On December 12, 1975 then President Gerald R. Ford signed H.R. 6971 into public law. The Consumer Goods Pricing Act overturned laws that allowed price fixing agreements between manufacturers and retailers. President Ford believed that fair trade laws designed to benefit the Depression era economy no longer made sense at that time. Prior fair trade laws required retailers to sell products at the price set by a manufacturer otherwise face criminal prosecution. Ford’s position was that both consumers and retailers have the right to benefit from price competition between retailers.
By the late 1980s, the efficacy of this law was being questioned. The Supreme Court made two landmark decisions that made it nearly impossible to enforce the law against price fixing. In the 1984 Monsanto case the Court made it nearly impossible for a retailer to establish itself as a victim of price fixing. In the 1988 Sharp decision the Court stated that certain agreements between manufacturers and retailers designed to eliminate lower priced competitors would not fall under the new definition of price fixing virtually halting enforcement of price fixing legislation.
By the 1990s large discount retailers were entering the market. The 1975 law allowed them to set low retail prices attracting buyers away from service oriented small retailers who had contractual price agreements with manufacturers in exchange for significant information services that these retailers provided to customers. In response, manufacturers began to do more trademarking and more advertising (as opposed to price fixing) in order to get product information to consumers. Where small local retailers were able to charge higher prices for offering warranty service this information became available through the internet. As a result the small service oriented local retailer is gone, replaced by mass market rock bottom pricing retailers (i.e. Wal-Mart, CompUSA) and manufacturers’ web sites.
References
- The American Presidency Project. (1998-2008). Gerald Ford XXXVIII President of the United States: 1974-1977, 724-Statement on the Consumer Goods Pricing Act of 1975. Retrieved September 28, 2008, from http://www.presidency.ucsb.edu/ws/index.php?pid=5432
- Boyd, D W (March 1997). From ‘mom and pop’ to Wal-Mart: the impact of the Consumer Goods Pricing Act of 1975 on the retail sector in the United States. Journal of Economic Issues, 31, n1. p.223(10). Retrieved September 28, 2008, from General OneFile via Gale: http://find.galegroup.com/ips/start.do?prodId=IPS
- Verdisco, R. (March 15, 1993). Enforce the law against retail price-fixing. Discount Store News, 32, n6. p.12(1). Retrieved September 28, 2008, from General OneFile via Gale: http://find.galegroup.com/ips/start.do?prodId=IPS
