December 5, 2008, 12:00 AM

Regulator promises study of price-setting rules that impact e-retailers

The Federal Trade Commission will hold workshops next year on the impact of manufacturers` ability to limit discounting, policies mainly aimed at e-retailers.

Katie Evans

Managing Editor, International Research

 

The Federal Trade Commission will hold a series of four to six workshops starting in January to gather information on the impact of a controversial court decision that makes it easier for manufacturers to set minimum prices, polices that are largely aimed at online retailers that sell at steep discounts.

FTC commissioner Pamela Jones Harbour announced plans for the workshops yesterday at a press conference in Washington, D.C., called by opponents of minimum-price policies. Among those participating were consumer group Consumer Federation of America, web auction giant eBay Inc., online retailer BabyAge.com Inc. and multi-channel retailer Costco Wholesale Corp. Costco is No. 18 in the Internet Retailer Top 500 Guide and BabyAge.com No. 296.

Following the press conference, about 30 individuals met in a closed-door meeting to discuss forming a coalition to oppose minimum-price policies, according to Bert Foer, president of the nonprofit American Antitrust Institute that organized the event. Such a coalition would likely lobby for a bill introduced by U.S. Sen. Herb Kohl (D-WI) that calls for reversing the June 2007 decision by the U.S. Supreme Court that opened the door for broader application of anti-discounting policies by manufacturers.

While Kohl’s bill never emerged from committee in the current Congress, it will be reintroduced next year, and supporters are hopeful it will gain the support of the incoming Obama administration. “The co-sponsors of the Kohl bill were Sen. Biden and Sen. Clinton and they’re both going to be pretty close to the President,” Foer says. Sen. Joe Biden will serve as vice president and Sen. Hillary Clinton as secretary of state in the administration of Barack Obama.

The Kohl bill would roll back the impact of the Supreme Court’s decision in a case known as Leegin, which says each minimum-price policy imposed by a manufacturer should be considered on its merits. Prior to that decision, it was automatically illegal for a supplier to require a retailer to sell at or above a certain price.

Since that June 2007 decision, the number of suppliers to BabyAge.com imposing minimum price rules has increased from about a dozen to nearly 100, says Jack Kiefer, CEO of the web-only retailer. He says organizations participating in yesterday’s meeting now must decide how much they can commit to lobbying and research efforts in opposition to price-setting rules. “It all comes down to the ability to fund these initiatives,” Kiefer says.

At the press conference, the American Antitrust Institute distributed examples of how the implementation of minimum price rules, often called minimum advertised price or MAP policies, has increased prices on affected items by 20-40% and resulted in many web sites selling popular toys, such as the Leapfrog Leapster and Elmo dolls, at nearly identical prices.

While manufacturers have largely focused enforcement of MAP rules against online retailers that sell at a discount, not all e-retailers are opposed to these minimum-price rules. “What happens on the Internet when there’s not a MAP policy in place, it takes retail prices down to unacceptable margins,” says David Craig, CEO of online-only retailer Rugs Direct, No. 292 in the Internet Retailer Top 500 Guide.

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