By Joan Biskupic, USA TODAY  WASHINGTON  When a Supreme Court majority let manufacturers require retailers to charge minimum prices for their products, dissenting justices warned that the ruling would hit American households hard and could cost some families $1,000 more a year in retail bills.  The 5-to-4 decision provoked an outcry from groups such as the Consumers Union and set off a rush of hearings and concern in Congress and the states. The dispute, Leegin Creative Leather Products v. PSKS, involved the maker of Brighton brand silver-studded belts and other accessories, which had cut off a Texas boutique for discounting its items.  That 2007 decision was one of the first major rulings of the changing court under Chief Justice John Roberts. It also was one of the first in a series of decisions that Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., and other critics say demonstrate the Roberts Court favors corporations above consumers.  Three years later, against the backdrop of a struggling economy, the momentum in response to the decision is in the states. State officials are trying to ensure that manufacturers don't punish retailers for slashing prices — and consumers don't end up paying extra.  Legislatures have tried to beef up their own laws against price fixing, and attorneys general are bringing cases, based on state statutes, against manufacturers that try to force retailers to set a certain price and inhibit discounters.  Before the ruling and for nearly a century, minimum-pricing requirements were an automatic violation of antitrust law. The high court's decision does not make such deals outright legal, yet it sets a high standard for retailers who want to challenge them in court. Among state and federal efforts to offset the decision's impact:  •In New York, in a case heard this fall by a trial judge and still awaiting resolution, state Attorney General Andrew Cuomo alleged that Tempur-Pedic violated state law by warning retailers it will only do business with them if they charge certain prices, including at least $1,699 for its "classic" bed and queen mattress.  State lawyers said the premium-mattress maker actively polices retailers to verify that discounts do not occur and encourages other retailers to report violators. As a result, their claims says, "New York consumers are paying more for Tempur-Pedic mattresses than would result from competition." Tempur-Pedic has denied any wrongdoing.  •In California, officials in February settled a case with DermaQuest after the state attorney general's office alleged the cosmetic maker had entered into price-fixing deals with distributors for minimum pricing, in violation of state law. DermaQuest agreed to pay $70,000 in civil penalties and $50,000 in legal costs.  Since the Leegin ruling, says Kathleen Foote, a senior lawyer in the California attorney general's office, "California and other states have stepped up their state law-enforcement work in this area."  •In Maryland, the Legislature last year passed a law that prohibits all minimum pricing, as federal law had until the high-court action.  Ellen Cooper, chief of the antitrust division of the Maryland attorney general's office, said state lawyers are seeking the "right" first case to bring under the prohibition.  "We're looking for something that is going to affect Maryland retailers and consumers specifically," she said. "We want one that would set a good precedent and that would be a warning to manufacturers out there who might be thinking" about imposing minimum-pricing agreements.  •On Capitol Hill, Democrats led by Sen. Herb Kohl of Wisconsin and Rep. Henry Johnson of Georgia have been pushing legislation to reverse the Leegin decision. Among the retailers who testified or wrote letters saying the ruling had hurt their business was Scott Mulder, who runs Tree Fort Bikes in Ypsilanti, Mich.  Mulder said if his company, which sells bike supplies mostly through the Internet, is pressured "to price things exactly the same as everyone else, the competitors who have enormous amounts of money to dump into advertising and huge 'big box' stores are sure to grab the sale."  On Dec. 8, the House Judiciary Committee issued a report that found the Supreme Court's decision appears to have had "an adverse impact on consumer prices."  Yet Harvard law professor Einer Elhauge, an antitrust scholar, says the economic downturn, among other factors, makes it difficult to know the real impact of Leegin on consumers nationwide.  Elhauge now represents Texas retailer Phil Smith, who lost the high-court case and is trying to get a new hearing at the Supreme Court on price fixing. Elhauge says some lower-court interpretations of antitrust law in the wake of Leegin "effectively make retail price fixing per se legal if a wholesaler agrees to it."  Smith, who operated Kay's Kloset in Lewisville, Texas, had won a $4 million judgment after lower courts found Leegin illegally fixed prices and cut off Smith's shop when he wouldn't go along with the Brighton price tags.  The Supreme Court threw out that verdict. Lower courts have since ruled that Smith lacked sufficient grounds — under the 2007 ruling — to bring a claim against Leegin. Rohit Singla, Leegin's lawyer, declined to comment on the new appeal pending at the high court.  Until the justices' June 2007 decision, it had long been automatically illegal for a manufacturer to force a retailer to charge a minimum price for its products.  The case arose after conservative Justice Samuel Alito had succeeded moderate Sandra Day O'Connor in early 2006. A powerful five-justice conservative bloc — Roberts, Alito, Antonin Scalia, Anthony Kennedy and Clarence Thomas — was beginning to flex its muscle. In that pivotal 2006-07 term, several longstanding precedents were reversed.  In the Leegin case, the five conservatives threw out a high-court principle that dated to 1911. Writing for the majority, Kennedy said minimum-pricing deals should be assessed by a "rule of reason." That now requires a judge to weigh all the circumstances to decide whether a restriction on price inhibits competition. The theory behind the rule is that some price restraints hurt competition, while others might stimulate competition in the consumer's best interest.  Kennedy said that sometimes minimum-pricing deals could lead to more consumer options, for example, between low-service and high-service brands. He suggested some manufacturers, such as Leegin, might prefer to sell only to high-quality shops that offer a certain ambience — including higher prices associated with more emphasis on customer service.  Justice Stephen Breyer, who wrote for the liberal dissenters, estimated that permitting all minimum pricing could cost a family of four roughly $750 to $1,000 annually.  Yet, he noted, "Just how much higher retail bills will be after this court's decision ... depends upon what is now unknown, namely, how courts will decide future cases under (the new standard). But ... figures indicate that the amounts involved are important to American families and cannot be dismissed as 'tiny.' "  In a recent interview, Breyer noted that he had taught antitrust law for many years before becoming a judge, and said, "I thought it was important to have a bright, clear rule that price fixing was, per se, illegal. ... My reaction was we shouldn't overturn" the 1911 ruling.  Members of Congress who support reversing the Leegin ruling emphasize that it came just as millions of consumers were about to face a serious recession.  Among them is Wisconsin Sen. Kohl, whose family founded a department-store chain.  "Consumers have been pounded by the headwinds of a bad economy and sluggish unemployment and have stretched their dollars to the limit," Kohl said this month. "We'll continue to build support for our bill ... so that consumers can get the discounts they so badly need."  Yet, Rep. Darrell Issa, R-Calif., said the legislation could hurt retailers who specialize in a single product, such as a computer, and want to keep up the product's value rather than face competition from discounters peddling several brands.  The legislation has been championed in both chambers by Democrats. Some observers of the debate, including Federal Trade Commission member Thomas Rosch, a Republican appointee, say the new GOP control of the House diminishes the chance legislation will pass.  Minneapolis lawyer Michael Lindsay, an antitrust specialist who tracks related developments in the states, says it is hard to sort winners from losers in the wake of the court's decision.  "If Leegin encourages policies that enable retailers to spend more time educating customers, and you're a consumer who values that service, then you should like Leegin," he says. "But if you're a consumer who goes out and gets information on your own, then you don't want to pay retailers to do it for you, and you probably don't like Leegin.  "... Likewise, if you're a retailer with an 'everyday low price' strategy, you may not like Leegin, but if you're a retailer that wants to cover the costs of educating a sales team to teach consumers about product features, then you like the decision."  The American Bar Association has urged Congress not to reverse the high court. In testimony before a Senate Judiciary subcommittee, James Wilson, a Columbus, Ohio, lawyer representing the ABA's antitrust law section, said such price arrangements can encourage retailers to provide better customer service and prevent discounters from "free riding" on services by others.  Yet, retailers such as Mulder, who sells bicycle parts and accessories at his Ypsilanti store and online, say shop owners should be able to set their own prices without distributors threatening to cut off products.  "My problem with the ruling is that it makes the playing field unfair and non-competitive," Mulder says. "Consumers cannot easily shop around" if retailers fear that offering a better deal would bring trouble from some manufacturers.  He says his business has offset the effects of the court ruling by diversifying the products he sells and allowing customers to report a lower price that Tree Fort Bikes will then try to match.  Mulder, who still hopes Congress passes legislation, insists, "It's inherently anti-competitive and anti-free-market for manufacturers to control prices across the supply chain."  You share in the USA TODAY community, so please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Use the "Report Abuse" button to make a difference.
The Supreme Court let manufacturers make retailers charge minimums for products. Some states want to let retailers cut prices if they choose.