As reported by the WSJ today, the FTC is probing whether instrument and audio gear makers have hampered competition by forcing retailers to charge minimum advertised prices (MAP).
Fender Musical Instruments Corp., Yamaha Corp., Gibson Musical Instruments Corp, the Tascam unit of TEAC Corp, as well as retailer Guitar Center Inc. have all received subpoenas. The industry does about $7.5 billion annually.
After the Supreme Court's 2007 Leegin decision, agreements to charge MAPs are no longer per se illegal. It is an open question what will need to be proven to show illegality, and any action by the FTC will be watched with great interest.
What is clear is that the Leegin decision has led manufacturers in numerous industries to go to war against internet discount retailers, with the effect of boosting prices to consumers in the short run at least. As discussed previously (see September 16, 2008 post below), MAP agreements appear to be driving up prices in the flooring industry.
Today's WSJ article also sugggests this is happening in the furniture industry. Retailer Design Furnishings Inc alleges that manufacturer Tropitone Furniture cut off its supplies after its web site advertised and sold Tropitone products below the MAP. The WSJ obtained a Tropitone distributor list that shows Tropitone set the MAP for a patio set at $5,884 on the internet and $4,464 in stores.
The purpose, it seems, is to drive internet retailers out of business.
This supports my thesis - that, whether or not Leegin was really the result of a maturation of economic thinking, it is having a concrete impact on contemporary business models. Consideration of its wisdom cannot be divorced from consideration of the desirability of that impact.