Price Cutting and the Law

August 10, 1951

Report Outline
Weakening of Curbs on Price Competition
The Fair Trade Concept in Action
State of the Law on Price Discrimination

Weakening of Curbs on Price Competition

Court Setbacks for Price Maintenance Laws

The price war which radiated from a New York department store in June may break out anew if the current lull in retail buying is prolonged through the autumn by successful negotiation of a cease-fire in Korea. Legal barriers to price reductions on branded “fair-trade” merchandise were greatly weakened by a Supreme Court decision in May, immediately preceding the price war; so that now, for the first time since the mid-1980s, consumer prices of most maker-branded goods are open to direct market pressures. In an earlier decision, handed down in January 1951, the Supreme Court so interpreted the federal anti-price-discrimination law (the Robinson-Patman Act) as to permit unlimited price slashes to meet lawful competition. The two decisions gave at least temporary pause to the long-term governmental policy of affording special protections to small business against predatory price cutting.

A week after the Supreme Court's decision in the Schwegmann fair-trade case, May 21, 1951, R. H. Macy & Co. of New York announced reductions of six per cent on nearly 6,000 privately-price-fixed items. In the hectic fortnight that followed, Maey's, Gimbel's and competing retail stores sold nationally-advertised products at mark-downs of as much as 55 per cent—and more on a few items. The price war spread to over 800 stores in 43 different cities and then gradually died out. Attorney General McGrath warned merchants and manufacturers, July 17, against any concerted action to bring pressure on price cutters; he said the Department of Justice wag investigating numerous complaints of attempted coercion received after the Schwegmann decision.

Schwegmann Case and the Miller-Tydings Act

The Schwegmann case on fair-trade price fixing concerned a New Orleans super market, Schwegmann Brothers, which sold Calvert and Seagram liquors at cut rates. Galvert and Seagram had signed contracts with certain other Louisiana retailers in which the latter agreed to abide by the resale prices set by the two distillers. Under the Louisiana fair-trade law these contracts bound not only the signers but also any other retailer selling the price-fixed brands. This same “non-signer” provision appears in the laws of all the 45 states which sanction resale price maintenance. Furthermore the Miller-Tydings Act, passed by Congress in 1937, exempts from the federal antitrust laws any vertical “contracts or agreements prescribing minimum prices for the resale of a [branded] commodity … when contracts or agreements of that description are lawful as applied to intrastate transactions.”

ISSUE TRACKER for Related Reports
Price Controls
Jul. 26, 2019  Prescription Drug Costs
Aug. 05, 1954  Discount Selling
Aug. 10, 1951  Price Cutting and the Law
Apr. 25, 1951  Enforcement of Price and Rent Controls
Nov. 10, 1948  Basing Points and Delivered Prices
Sep. 14, 1948  Prices and Politics
May 28, 1947  Retail Price Agreements
Aug. 12, 1935  New State Laws for Price Maintenance
Apr. 03, 1930  The Trend of Commodity Prices
Regulation and Deregulation