Will the nation’s highest court force higher prices?

In what might be one of the most important consumer-related cases to reach the U.S. Supreme Court in decades, the court has agreed to hear arguments on whether to give manufacturers greater leverage to dictate the "minimum" prices that retailers charge for their products.

The court is being asked to overturn its 1911 decision barring manufacturers from entering into agreements that force retailers to sell products at or above a specified minimum price. If the court agrees, the decision could make it impossible for discounters, including many low-price Web sites, to charge less for those products than other retailers. The court has set oral arguments for March 26.

"You'd be changing the fundamental structure of retailing at a moment when we have this new technology that has been very consumer friendly," said Mark Cooper, director of research for the Consumer Federation of America.

On Feb. 26, the group filed an amicus brief asking the court not to overturn the rule, joining 37 state attorneys general, the American Antitrust Institute, and Burlington Coat Factory, a national discount retailer.

Among those asking the court to eliminate the restriction are the American Petroleum Institute, the cellular communications industry, and PING, a manufacturer of high-end golf products.

But the most notable opposition to preserving the restriction came from the U.S. Federal Trade Commission and Department of Justice. In a joint brief, the agencies said price-maintenance practices should not be prohibited outright, as under current law, but only if they're deemed anti-competitive.

Cooper called the agencies' position part of a last-gasp effort by the Bush administration to "grab as much as it can" during its final years in office. In the 1990s, Congress prohibited the Justice Department from using any of its funding to overturn the rule, a provision that has since expired.

During much of the last 100 years, retail-price maintenance agreements have been deemed anticompetitive by definition, and a violation of federal antitrust laws, which can bring harsh penalties, including prison.

Critics of the prohibition say it is based on the assumption that minimum retail prices are anticompetitive, which they contend is not always the case. A manufacturer might set minimum prices to eliminate fierce competition that is driving some retailers out of business and, as a result, preserve the number of outlets for its products.

Also, by ensuring retailers a guaranteed margin, they say, minimum prices encourage stores to improve promotion of products and give customers advice and services that would be too costly to provide otherwise.

They say the practice would also help eliminate the ability of discount online retailers to "free ride" on the costly promotional efforts of full-service retailers.

And, while they acknowledge that a retail-price maintenance program reduces competition among sellers of a particular brand, they say the practice can foster competition among different brands.

But those who support keeping the restriction say that rather than fostering competition, the practice would encourage competitors to adopt their own minimum prices, causing consumers to pay more no matter which product they buy.

They point to a 1970 Justice Department study that found prices were more than 37 percent higher in states that allowed retail-price maintenance programs, which Congress permitted from 1937 to 1975.

The 37 attorneys general who oppose lifting the prohibition contend that the argument that fixed minimum prices foster competition "is based on untested academic speculation."

In its brief, Burlington Coat Factory told the court that it and other discount retailers, having "financed, structured, and operated their businesses" based partly on the court's 1911 decision, "stand the most to lose" by having the court overturn it.

The current case involves a policy by California-based Leegin Creative Leather Products requiring retailers to agree to sell its products at the suggested retail price. A retailer that violated the agreement sued after Leegin cut off its supplies. A jury in a lower court ordered Leegin to pay $1.2 million in damages.

Under current law, the only action a manufacturer can take against retailers who sell below a set price is to cut off their supplies, which most are reluctant to do. But if the rule is changed, they could press retailers to sign contracts to follow the pricing policy, with violators having to pay penalties or even damages, said Peter Barile, the New York antitrust lawyer who wrote the Consumer Federation's brief.

If the court overturns the rule, Cooper said, the Consumer Federation will ask Congress to restore it.