Tuesday, April 28, 2009

No Minimum Required

Sometimes when I read a news story, I find myself scratching my head and wondering if I'm missing something. Particularly when it comes to the "need" for government to regulate certain aspects of business. Case in point is this story in today's WSJ on a new law in Maryland that Targets Minimum Pricing (sub req):

The law, which takes effect Oct. 1, takes aim at agreements that many manufacturers have been forcing on retailers, requiring them to charge minimum prices on certain products. The practice has surged since a controversial 2007 U.S. Supreme Court ruling that no longer makes such agreements automatically illegal under federal antitrust law.

Under the new state law, retailers doing business in Maryland -- as well as state officials -- can sue manufacturers that impose minimum-pricing agreements. The law also covers transactions in which consumers in Maryland buy goods on the Internet, even when the retailer is based out of state. That could potentially affect manufacturers throughout the country.

So far, so good. These minimum-pricing agreements must be quite an affront to liberty.

Maybe if we looked at an example, we could better understand their dastardly nature:

One company with a minimum-pricing policy is Kolcraft Enterprises Inc., a Chicago-based supplier of bassinets and strollers sold by Wal-Mart Stores Inc. According to a copy of a pricing agreement obtained by The Wall Street Journal, Kolcraft requires retailers to charge a minimum price of $159.99 for its Contours Classique 3-in-1 Bassinet. Wal-Mart's price is $169.88. The price dictated by Kolcraft for its Options Tandem Stroller is $219.99; Wal-Mart charges $219.98.

The agreement states that the policy is intended, among other things, "to protect all Kolcraft and Kolcraft-licensed brands from diminution." Kolcraft also sells products under the Sealy and Jeep brands. Eileen Lysaught, Kolcraft's general counsel and vice-president of operations, declined to comment, as did Wal-Mart.

Okay, let me get this straight. Kolcraft and Wal-Mart voluntarily enter into an agreement in which Wal-Mart agrees to buy products from Kolcraft and then resell to consumers at no less than a price that Kolcraft stipulates. Then a consumer voluntarily purchases a Kolcraft product at that price. My God, there ought to be a law.

Seriously though, what is wrong with such agreements? If Wal-Mart doesn't like it, they can tell Kolcraft to go pound sand and refuse to sell their product. That's actually one of the more amusing angles to this story. Maryland's law and others proposed through the country purport to be about protecting consumers and the retailers are playing along by pretending that they are needed to help them ward off the predatory manufacturers:

The Maryland bill won the support of the Maryland Retailers Association, whose members include Wal-Mart, Target Corp. and Sears Holdings Corp. Wal-Mart did not take a position on the Maryland bill. But Rhoda M. Washington, Wal-Mart's regional senior manager for state and local government relations, says, "Wal-Mart customers expect competitive, reasonable prices, and the Maryland legislature is seeking to ensure that we can deliver on that promise." Target and Sears declined to comment.

It's all about the customers, isn't it Wal-Mart? If the government doesn't step in and help protect Wal-Mart, and by extension their customers, they would helpless to prevent their suppliers from imposing these draconian minimum pricing agreements.

That's good for a larf. Wal-Mart is well-known notorious for "managing" their relationships with suppliers. Said relationships between Wal-Mart and their suppliers are probably best compared to that between the sadomasochistic redneck homosexuals and "The Gimp" in the movie "Pulp Fiction." Essentially Wal-Mart's suppliers are brutalized, enslaved, chained and locked in a box in a basement dungeon. Upon Wal-Mart's request they can also be made to squeal like a pig. Their supplier recognition events are a real hoot. (Yes, using two redneck gay rape movie references when talking about Wal-Mart was lazy, cheap and tawdry, but it was too hard to resist.)

Now, we're expected to believe that all that stands between greedy suppliers having their way with Wal-Mart and their customers is the powerful hand of government stepping in to outlaw such practices? Again, this is one of the cases where I just don't get it.


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