WASHINGTON — Manufacturers can set a minimum price for their products and forbid retailers from offering discounts, the Supreme Court said Thursday in a decision that overturned almost a century of antitrust law and could result in higher consumer prices and fewer discounts, especially on the Internet.
But it was good news for manufacturers and full-service retailers, which say they need higher prices to cover the costs of store displays and knowledgeable sales staffs.
In a 5-4 ruling, the court's majority said the long-standing rule against price-fixing, or what lawyers call "resale price maintenance agreements," is outdated and in conflict with modern economics.
Manufacturers compete across brands, and they should not be prevented from marketing their products as they choose, the majority said.
"It is a flawed antitrust doctrine," Justice Anthony M. Kennedy said, because the rigid rule "requires manufacturers to choose second-best options to achieve sound business objectives."
The dissenters said consumers would see higher prices and fewer choices because some discounting might be eliminated.
The rule against price-fixing is familiar to anyone who has looked at the window sticker on a new car. "Manufacturer's suggested retail price" meant automakers could do no more than suggest what the customers should pay.
Until now, independent dealers have been free to sell for less.
This rule dates to 1911, when the court decided a case involving the Dr. Miles Medical Co. of Indiana and its patented medicine. The company required retail druggists to charge the prices it set for its medicines, but the Supreme Court said such price-fixing tactics violated the free-trade principles set in the Sherman Act of 1890.
Business experts disagreed Thursday on the effect repeal of the "Dr. Miles rule" would have.
Because many manufacturers focus on having large sales volumes, they will not choose to set prices that leave a high margin for retailers, some analysts said. But others said makers of products such as watches, computers and golf clubs might prefer a strategy of higher prices and better service for customers with lower sales volumes.
"Resale price maintenance can increase inter-brand competition by encouraging retailer services," said Kennedy, speaking for the majority. He said retailers that offer displays and service for customers could be undercut by "free-riding" discounters.
