The Consumer and the Maintenance of Resale Prices

Abstract

M UCH HAS been written about the present status of resale price maintenance in the United States. Most marketing men know that fair trade laws are in effect in 43 out of the 48 states; that federal legislation has been enacted to legalize contracts between parties living in different states having such laws. It is equally well known that the usual law makes the issuance of one contract tantamount to the issuance of contracts to all. That is to say, the legislation from the point of view of the proponents seems to be free from bugs; should be, from their point of view, quite effective. The scope of fair trade legislation has also received some attention. Fortunately-from the consumer's point of view-its provisions are limited to the sale of identified commodities, which means that produce, secondhand goods, and all other types of goods sold without benefit of brands are without the scope of fair trade legislation. Indeed, actually, goods containing a high degree of the fashion element and those which are highly competitive are not easily subject to price control either. Consequently, probably not more than io%at the most I5%'-of retail sales has any possibility of coming within the scope of resale price maintenance laws. Indeed, at present the bulk of contracts are in books, liquors and drugs and cosmetics.2 Moreover-as shall be brought out later-because of the existence of more or less fixed patronage habits only a portion of the consumer body in any line is immediately affected in a material way by the inauguration of such legislation. However, no bad piece of legislation should be condoned on the ground that only a small proportion of the public is affected by its provisions. Question is: What is the effect of price maintenance on the several classes of consumers? Fortunately, there are now available results of a number of objective studies. From these the impact of price maintenance legislation can be deduced. The now-classic study made by Professor Grether of California still is outstanding. As most people in the field know, Grether found (granting the representativeness of the sample) that after the inauguration of effective legislation in California prices of contractual items in the drug field increased about 30% in cut-rate establishments, but declined slightly-probably not over 2% -in the same period in the small city or neighborhood type of outlet.I Right in line with these findings are those recently published by Dun's Review. In this study4 the investigators