[Congressional Record Volume 155, Number 104 (Monday, July 13, 2009)]
[Extensions of Remarks]
[Page E1734]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  INTRODUCTION OF THE DISCOUNT PRICING CONSUMER PROTECTION ACT OF 2009

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                  HON. HENRY C. ``HANK'' JOHNSON, JR.

                               of georgia

                    in the house of representatives

                         Monday, July 13, 2009

  Mr. JOHNSON of Georgia. Madam Speaker, today I am pleased to 
introduce the Discount Pricing Consumer Protection Act of 2009. I am 
joined in my efforts by the honorable Chairman of the Judiciary 
Committee, Representative John Conyers of Michigan.
  The purpose of this bill is to undo the harm to consumers posed by 
the Supreme Court's 2007 decision in Leegin Creative Leather Products, 
Inc. v. PSKS, Inc. In Leegin, the Supreme Court overturned 95 years of 
antitrust jurisprudence by reversing its 1911 decision in Dr. Miles 
Med. Co. v. John D. Park & Sons, Co., which had expressly prohibited 
agreements between manufacturers and distributors on a minimum retail 
price for their products. Under the precedent set by Leegin, 
manufacturers are free to pursue this type of anticompetitive price 
fixing. This bill would negate the Leegin decision by making any such 
agreements a violation of Section 1 of the Sherman Act.
  The philosophical foundation of our nation's antitrust policies is 
simple: competition benefits consumers. When competitors have no choice 
but to compete aggressively with one another, it is the customer who 
benefits from lower prices, better service, increased variety, etc.
  The Leegin decision runs contrary to that philosophy. Consumers do 
not benefit from price fixing. In his dissent in Leegin, Justice Breyer 
writes that even if only 10 percent of manufacturers implement minimum 
price fixing policies, the average annual shopping bill for a family of 
four would increase by between $750 and $1000 annually. In this time of 
economic hardship, preserving competition and delivering value to 
consumers is as important as it has ever been.
  Retail price competition is essential to promoting this country's 
culture of entrepreneurship. Small businesses often get their start by 
offering consumers something they're not getting from more established 
retailers. In the Internet space, this frequently involves selling 
goods available in retail locations at lower prices. Here again, where 
there is competition among retailers, the consumer wins.
  The Leegin decision undermines retail competition by making it 
possible to set a floor price on goods sold in every conceivable 
outlet. Thus, the retailer who operates with lower overhead or a better 
cost structure is prevented from passing those cost savings on to 
consumers. The Supreme Court decision gives manufacturers the cover to 
strong-arm discount merchants into sustaining artificially high retail 
prices. True, the Leegin decision doesn't make every such agreement 
legal; it simply removes the prohibition that made any such agreement 
illegal on its face. But, as practicing antitrust attorneys will tell 
you, the enormous evidentiary burdens that a plaintiff faces post-
Leegin makes litigating such cases cost-prohibitive. The real-world 
effect, then, of Leegin is to make such agreements legal.
  The benefits of the Leegin decision are dubious. Supporters claim 
that the decision prevents the ``free riding'' problem, in which 
customers do their research at higher-priced bricks-and-mortar outlets 
but then purchase the product at a lower-priced online retailer. In 
this manner, the bricks-and-mortar outlet, which invested in the 
customer service, is denied the benefit of the sale; the online 
retailer thus ``free rides'' off of its competitor. But I question this 
presumption. My children will search out all of the information they 
can find on high-priced gadgets before going to a store to check them 
out. Sometimes they buy them on the spot if they don't want to wait for 
shipping. Which begs the question: who is free-riding off of whom?
  A second argument that crops up frequently is that minimum retail 
prices benefit new entrants. This is so reasonable-sounding that even 
supporters of the Dr. Miles decision will acknowledge it somewhat 
apologetically as an exception. But for the 95 years that Dr. Miles 
controlled, we saw innovation and new entry in every industry. 
Supporters of Leegin say that minimum retail prices give big retailers 
the security they need to take a chance on promoting a new product. But 
many of these concerns can be addressed contractually, in the form of 
contracts for services, contracts for buybacks, etc. There is no need 
to overturn settled antitrust law to accomplish indirectly what may be 
contracted for directly.
  The harms of minimum retail price fixing are real and proven. In 
1937, Congress passed the Miller-Tydings Act to shield from the federal 
antitrust laws so-called state ``fair trade'' laws that permitted 
manufacturers to set minimum retail prices for their goods. The results 
were bad for competition and bad for consumers. Studies conducted by 
the DOJ found that minimum retail price fixing on average increased 
prices for the affected goods by between 18 and 27 percent, and that 
elimination of the practice would save consumers $1.2 billion. Congress 
responded by overturning Miller-Tydings with the passage of the 
Consumer Goods Pricing Act of 1975. In doing so, Congress examined and 
rejected various justifications for minimum retail price fixing, 
finding that the practice served little purpose other than to raise 
prices for consumers.
  The bill I introduce today takes a stand for the consumer. It 
challenges manufacturers to remain innovative and aggressive, and not 
rely on side agreements with retailers to guarantee their own profits 
at the expense of a working family's paycheck. The federal antitrust 
laws are not an administrative inconvenience, to be done away with when 
threatened by the challenges of the free market. They are the greatest 
protection consumers have against the dangers that corporate greed, 
left unchecked, can pose.

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