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Supreme Court Overturns 96-year-old Anti-Trust Rule

By June 28, 2007

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In March, I alerted you to a case before the Supreme Court that had the potential to severely limit the ability of a retailer to offer goods for sale below a manufacturer's "suggested retail price." In other words, the case pitted retailers (of which there are, relatively, many) against manufacturers (of which there are, relatively, few). The manufacturers won.

Comments

June 29, 2007 at 3:38 pm
(1) CarlP says:

Not exactly.

The NYTimes says:
“The court struck down the 96-year-old rule that resale price maintenance agreements were an automatic, or per se, violation of the Sherman Antitrust Act. In its place, the court instructed judges considering such agreements for possible antitrust violations to apply a case-by-case approach, known as a “rule of reason,” to assess their impact on competition. The new rule is considerably more favorable to defendants.” [emphasis added]

- Carl

June 29, 2007 at 5:30 pm
(2) uspolitics says:

Hi, Carl:

Please help me understand how having a manufacturer “virtually” vertically integrate … by mandating retail prices when the manufacturer does not own the retail outlet or the distribution system … is

a) good for competition
b) good for consumers
c) anything other than anti-competive, given the structure of the US economy

just because a few chicago school economists say that it *might* in some cases be so … doesn’t make it so.

moreover, this ruling just endowed judges and courts with an new power of the economy and prices. you *like* this?

Kathy

June 29, 2007 at 7:45 pm
(3) CarlP says:

You infer a lot of meaning from my comment, which contained exactly two original words.

I don’t intend to argue your spray of various points – though I assert that they are all arguable. I’ll only address the last.

Judges already had a lot of power in decide whether to accept filing of a case on the “per se” violation of Sherman. This ruling gives them a bit more discretion. I don’t think that’s a particularly bad thing; we’ll see how it plays out.

- Carl

June 29, 2007 at 9:45 pm
(4) Chuck Manson says:

I’ll try to address this issue again. My first attempt never posted for some reason?

I spent many years in Retail. Some of our manufacturers required a set minimum retail pricea. This was good for the small retailers since we had to discount less so therefore we made more money with their exclusive product. So, for the retailer, it’s good. Most of these products were high end and elite. If someone didn’t want the best, they bought the discount product. There’s a certain mystique around elite products that you can’t find anywhere else for less. Look at the Apple Ipod. I don’t see where anyone is being hurt. It’s not like there aren’t other products out there for less?

I also think that a manufacturer has the right to produce a product and require that product to be marketed in the way they prefer. Manufacturers have rights too. And if part of their marketing phylosophy is no discounting, who are we to argue? If we don’t want to pay the price we can always buy someone else’s product.

The idea that the government can mandate that I market my products just like every discounter is wrong.imo

C

June 30, 2007 at 1:58 am
(5) uspolitics says:

C&C — I outlined my philosophical problems with the case in the original post.

Chuck 1 – don’t know why it did not post. It was not held for moderation, I just checked.

Chuck 2 – Prior to this decision, the government “did not mandate” how you marketed your products. However, if you want to control the price at the retail level — and you are a manufacturer — 96 years ago the Court said that you needed to be vertically integrated … ie, you needed to *also* be the retailer.

If you have “sold” your product directed to a retailer or to a distributor who, in turn, sells your product to a retailer … you, as the manufacturer, should not have the power to tell the retailer what the price has to be at retail. Not only is is asserting private property rights *after* you have relinquished them … it is a form of unequal market power (there are fewer manufacturers than retailers).

June 30, 2007 at 9:23 am
(6) Chuck Manson says:

“you, as the manufacturer, should not have the power”

Says who? You? They have every right to establish a marketing contract with a retailer. If the retailer doesn’t want to abide by the terms, don’t sign. Free country, remember? But if you sign on and agree to the manufacturers terms, you must obey. Once again your protectionist mentallity rears it’s ugly head.

To suggest that Roberts and Court did this because they are business friendly just doesn’t wash. This new court believes that the marketplace will determine price and equality. That’s OK by me. You believe the government knows what’s best for us and that’s been proven wrong over and over. I don’t understand where you lefties come up with this stuff? Simple logic and an understanding of past government histories tells us that socialism just doesn’t work. Capitalism does. FREE markets work.

C

June 30, 2007 at 1:23 pm
(7) uspolitics says:

Hi, Chuck:

Do you *understand* what “free markets” entail?

– no differentiation between products, ie, full product substitutability
– no market power on the part of either the buyer or seller, ie, no one entity has sufficient market power to affect price: all parties are *price takers*
– ease of entry/exit
– perfect information, ie, buyers and sellers have access to all relevant data

This is the “free market” as envisioned by Adam Smith (he of the “invisible hand”) and as taught in a 101 economics class.

When one or more of these conditions is not met — then the market is “imperfect.”

FWIW, this is NOT a “liberal” or “leftist” construct — it’s fundamental economic theory.

When the market is imperfect — and most markets are — then society (aka “government”) has to choose how important it is to mitigate the imperfection. This is where “politics” meets “economics.”

Most “conservatives” believe in the power of “the market” as a theoretical concept — that market imperfection is negligible. This “Chicago School” theory buttresses this SC decision. Most “liberals” believe that some imperfections must be tempered with regulation. This theory underlies regulation of air pollution and monopolies and concepts like standing armies and fire departments (public goods).

July 2, 2007 at 1:30 pm
(8) CarlP says:

Once again, trot out the academic definition of “perfect competition” and label it a definition of “free market”.

Of COURSE “most liberals” believe that imperfections must be tempered with regulation. Since, by definition, nothing is perfect, well, what does that say will need to be regulated?

Reiterating – the court HARDLY rolled back the concept of legal sanctions against contract which set minimum retail prices. They introduced some discretion – one would think that’s what you’d WANT, if indeed it is your contention that these SOMETIMES interfere with competition. The status quo ante was that retailer agreements with a price floor ALWAYS, BY DEFINITION interfered with competition in a and were therefore illegal *per se*.

You may argue that the new ruling will put additional burden on the courts, and you seem to be skeptical that they will handle it to your liking. Maybe true. But maybe not – and maybe the new way will actually bet better for effective competition.

- Carl

July 2, 2007 at 1:44 pm
(9) uspolitics says:

Hi, Carl –

Perfect competition is the ONLY truly free market. It’s not “trotting out” academic theory … is is THE academic theory. It’s the one that underpins the Chicago School — the ‘subject matter experts’ that swayed the court.

My prediction is that this decision will be revisited — sooner rather than later — as lower court decisions are appealed. This appellate process makes money for big business, as they don’t have to change their practices (usually) while the cases drag on. Those potentially harmed: consumers and small retailers.

Note: those potentially harmed by this decision include internet retailers. Why would I buy a printer or a digital camera, for example, from NewEgg … if NewEgg is forced by HP or Nikon to stick to its MRRP?

And Chuck — a point that I forgot earlier — You typed:

spent many years in Retail. Some of our manufacturers required a set minimum retail pricea. This was good for the small retailers since we had to discount less so therefore we made more money with their exclusive product.

The reason you made “more money” was because the market is now *imperfect.” Your retailer was slicing off a bit of the Monopoly Rent pie. This is not the best thing for consumers *or* for the economy as a whole. It’s great, however, for the greedy.

July 2, 2007 at 4:03 pm
(10) Chuck Manson says:

” It’s great, however, for the greedy”

Making a profit is greedy? Right out of the left wing kook manual. Free markets determine what’s best for the economy not you and definitely not the government.

C

July 2, 2007 at 5:05 pm
(11) CarlP says:

We’ve been around this one many times before, Kathy. You insist on trying to educate me about economic theories of which I am quite well aware. Your references are circular – “Free Markets only exist in conditions of Perfect Competition because Perfect Competition is necessary for Free Markets”. This set of reasoning is a fine basis for your “Imperfect Market allows Monopoly Rents which aren’t good for the consumer OR the economy” – which may be absolutely true in the context of formula 12b on page 716 of your economic textbook, but has little relevance to how real, always imperfect, markets operate in the real world where “a little more free” is better than “a little less free”.

And “free” is a reference to choice and power of individuals making decisions, not to whether the climate fits Formula 12b on page 716, which it never has and cannot, by definition.

- Carl

July 2, 2007 at 6:55 pm
(12) uspolitics says:

Hi, Carl!

I’m not “trying to educate” you. Please note that my reply with the specifics about what constitutes a “free market” was directed to Chuck. :)

I know you and I aren’t going to agree on this. That doesn’t make the economic theory of perfect, or free market, competition any less valid.

Kathy

July 3, 2007 at 11:59 am
(13) STRATAR says:

Screw the theory — what’s “free” about a powerful, giant economic entity dictating prices to a weaker, smaller one? This bullying inequity is obviously bad for the general public, & contributes to the destruction of any “free” society. Everyone knows exactly what this law-reversal is about; even CarlP who screams out “liberal!” like a racial epithet when his arguments are shown to be self-serving sophistry. It’s been the intention of every Republican administration since the Guilded Age to turn our country, the land of the free & home of the brave, into a mideval feudal society where 0.1% of the people are Aristocrates, 9.9% are a psuedo middle class that directly serves them (this includes the military & clergy), & 90% peasants. And peasants don’t count.

July 3, 2007 at 12:22 pm
(14) uspolitics says:

Hi, Stratar –

Is this reference to David Schweickart’s book where you got your data?

If we divide the wealth of the US into thirds, we find that the top one percent own a third, the next nine percent own another third, and the bottom ninety percent claim the rest. (Actually, these percentages, true a decade ago, are now out of date. The top one percent are now estimated to own between forty and fifty percent of the nation’s wealth, more than the combined wealth of the bottom 95%.)

A search for your stats also yielded this interesting Princeton study: Partisan Politics and the U.S. Income Distribution

Census Bureau data reveal large, consistent differences in patterns of real pre-tax income growth under Democratic and Republican presidents in the post-war U.S. Democratic presidents have produced slightly more income growth for poor families than for rich families, resulting in a modest decrease in overall inequality. Republican presidents have produced a great deal more income growth for rich families than for poor families, resulting in a substantial increase in inequality.

October 23, 2007 at 12:13 am
(15) Namson Pham says:

Dear Kathy,
Is that data a function of when the Presidents are? or WHO the presidents are? I think you might have a time issue in exactly which presidents create which inequalities. The fact is that globalization will create a system of specialization. The way the US is seeming to specialize, towards higher education professionals, would seem to create larger inequalities.

Free markets need not be perfectly competitive. The definition of a free market is “free from government regulation and fear of monopolies.” So the definition of free market is best captured by the short phrase “non-regulated, non-monopoly” rather than perfect.

Additionally, let’s not forget that plenty of non-perfectly competitive markets can yield the good old D=P=MR=MC=AC curve. When oligopolists price compete, the Bertrand-Nash eq. ends up at that level. When there are low barriers to entry and there is only one firm in the market, we call it a “natural monopoly.” That isn’t to say that its inefficient.

To answer your previous question as to how it may be good for competition or consumers: Attempts to price set at the retail level by manufacturers actually shifts buying/negotiation power from consumers to retailers. Retailers have much more sway (consumers are less likely to lobby or litigate for any sort of regulation, unlike businesses who make it a priority). It sets up a more salient oligopsony which shifts benefits toward “consumer good.”
The fact is, that eventually another market for the the same non-price-set items will arise

Of course, we can look at this the way the court looks at this. Who has the best information about manufacturers?… let’s see… oh yeah. Manufacturers have the best information about each other! Let’s have them set prices if they want to, based upon each other instead of having middlemen retailers set the prices of every item of every brand. It’s really just a redistribution of pricing power.

That’s really not the point anyhow though, if you read the opinion (did you read the whole 50 page opinion? If you didn’t shame on you), the reason the court is getting rid of the doctrine is because, like in many other situations across the legal board, they’re realizing that strict adherence to fuzzy illogical rules don’t make any sense in a world with myriad possibilities. Strict adherence to the rule gives treble damages and attorney’s fees, possibly in situations where little or no damage to the economy was actually done. In fact, good to the economy MAY have been done as intimated by USPolitic’s first post, in which case non-adherence to the pricing contract is actually beneficial. Breach will happen, and the case will litigate, ultimately causing negative effects upon the manufacturing company, and ultimately putting it out of a business where it was once doing economic good.

Namson

October 23, 2007 at 2:50 am
(16) Kathy says:

Hi, Namson — you wrote:
Free markets need not be perfectly competitive. The definition of a free market is “free from government regulation and fear of monopolies.”

Pardon me if I laugh a little. The only way to be free of a fear of monopoly is for markets to be competitive! BTW, I’ve never seen this definition before.

“Free” markets only exist in a perfect competition, which is, for the most part, a theoretical construct.

Later on in your rebuttal, you attest to inequality in market power when you argue that retailers are in a better position to negotiate price with manufacturers than consumers are with retailers. (At least I think this is what you said.)

I don’t think that most retailers have sufficient market power to negotiate a reduction from MSRP from most manufacturers. A few retailers have power over manufacturers — such as Wal-Mart — but this is the exception.

BTW, USPolitic is _me_. :)

October 25, 2007 at 2:40 am
(17) Namson Pham says:

There’s a good amount of difference between Monopoly and Perfectly competitive, in fact, there are two generally recognizable stages between perfect competition and monopoly. The first is monopolistic competition, this is most common. Here the main difference is that there are some barriers to entry, and competitors will generally try to differentiate their products. Further explanation of how this works cannot be made without somewhat complex mathematics (substituting reaction functions). Then there is oligopoly, where a few firms dominate the market. All of these market states can achieve competition, and indeed the prefectly competitive D=P=MR=MC=AC equilibrium Price and Quantity.

In response to your chuckle, the definition I pulled was directly from a number of dictionaries. So I posit that in the general, and lay sense of the work “free market” I would be correct. When in doubt about a definition, turn to a dictionary, thats what my law professor used to say.

And actually, there are significant studies which show that regulation often cuts in the direction of business, and not consumers.

If you think of the structure of the market between retailers and manufactures which do negotiation, you find that few buyers end up having more power than many buyers. Because the fact is, that in order to have meaningful negotiation you need solidarity (like unions), and if the power centers are focused, it’s easier to negotiate a lower price when you’re buying, or a higher price when you’re selling. This is most beneficial to customers when the number of retailers is higher, but the number of negotiating retailers is lower, which is exactly the case we have here. In this case, let’s take the clothing industry for example, with just one manufacturer and many retailers, but only a few retailers who have negotiating power. The manufacturer can set only one retail price. He cannot set a differential retail price schedule per retailer, because he’d immediately run into Sherman Section 1 problems. So the negotiating retailer will negotiate a the low retail price and everyone else will follow, since the top of the profit hill is to maximize price and quantity (given multiple retailers…lets say in excess of 400 retailers), the price and quantity still converge to the D=P=MR=MC=AC social optimum, because the manufacturer’s best option after having set the price, is to sell as many widgets or shirts or whatever as possible to whoever will buy. The large firm will learn that the profit maximizing price is to set a retail price as close to the social optimum as possible, and clear as quickly as possible. With over 400 competitors, not even Folk theorem will demonstrate whole market monopoly quantity and pricing. And they won’t achieve it, at least not without anti-trust investigators taking note. And there are worse things than Sherman section 1 they can charge a company with… trust me on that one.

Besides, its about a standard of review, a rebuttable presumption vs. a very very very strong inference.

Namson Pham

October 25, 2007 at 2:44 am
(18) Namson Pham says:

Remember also, that this case is a civil claim… not a criminal charge, which has different standards. So the SEC will still do it’s work, this is more about businesses suing businesses over botched, illegal, agreements to do dirty pricing. It just says that manufacturer is not automatically in the wrong. I mean you COULD make a agreement to price at retail, the competitive price… it would seem silly in that case to expose a company to liability… even if that’s not the norm.

Namson

October 28, 2007 at 12:51 am
(19) uspolitics says:

Hi, Namson — Wikipedia has a pretty good definition of free markets:

“A free market is a market where prices of goods and services are arranged completely by the mutual non-coerced consent of sellers and buyers, determined generally by the supply and demand law with no government interference in the regulation of costs, supply and demand.”

By this definition, the court decision does not reflect “free markets.” Retailers are not being allowed to set prices based on the demand in their markets … instead, the prices are being mandated by the manufacturer.

It is generally assumed that the laws of supply and demand rest on Adam Smith’s invisible hand … something that sits on the foundation of perfectly competitive markets.

And yes, there are markets “in between” monopology (or monopsony) and perfectly competitive markets. But every economist worth his or her salt will say that those markets are imperfect.

This assertion “you find that few buyers end up having more power than many buyers” is an interesting one.

First, let’s begin from the assumption that a manufacturer has a monopoly on their brand. [That's the reason for branding a product, to differentiate it from its competitors.]

In this case, you are correct — one buyer (retailer) would have more power than 100. This is the rationale for farmer cooperatives. However, I don’t see how this anecdote “works” in the retail market for designer leather goods.

I do not believe, for a single minute, that the manufacturer gives a fig about profit maximization for the retailer. If they did, they’d let the retailers change MSRP.

October 29, 2007 at 1:53 am
(20) Namson Pham says:

… I see that nowhere in your definition of free-market from wiki that it says “perfectly competitive”

Investopedia has this to say about “free market(s)”

“In simple terms, a free market is a summary term for an array of exchanges that take place in society. Each exchange is a voluntary agreement between two parties who trade in the form of goods and services. In reality, this is the extent to which a free market exists since there will always be government intervention in the form of taxes, price controls and restrictions that prevent new competitors from entering a market. Just like supply-side economics, free market is a term used to describe a political or ideological viewpoint on policy and is not a field within economics.”

I would say that that’s term everyone else here is using, and I might add, the accepted general usage. While you are not unique in thinking that “free market”=”perfectly competitive” I would have to say that you are in the minority, and given the definitions from dictionary.com, an aggregation of different dictionaries, and indeed at least one reading of the quote you put up, the position that “free market”=”perfectly competitive” is untenable.

What you have to see is that in the MSRP price setting, there are several markets, as far as I can count 4 markets, Manufacturer v. Consumer, Retailer v. Consumer, Manufacturer v. Retailer, and Manufacturer v. Manufacturer (monopolistic competition w/ product variation). Within these 4, there will be 4 considerations that go into 2 prices.

No one says that non-perfectly-competive markets are perfect. That assumption was never made during our discussions. BUT non perfectly competitive markets can theoretically come up with market efficient P and Q solutions (see Bertrand-Nash Eq. for Duopolists and multi competitor Oligopolists).

I agree, the manufacturer doesnt care about profit maximizing outcomes for the retailer. But the retailers do, and WILL negotiate an MSRP to fit their retail operation.

How it fits to leather goods. Imagine that there are 1000 retailers, one that is very large, and a manufacturer that can set only one MSRP. In the first period, the large retailer will negotiate the MSRP price with the manufacturer. When they agree on the price. In the second period, the manufacturer will attempt to sell as many units as he can. He will then sell to all 1000 retailers. The retailers will sell at the MSRP price, quanitity bought in the end consumer market then dictates how many are bought from the retailer and the manufacturer, this presses the third period price downward. The third period is really the first period over again, the fourth is the second and so forth.

Depending on the negotiating power of the large retailer and the power disparity of the manufacturer (say it’s a start up), optimal solutions CAN result (as optimal as you can get in the real world). That’s why it’s not an (S) 1 violation per se.

Namson

October 29, 2007 at 2:12 am
(21) Namson Pham says:

I have to chastise you for taking your quote out of context. It’s an academically sloppy or academically dishonest way of making an argument.

I’m going to quote the entire passage here:

“A free market is a market where prices of goods and services are arranged completely by the mutual non-coerced consent of sellers and buyers, determined generally by the supply and demand law with no government interference in the regulation of costs, supply and demand. The opposite of a free market is a controlled market, where government sets or regulates prices directly or through regulating supply and/or demand.[1] Although a free market necessitates that government does not regulate supply, demand, and prices, it also requires the traders themselves do not coerce or mislead each other, so that all trades are morally voluntary.[2] This is not to be confused with a perfect market where individuals have perfect information and there is perfect competition.”

I’m going to further reiterate the last line.

“This is not to be confused with a perfect market where individuals have perfect information and there is perfect competition.”

I apologize for the pseudo-ad hominems, but I think in this case they’re warranted.

October 29, 2007 at 2:18 am
(22) uspolitics says:

You typed: … I see that nowhere in your definition of free-market from wiki that it says “perfectly competitive”

Good lord, I would not expect a lay description to include the words perfect competition, although the definition implies several (not all) characteristics of perfectly competitive markets.

I chose a neutral definition and then argued that even with THIS definition, the court decision does not jibe with the concept of “free market.”

You wrote: “While you are not unique in thinking that “free market”=”perfectly competitive” I would have to say that you are in the minority…”

SO? Most people don’t know what a monoposony is, also. So?

Politicians (and others) throw around terms like “free markets” and “competition” with abandon and without agreed upon definitions of what the words mean.

“free market” is not an economics term, it’s a made-up-by-someone-else term. Economists talk about perfect and imperfect markets.

The fact that you believe that retailers have the power to negotiate an individual MSRP boggles my mind. MOST retailers do not have the market power (Costco and Wal-Mart being two exceptions) to negotiate an MSRP for a “luxury branded” leather good.

October 29, 2007 at 2:35 am
(23) uspolitics says:

One more quote … on the ambiguity of terms like “free markets” or “central planning”

Google Books: Terms such as “central planning” and “free market” have many interpretations. In analyzing the merits and weaknesses of the market process, it is important to distinguish perfectly competitive markets from those that are monopolistic, oligopolistic or otherwise imperfect.

###

Clearly, the market described in this case is oligopolistic on one level (a few firms manufacturing luxury goods v a large number of retailers) and monopolistic on another (one luxury firm manufacturing luxury goods v a large number of retailers). Neither is “competitive” and thus should not be considered “free” (given that the lay meaning has the two terms acting as though they are synonymous).

Book details: “Friedrich A. Hayek” is the fourth work in the Routledge Series of “Critical Assessments of Contemporary Economists”… by John Cunningham Wood
and Ronald N. Woods … 1991. ISBN 0415139082

###

Then there is this new book from Wharton: Rewriting Econ 101: Teaching the Shortcomings of Market Allocation.

“The Tyranny of the Market is based on academic papers that Waldfogel wrote over the past decade. He says he has repeatedly made the argument to his fellow economists that markets share some messy features of politics and are far from perfect. Now he aims to bring the same ideas “to people outside the narrow world of academic economics,” a goal that meshes with his role over the past 18 months as the Dismal Science columnist at Slate. “

October 29, 2007 at 3:18 am
(24) uspolitics says:

Namson, I used that quote AS a “pretty good definition of free markets” — and then argued why the decision did not meet THIS definition.

I left “perfectly competitive” out of that argument.

Good grief.

Here’s the non-economist (finance) definition cited in the Wikipedia article:

Dictionary of Finance and Investment Terms. Barrons, 1995 — “market in which price is determined by the free, unregulated interchange of supply and demand. As well demand and supply are like jenny n forest gump- two of a kind; peas n carrots if u will. The opposite is a controlled market, where supply, demand, and price are artificially set, resulting in an inefficient market.

You and I know that this colloquial language and text-messaging syntax did not appear in the original (1995) entry. And there is no “search inside this book” entry for the book at Amazon.

The phrase “This is not to be confused with a perfect market where individuals have perfect information and there is perfect competition” is NOT cited (thus it is the collective opinion of the wiki authors but has no academic foundation) — but again, I argued with NO mention of perfect markets.

Kathy

October 29, 2007 at 5:29 am
(25) Namson Pham says:

OMG… I just lost my whole argument because it said I didn’t put a name in…

You don’t get the full effect but I’m going to try to re-make it. Please forgive me for not making all the arguments as fully as they could be made (as they were made in the last piece I tried to post).

Firstly I want to address this issue, it’s important, and then I’ll address the other’s in piece-meal.

I want to apologize for misreading your arugment. I thought you were proffering that definition in support of your argument that free market = perfectly competitive. I apologize for the confusion on my part, and the entailing accusation, but I thought that issue was what we were arguing about.

I made no representation that this market was free or perfectly competitive or anywhere inbetween. I was arguing, and I think I did so explicitly that free market does not mean perfectly competitive. Because you stated that.

Quoting:

“Do you *understand* what “free markets” entail?

– no differentiation between products, ie, full product substitutability
– no market power on the part of either the buyer or seller, ie, no one entity has sufficient market power to affect price: all parties are *price takers*
– ease of entry/exit
– perfect information, ie, buyers and sellers have access to all relevant data”

As one of my professors was fond of saying “surely we can quibble.” We can go ’round and ’round in a 6-year-old style argument “Yes it is! No it isn’t! Yes it is! No it isn’t!” Ultimately, 5 dictionaries and a wiki page, including the most important dictionary, Black’s, says that it isn’t, consistent with an inference that there IS a common definition.

Here is another wiki page:

http://en.wikipedia.org/wiki/Laissez-faire

Stating

“The term laissez-faire is often used interchangeably with the term “free market”. Some use the term laissez-faire to refer to “let do, let pass” attitude for matters outside of economics.”

As to your alternative pleading. This court just took away a regulation: (S) 1 application to secondary line competition. THAT is consistent with a trend in deregulation, and promotes THAT particular definition of “free market.” (Free from government regulation).

I’m going to go out on a limb and argue that “artifically set” prices means “set by the government.” And that it doesn’t mean “set by a manufacturer.” Because if a price isn’t set by the producer of the goods who is it set by? (By me? By You? What would you set the price at? What would the lay person set the price at? Probably free… a market inefficient solution). Producers always set the price, consumers exert downward pressure by quantity response. That’s the market (the meeting between producers and consumers). Ceteris Paribus, Producers reset prices accordingly. But you hardly need a rehash of fundamental economics.

As for negotiating power. I never stated that all firms have negotiating power. In fact, in my hypothetical, only 1 firm had negotiating power. I said that that was sufficient. Let’s name two firms for the Luxury leather goods market with negotiating power. Macy’s? Nordstroms? Shall I name more? Harold’s? Barney’s NY? Sak’s Fifth?

A list of major department stores can be found here.
http://en.wikipedia.org/wiki/List_of_department_stores_of_the_United_States

In luxury leather goods, exclusivity is part of the good. Shouldn’t manufacturer’s have some control over that? That’s the difference between a Coach bag and a wallmart purse, or an Hermes tie and a D. Trump piece of trash. (Surely we can quibble). There are plenty of comparable belts, but there’s a substantive difference between my Louis Vuitton belt and other belts of like manufacture.

“First, let’s begin from the assumption that a manufacturer has a monopoly on their brand.” That’s quite a narrow framing. Let’s say that manufacturer A has a monopoly on “widgets manufactured by manufacturer A,” and manufacturer B as a monopoly on “widgets manufactured by manufacturer B”…

Besides, the case is about a fine point of LAW, and about the role of the judiciary. There’s a substantive difference between primary line competition and secondary line competition. Only the former is subject to (S) 1 actions; the latter fails to state a cause of action upon which relief can be granted.

Namson

October 29, 2007 at 5:44 am
(26) Namson Pham says:

Posts aren’t making it to the board. I implore you to keep it open. This is a good scholarly discussion. I’ve made two so far.

October 29, 2007 at 12:55 pm
(27) uspolitics says:

Sorry, Namson — the admin guys did a lot of backend stuff over the weekend and postings were delayed. I’ll check the queue to see if anything is still lagging. Please know it’s not me actively doing something!

October 29, 2007 at 12:59 pm
(28) uspolitics says:

Namson, there was only one post on “hold” — that was probably because it contained two URLs. I’ve approved it and waved the magic wand that is supposed to make it show up here.

I’m on my way to meetings on campus — I’ll check back later this afternoon to see if the server decides to post it. If it doesn’t I can copy&paste it.

Apologies again for our backend system.

October 31, 2007 at 1:10 am
(29) Namson Pham says:

Well. Looks like it made it ok. Too bad I still lost the first draught. No biggie.

Namson

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