" or "at participating dealerships."
That was required because independent sellers could not be forced to charge the lower price. This "maximum price fixing" had been deemed illegal under antitrust laws in a 1968 high court ruling, Albrecht vs. Herald Company.
Economists and antitrust experts often had derided that decision as mistaken.
Certainly price floors--or "minimum price fixing," which is banned by law--make sense, they said. Price floors hurt consumers because they prevent retailers from offering discounts.
By contrast, banning price ceilings hurts both consumers, who pay more, and manufacturers, who often sell less, economists said.
On Tuesday, the justices admitted that the 1968 precedent was in error and threw it out.
"We conclude that Albrecht should be overruled," Justice Sandra Day O'Connor announced for the court. A "considerable body of scholarship" has shown that not all price fixing is harmful, she said. "Low prices benefit consumers regardless of how they are set and . . . they do not threaten competition."
Tuesday's decision has the potential to reshape the arrangements between manufacturers and retailers in an array of industries, lawyers said. Now, franchise systems, product manufacturers and wholesalers can negotiate new agreements with retailers that include price ceilings.
"It will take a while for this to work its way through the distribution chain in some industries, but I think franchisers are likely to use this decision very quickly," said Steven B. Feirman, a Washington lawyer who represented a coalition of familiar companies including Burger King, Wendy's, Motel 6, General Motors and Pillsbury.
"Franchisers have been very upset at their inability to deliver uniform low prices. It upsets consumers," he said. "This permits the companies to bring the renegade franchisers into line."
