CWAG 2014 Annual meeting

2. CWAG 2014 Annual meeting The Future of Resale Price Fixing Bob Hubbard NY Assistant Attorney General 212 416-8267 Robert.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 Bob Hubbard

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

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 Bob Hubbard