The Economic Significance of Recent Price Legislation

Abstract

THE PRICE legislation to which reference is made in this session in ludes, I presume, the Robinson-Patman Act, the various state resale price maintenance laws together with the MillerTydings amendment, and the minimum price laws. These laws have different specific objectives, but they have enough in common to enable us to discern a general movement of which these are special manifestations. Some of the features which these laws have in common will be suggested as we proceed. Ostensibly, these laws are aimed at different alleged evils. The RobinsonPatman Act purports to prevent unwarranted price favoritism in the purchase of goods. The state resale price maintenance laws give to a manufacturer the legal right to specify the price at which his branded goods will be resold, and the Miller-Tydings amendment is an attempt on the part of the national government to give effect to the purpose of the state laws. The laws against selling below cost are aimed at preventing some retailers from injuring others by an uneconomical retail price policy. The laws thus impinge upon prices in apparently different ways: the first deals with relative prices paid by retailers, the second with prices relative and absolute charged by retailers for identical branded goods, and the third group with prices charged by retailers on any and all goods relative to the costs of those goods. Let us consider these laws individually a little further. The Robinson-Patman Act represents an extension of the rule against discrimination on the part of a seller between buyers. As a general principle, the undesirability of arbitrary discrimination has been long recognized. As to public utilities, this attitude has long existed even in the common law and, more specifically, in statute such as the Interstate Commerce Act. And as to other businesses, it was prohibited in the Clayton Act. Furthermore, I think it is fair to say that business men themselves recognized that discrimination, in the absence of some specially justifying circumstances, was questionable on ethical grounds. Competitive forces might make it necessary, but there was an apologetic attitude toward it very much as there is an apologetic attitude toward the practice of reciprocity even on the part of many business men who engage in it. In a sense, therefore, the Robinson-Patman Act was merely giving more practical ffect to a principle which was approved by the common sense of the business community as well as approved by legislation. The price maintenance laws also apparently put into effect a principle that has long had a considerable support in this country. That principle is that a manufacturer who has attached his name or brand to an article of his production should be permitted to specify at the time of sale the conditions under which it could be resold. This principle did not have as wide an acceptance as * Paper read before the joint meeting of the American Marketing Association and the American Accounting Association at Detroit in December 1938.