or those subject to be quote a free market place as has been the financial industry and  consumer this congress has consistently stated over the past one hundred years that if there is no benefit to consumers then  the administration had no intention of changing the long standing policy a dramatic shift took place in the last administration and i believe it harm that's not always possible but i remain hopeful and in that regard now thank you all for listening to my comments and now i'll turn it over to my colleague our make statement it is so nice to be younger than someone as to my hairstyle i actually cut it this way to facilitate the fact that i hand out plastic combs throughout my district and  utah except for the fact that you know order to to raise my name i d in my district i cut it distinctively now as to the matter at hand to there are two sides to this argument the side against retail price maintenance is simple but might very well be compelling and that is discounts mean lower price the arguments  against a per se rule are more complex one of those isn't just government should be laissez faire one counter to that is maybe manufacturers should be laissez faire and let retailers have the freedom to do what they want the second is that in the absence of true vertical integration the manufacturers interests are not necessarily hostile to those of the consumer the manufacturer wants to move as many products as possible retailers to take out on a test drive even though there was no retail price there was there is a franchise governing a certain territory but the fact that most of us live in urban areas means that we could easily go to any of the other franchises and now we can go online as well so one wonders whether we really need to get away from decades use it comparing it to their other products etc so i don't know whether the old rule actually deprived us of the service that consumers want i do know that the old rule maximize discounts for consumers all of you that have contributed this i wanted to thank the chairman for recognizing that this important issue and calling this hearing i would note for the record that i've never owned a column in my life and especially since i learned about the miracle of hairstyling  which is come to serve me well for the record i don't know it and i appreciate it and look forward to listening and hearing from you rather than being heard so thank you thank she's also spent eleven years as a new york state attorney general during which time she argued before the supreme court in a number of cases including oil versus was the vice president and counsel of new media for the motion picture association of america and before that he was legal counsel and vice president for the business and also the harvard law school where he was an editor of the harvard law review just like newly elected president i want to thank you all  views that that are expressed because it's an education process for us but unfortunately we were unsuccessful  and i'm sure that they are watching everything that's going on on this issue particularly my my parents here  as we proceed and we'll have other hearings where we're going to we're going to hear more views and we will hear today so without objection your written statement will be placed into the record and we would ask that you limit your remarks to five minutes and you'll note that we have a lighting system that starts with a green light and at four and seven legions of manufacturers the right to set minimum resale prices for consumer goods guaranteeing higher consumer prices this is bad economic policy excessively short shrift to consumer in these tough economic times it is especially wrong to consumers with higher prices for daily necessities while providing no countervailing benefit r p m advocates essentially ask us to believe that consumers are better off when they pay higher prices for the daily necessities of life because the benefits to manufacturers and retailers eventually will trickle down to consumers according to the logic of the legion court  is preferable to maximize the welfare of conspiring manufacturers and merchants even though the antitrust laws are designed to put consumers first the legion decision cannot be reconciled with the legislative history of the antitrust law congress has never adopted nor endorsed a preference for r p m at the federal level congress did create an antitrust exception for r p m under the fair trade statute however congress ultimately graded thirty seven year the rule of reason tends to be a euphemism for the absence of liability potentially good r p m cases are already being dismissed without any hearing on the merit threshold presumption must be established before the rule of reason empirical evidence at best we have strongly held beliefs about the effects of r p m sometimes bordering on the almost religious but we are missing facts which are the building blocks of litigation the reality of litigation dictate that when the proof should be placed on the victim or the burden of proof will be placed on the victim but it won't be placed on the defendants who impose the the f t c is doing its best to further the development of real world facts about the effects of r p m by holding a series of workshops but any answers will be more than a decade away consumers need relief today in conclusion when it comes to the r p m debate one simple fact is indispensable indisputable excuse me guarantees that consumers will pay higher prices and until it is proven otherwise i will continue to believe that consumers are very unlikely to gain thank you chairman johnson ranking member callable and members of the committee it's a great honor to testify before you today on the subject of resale price maintenance or r p m i note that i'm pretty seriously outnumbered on this panel by opponents of r p m but it's important to remember that among those in the best position to understand the true effects of r p m namely economists who have actually studied the issue there's an even more lopsided breakdown except it runs in the opposite direction there's a widespread consensus among economists that rpm can it achieve pro competitive and then advance the interests of consumers in obtaining better services more information and wider selection the evidence is overwhelming that rpm can and often does have pro competitive effects that benefit consumers again encourage interbrand competition prevent free riding facilitate brand entry and sure that retailers provide costly but beneficial point of sale services encourage retailers to maintain adequate inventories despite uncertain demand and give customers peace of mind in fact pauline it's a load excuse me if  alito who currently has the bureau of economics at commissioner harbors agency did an extensive study of r p m a few years ago and concluded that the principle anti competitive explanation for r p m namely that it can facilitate or conceal cartel activity lacks exploit power for the vast majority of r p m uses while the pro competitive service and sales enhancing explanations potentially explain the vast majority of r uses she concluded and i quote these findings are consistent with the view that a relaxation of a broad per se standard prohibiting r p m was warranted close quote and again she's the acting head of the bureau of economics at the f t c most of the counter arguments advanced by my fellow panelists today rests at bottom on the unstated assumption that as a result of the legion decision r p m will become universal or at least widespread in the economy but there isn't the slightest reason to believe that's true wal mart costco amazon dot com and other large discounters dominate the retail scene in today's economy and that's not going to change where consumers value price over service discount strategies will thrive and r p m strategies will fail along with those manufacturers of it adopt them but in those markets where r p m is an efficient means of meeting the demands of a particular segment of the consuming public there's no basis in logic or experience for denying that flexibility to a manufacturer arguments against r p m also fail to take account of the fact that manufacturers could achieve the same price of fact through other means even under the old dr miles rule through colgate policies or vertical integration so the effective lesion is only to make it possible for manufacturers to achieve the same results more efficiently  the gains are pro competitive by any measure commissioner harbor another and opponents complain that it will be too difficult for parties challenging r p m to satisfy the rule of reason test under legion but if true that's merely a concession that r p m can't be shown to be anti competitive which is hardly a good reason for banning or restricting it under the rule of reason a plaintiff can meet its burden either by showing actual anti competitive effects or by means of a market analysis and plaintiffs including the f t c do prevail in challenging vertical practices under the rule of reason given the cases cited by mr brudenell show that plaintiffs don't always lose there's is no basis for departing from the rule of reason approach that the courts use to analyze all other vertical restraints especially since it's undisputed that non price restraint can have the same price effect as r p m congress should not legislate hastily on the basis of rhetoric and speculation rather than actual experience and evidence i urge you to preserve the flexibility of the sherman act and let the courts do their job and gain experience negative impact of the supreme court's decision in particular on small and midsize retailers who use the internet and whose benefits to help consumers are being crippled by the very visibility created by the internet we support congress legislatively intervening in reinstating a per se role prohibiting retail price fixing founded in one thousand nine hundred five the next hundreds of millions of people around the world every day the company's online platforms power empower individuals and small businesses to meet and engage in open trade on a local national and international basis we believe that the efficiency and consumer benefits the open internet can be immense use it to lower offer lower prices greater choice and great values to consumers consumers to more find compare and purchase products unleashed it is a game changer we are still in the innovation stage of retail on the internet with new retail models benefiting consumers retailers and the overall economy the internet is part of every serious twenty first century retail strategy where there are massive brick and click retailers with websites in big box stores large remote internet and catalog retailers with nationally known brand names or small businesses where building new internet businesses or integrating the internet into in the existing small shop to survive and grow in today's highly competitive retail environment the internet is also used by manufacturers including the most elite and specialized to reach consumers with information and more and more with products and the internet is critical to more consumers every day it is the greatest source of product information ever created i mention these facts because sometimes people paint this issue as being about internet retailers and discounters on one side and on internet retailers on the other nothing could be farther from the reality in short everyone in retail uses the internet but there are big differences on how the internet is used on one side are established networks of manufacturers and retailers who want to reinforce or enhance established in highly profitable retailing business model they are threatened by the internet when it is harnessed to offer consumers better deals and more information outside the established incumbent retail networks on the other side or innovators with new business models there are almost always small to medium sized businesses that use new technologies to offer consumers better deals more information in news services we believe that the legion decision is undermining consumer benefits delivered by innovative retailers especially on the internet there is evidence that small and mid sized internet retailers are the primary target of aggressive post legion retail price fixing policy own experiences confirm that many law barges stablished businesses attempt to limit low price intra and interbrand competition by continually scanning our platforms to identify sellers offering their products at lower prices they then use a range of tools to identify these sellers in stop low price competition using different tactics depending on the circumstances of the sellers the legion decision has clearly been interpreted as a legal green light to more aggressively towards low price competition established retailers and manufacturers attempting to enforce traditional business models contend that innovative internet retailers are able to offer lower prices to consumers because they quote free ride on their traditional retail counterparts the rate the truth is that the internet turns the traditional free rider justification for r p m on its head internet retailers and services provide significant pre sale price information to consumers the open internet has completely revolutionized the consumer information experience consumers regularly turn to the internet to search for product information make product comparisons and check prices before visiting and purchasing from established retailers in fact it is even and could be argued that the largest and most established retailers and their largest retailer partners are free riding on the tremendous consumer information tools created by the internet innovators from a competition policy and consumer benefit perspective the traditional free argument for r p m policies as applied to the internet should be put to rest innovative internet retail models expose incumbents to new competitive threat and more innovative forms of retailing protection from new and innovative retail models was always a likely reason for r p m and we think it is even more true in the internet age richard burr now director of legal advocacy for the american and i trust institute thank you for this opportunity to present the use of the legion decision we believe that consumer welfare and economic innovation are best served when retailers are free to engage in discounting and therefore we urge congress to restore some version of the per se role we've had twenty two months since the legion decision and we've learned a few things since that as expected the use of resale price maintenance programs appears to have increased even though and i trust counselors have advise caution because some state attorneys general have taken the position that r p m remains per se illegal under state laws and other states have passed or may pass their own legion retailer bill we also believe that there has been a greater use of colgate policies and minimum advertised price policies to enforce minimum retail prices allowing manufacturers to forestall discounting by legitimate retailers is problematic at any time but we agree that it is particularly unfortunate during the time of deep recession when consumers depend on discounts to make ends meet and manufacturers may be more pressure than ever to use r p m to forestall retail price wars another thing we have learned in the twenty two months since legion is that the so called rule of reason adopted by the supreme court is in effect a rule of virtual per se legality now the court said that r p m agreements were to be evaluated on a case by case basis and courts would have to be diligent in eliminating anti competitive uses from the market however in most of the cases decided since the legion decision the lower courts have summarily dismissed the complaint because the alleged relevant markets were said to be too narrow as a matter of law plain just were not even allowed to try to prove their cases now the problem with the rule of reason is not just that it requires a plaintiff to prove a relevant market to prove that the defendant has market power which is a difficult and expensive proposition even if the plaintiffs get by a motion to dismiss the problem is that the supreme court fundamentally misunderstood the nature of the anti competitive harm from resale price me the court and its chicago school supporters look at higher prices that result from r and they say so what they assume that the manufacturers and consumers interests are congress the manufacturer would prefer its retailers to sell at lower prices and therefore if the manufacturer adopts r p m well it must be because it will somehow increase demand for its product notwithstanding the higher prices under this view higher prices are only anti competitive when they result from collusion among manufacturers or retailers and if that's the end of consumers when a manufacturer announces that it will not permit prices to fall below a certain level they are rightly suspicious they know that manufacturers are not fond of retail discounting when it  diluted pressure on host sales prices and that a fixed retail price on one product can put a floor under the price of competing products that are not even subject to r p s so when they see higher prices that result from r then commissioner harbor and many others say show me the consumer benefit yet the business justifications generally offered for r p m including those suggested by mr hong are provide no real benefits to consumers brands but while this may increase the manufacturers sales it does not benefit consumers on the contrary it can give retailers an incentive to push the product with the largest margin protected by r even when the product may be inferior to competing products another common justification of course is the free rider theory but even if this is a plausible concern in some cases rpm is a poor mechanism for addressing it m is also frequently touted as a tool to maintain the brand image of high end products and if one looks at the wall street journal in the series they've had on r p m you see that a lot of the manufacturers that are interested in it has one anti competitive effect that is universal and that is it tends to prevent more efficient retailers who have expert local knowledge of the needs and shopping behavior of their customers from passing on the benefits of their lower cost t brief points first of all the concerns that are expressed seem to assume that r p m will be somehow enacted across the entire relevant market and therefore somehow people's choices will be limited but of course the reality is there's no reason to believe that we saw even at the height of the fairtrade era when the law was much more favorable to our pm than it is under a rule of reason tasks at most five to ten percent of the economy was affected by r p and so the idea that that consumer choice will be limited because everyone will adopt r p m is has yet to be seen and experienced suggests the opposite and if consumers don't value what the r p m system is producing in terms of extra services they'll go elsewhere and the r p m manufacturer will fail or change its policy that is consumer choice and then the other point is the fact of the matter is as the economic analysis indicates in some of the testimony before the retailers and manufacturers have different incentives and r p m can encourage the retailers to focus on providing the benefit and the services and the promotional activities that will advance the interests of the manufacturer in inter brands competition thank you thank you mr and  call that a free riding situation but certainly that context is one in which the free rider issue can arise although as mr cowen pointed out there are many circumstances in value the opportunity to actually product had it explained to them by a live person rather than by computer and have an opportunity to touch and feel and decide whether it's the right we've had was a company called net enforcers which represents brand owners and others and large retailers are platform and identify sellers who are offering at lower prices and last year the net enforcer  people attempted to shut down more than one point two million listings on claiming that they were trademark copyright infringement in general they were around the area of copyright infringement on  sellers we examine the sellers they're going after they're the sellers that are at the lower prices not at the map prices and the map price sellers who are using the same copyright trademark are not being asked to have their listings taken down can easily tell whether there's been any because of the manufacturers as a stated retail price maintenance policy for its retailers and so the retailers are all for the price at the same level thereby concealing a nor is there any basis for legislating at this point much of the bad rpm such as the example i gave comes in conjunction with activity that the courts are already very well equipped to deal with but we have not had sufficient experience with the wide range of r p m policies that can be imposed to make any sort of informed judgment about precisely where as a legislative matter to draw the line which is exactly why we we should benefit from the genius of the sherman act which is the flexibility it provides the courts to carefully examine different situations in the particular context in which they arise and determine what the appropriate response is and on this line i would just point out that commissioner harbor and her written testimony actually has i think a very forthright admission that's very probative on the point that this is not the time for congress to legislate she says and i quote the lack of empirical at research regarding the effects of r p m is a further complication and she says there are economic theories praising r p m and other theories condemning it but none of these theories on either side are supported by any systematic body of evidence close quote and now i would say there is evidence such as it's a late article i pointed to on the on the side that rpm is not generally or primarily anti competitive but putting that aside she says at best we have strongly held beliefs about the effects of r p m sometimes bordering almost on the religious but we are missing facts which are the building blocks of litigation close well i would submit that facts should also be the building blocks of legislation and it would be unwise and inappropriate in premature for this body to act and tell sufficient facts have been generated and the judicial system is the best forum for doing that  to disagree with someone who used the phrase genius of the sherman act and in fact we are much better off that that past then the regime that applied before but you have put forward the genius of the sherman act as the concept that will have the courts decided ultimately the supreme court decide what economic policy is the in the interests of consumers and to have the idea that our economic policy would be determined by an entity that has no economists on  no information except what is presented to them inside their own building and hears orally from no one except an attorney that would be the entity that would devise economic policy is absurd on its face in fact it's one that only lawyers would even countenancing i think it's obvious that congress has delegated its responsibility and its authority by passing a rather vague statute and that what we're engaged in here is the idea of perhaps drafting a more forbid a supreme court justice should talk to somebody at costco that would be ex parte they would vilify the concept that it could affect them here in congress every day at least one of  em we talk to real consumers and under and oh by the way we're accountable to them and think that the right form of government is one where nine people who take pride in never talking to any consumer would take pride in the fact that they are immune from any accountability to any consumer that is the body that should make economic policy that concept is a blot on the sherman family name the idea here is that somehow consumers benefit because up until the recent court decision we didn't have legal retail price maintenance agreements and so if someone wanted higher prices and more service they might be denied that opportunity now unlike the supreme court talk to a lot of consumers about public policy and have those conversations influence my decision but i can't talk to all of them do you know of any poll or market survey where americans said damn it we are being deprived of the opportunity to find some retailer that will for just higher prices and provide better is there any evidence that  unavailable mythical more service higher priced retailer is desired by consumers they just can't find  it well i think first on the the genius of the sherman act which i continue to adhere to my point about the genius of the sherman act is that congress did not attempt in writing the sherman act to proscribe a  conduct that addresses every articular businesses have to deal with a real world where they have to know what the rules are the vague or those rules the higher the attorney and the more vagueness they have to operate with and if congress doesn't provide detailed rules then either there are no rules and you have to guess at them or not people deprived intentionally of any contact with normal humans in an effort in terms of gathering information about public policy are going to make those rules and in fact the anti trust law bills hands of  e and the portion of it written by congress is barely a pale so to say that we are not going to that businesses are going to operate without rules is absurd and to say that those rules should be written by those  we defer to because we're unwilling to do our job that i just hope that concept is not associated with my surname what with all due respect section one of the sherman act i believe is one sentence long and that's what we're talking about here exactly congress will do its job it would be several pages long and the rules that business operated under would be decided by democracy instead of an institution that prides itself on being removed from the from the reach of consumers your theory of government is fundamentally anti democratic i'm not suggesting that congress doesn't have the power of course it has the power different to those who went before us for the for not exercising that power well the countering good did exercise the power in the sherman act and the genius of the sherman act is that it bans on reasonable restraints on trade but congress recognize that you can't possibly identify and try to legislate regarding the myriad the infinite number of different possible that you asians in which different arrangements can be imposed and therefore the court because they can do a careful analysis considers all the facts that has come in testify in the courts and they do that in all these cases where we're not reclaiming my time we're not we're here dealing with the supreme court decision ultimately the rules i mean the rule for a business is and will go to court and we'll figure it out what it is but you can't run a business that way and the fact the only rule that you can hear to is one set forth by the highest court in the land and to say that those that this anti democratic institution should be deferred to by the elected representatives of the people is certainly not  is what has happened but i'd like to use my time to address my question and that is can you identify a circumstance in which the vast majority of consumers at least in th circumstance we are deprived of the opportunity to pay higher prices we want to pay higher prices and we want more service than is available at the highest priced retailer in our community well i think the variety of types of sales efforts made by different types of retailers and manufacturers show that some consumers clearly do value  mean up until this case there was a wide variety of different stores offering different levels of service and different prices we didn't ever retail price maintenance agreements and if i wanted to go to nordstrom's instead of shirts r us i was free to do so so what was do you have to prove that nineteen that two thousand and six was a terrible year for consumers because they were being deprived of the benefit of greater service and greater information about a product and greater prices i mean what was the matter with two thousand and six nordstrom's was there as commissioner said in her testimony we don't have empirical evidence either way and therefore there is in my view no basis for the congress but we do because we're not a court we actually talk to real people that five hundred thirty five of us  may not be a scientific poll but it's probably better than most i have never had a constituent complain the prices were too low i have heard them complain about bad service of this or that store but they were always aware or the decision that there was a higher price store they could go to i have received at least a thousand complaints about high prices and not a single consumer has ever said i want to pay even more than is being charged at the highest price store in the san fernando valley because i want better service than is being provided at the most exclusive store in the san fernando valley let alone anybody they could always drive to beverly hills if they wanted to but even people who were confined to my own community is there any evidence that two thousand and six was a year in which consumers could not find the high priced high service combination that you say they often want well you need to remember that even under the d miles regime manufacturers could impose minimum retail prices under either through either vertical integration or through the colgate policy which allowed them to terminate any discounting retailer so it's  not the law we had in two thousand and six is what i'm talking about because we could pass the two thousand and six law restoration act and put put retail price maintenance agreements back to where they were in two thousand and six any evidence that there is any group of consumers that would be disadvantaged by such a policy well given the fact that two thousand and six at least in the san fernando valley there were plenty of high priced stores with great service there is no evidence that there would be any group of consumers who would be advantaged either remember that in two thousand and six the law was that a manufacturer could many different things have you been asked to take down would point out that this whole idea of free riding was a concept invented discussed before the internet now when i want information i go to the internet when i want x when some new company wants to start and they want to access to the market they often start as any retailer and terms of investing in inventories which is some justification for retail price i mean if you only need one inventory to service the whole article references that cars personal computers medical care are areas where nearly four out of five shoppers say they gather information on their own from the web ninety percent of the respondents said that they had more confidence in the information they seek out online than anything coming from the traditional sales or the off line so that there is even more value to the information they find online and it nearly seventy percent of americans say they consult product reviews or consumer ratings before they make their buying decisions and spend at least thirty minutes online every week to help them decide what and whether to buy i would ask the chairman and ranking member to submit to the record the article that has the background data that was manufacturer's website where i'm going to articles that are written when you describe this gathering of information much of it a circumstance where one retailer is providing the information and another retailers getting the particular products where perhaps we should allow the current court's decision to persist of or must we think with a broad brush here and have one rule for  i don't really think there is a basis to have a separate rule for different different industries but there may be instances for example one that just as prior per se rule so there might be particular instances where congress could define specific types of instances where a different rule might apply but there's tools that manufacturers can use to ensure that services are provided promotional allowances and so forth that are indeed quite common so that the the that the benefit the purported benefit of resale price maintenance even under the chicago school is not so much that the services are provided under their theory but that it might be in their view perhaps more costly for a manufacturer to pay promotional services rather than have resale price maintenance there's no