Bob Hubbard 2

CWAG 2014 Annual meeting

The Future of Resale Price Fixing

Bob HubbardNY Assistant Attorney General

212 416-8267Robert.Hubbard@ag.ny.gov

Bob Hubbard 3

Caveats

• I speak only for myself• I make recommendations– My recommendations are sometimes rejected– Consideration of my recommendations improves

future recommendations– Multistate enforcement emphasizes merits, more

than hierarchy• I don’t instruct other states either

Bob Hubbard 4

Some success in recommending

• I’ve led many multistate efforts• I chaired the Multistate Antitrust Task Force

for 4 years• Resale price fixing is an area of interest for me

Bob Hubbard 5

My perspective

• My job is to represent consumers (and the state)– Others ably represent other interests

• My job is to push for competition– The Magna Carta of the free enterprise system– A public policy of the first magnitude

Bob Hubbard 6

Higher prices for consumers are good?

• Skeptical that consumers benefit from being forced to pay more– Price better set by consumers able to choose

among alternatives and businesses able to present alternatives

– If more value is being provided:• consumers will willingly pay more or • supplier will compensate the retailer

– Retailing innovations include charging consumers for fewer ancillary services

Bob Hubbard 7

Consumers benefit by paying more for the same thing?

• The very purpose of the restraint is to have consumers pay more

• I’ve been unable to convince non-antitrust lawyers that paying more is good for them

• A.G. skepticism is widespread and bipartisan– Not the best campaign slogan: I’m working hard so

you will be charged more

Bob Hubbard 8

State views have had an effect

• Leegin: 5-4 decision on federal antitrust law• State law constrains the formal use of resale

price restraints– CA enforcement– MD legislation– NY (and NJ) statute: “This statutory language

makes clear than an action may not be maintained in a court of law to enforce such a provision.”

Bob Hubbard 9

Government won’t help enforcement

• Haven’t seen judicial enforcement– No return to the Fair Trade Laws, during which

courts were clogged with litigations against businesses who wanted to sell to consumers at less than prices set by the manufacturers

• Haven’t seen contracts that would support such litigations

Bob Hubbard 10

Illustration of antitrust federalism

• Federal law is not the only antitrust law• Antitrust federalism– State law can be different– Different enforcers can reach different conclusions– State enforcers have different views and now• Antitrust less divorced from how voters think• Resale price restraints are more restrained

Bob Hubbard 11

The Beauty of Antitrust Federalism

• Laboratories of democracy have an effect– Closer to the people– Makes antitrust less something only for experts• Less technocratic• More something voters can understand

Bob Hubbard 12

Resale price restraints endure

• Setting resale prices without an “agreement”– Making supply contingent on resale price• Unilateral pricing policy (UPP)• Disclaiming an agreement in the distribution contract

– Making discounts hard to find• Minimum advertised price (MAP)• Manufacturer/supplier restrains the price shown in

advertisements of its products generally when manufacturer pays in part for the advertising

Bob Hubbard 13

UPP and MAP effects

• Usually focused on new high end products• Often luxury brands for which the higher price

is part of the cachet consumers want– Hard to justify using enforcement resources– Minimal impact– New York v. Tempur-Pedic: unsuccessful effort to

challenge a policy set up to avoid agreement

Bob Hubbard 14

Often applies to “just right” brands

• Strong brands have strong demand and can charge high wholesale prices

• Weak brands aren’t strong enough to make the resale price stick

15

Retailing dynamics

• Internet sales and other forces make restraining a resale price harder and harder– Alternatives more visible and more available– Fewer intermediaries; direct connections between

producer and user– Fewer capacity constraints, like shelf space

Bob Hubbard

Bob Hubbard 16

Establishing an “agreement”

• Pre-Leegin case law: “conscious commitment to a common scheme”

• Barnacles connected to the per se rule that went down with the per se ship in Leegin?

• American Needle expresses functional, not formalistic, test