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Attention Discount Shoppers

Kohl proposing bill that would overturn Supreme Court decision regarding minimum retail prices.

Everybody loves a deal. With the holidays around the corner, consumers make a lot of effort to stretch their dollars. That’s why I’m the sponsor of the Discount Pricing Consumer Protection Act, which was passed by the Senate Judiciary Committee today. I’m pleased that the committee’s vote brought us one step closer to protecting consumers and making products more affordable in both good times and bad.

For decades, the law prevented major manufacturers from dictating minimum retail prices for their products. This prohibition applied broadly to everyday consumer goods that we all enjoy and allowed retailers to offer discounts. In 2007, the United States Supreme Court examined this rule in the Leegin case, overturning the ban on vertical price fixing. That Supreme Court decision allows manufacturers in most circumstances to set a minimum price that the stores must charge for their products. Stores are then forced to adopt those minimum prices and are prohibited from discounting, causing consumers to pay more.

My bill would overturn the Supreme Court’s Leegin decision, ensuring that stores can sell products at a discounted rate, helping consumers save more of their hard earned money. I am joined in this effort by many of my colleagues. Additionally, this legislation has been endorsed by 38 of the nation’s state attorneys general, numerous large and small businesses, consumer groups and antitrust experts. As Chairman of the Senate Judiciary Antitrust Subcommittee, consumer protection is one of my highest priorities and I will continue my work on behalf of consumers in Wisconsin and nationwide.

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St. Swithin November 04, 2011 at 02:44 PM
Bob, give me one example of a manufacturer dictating prices to Wal-mart. Wal-mart is a popular study in business school. Its practices are well known. Any supplier that tried to dictate pricing to Wal-mart would be dropped immediately. Too many other suppliers are eager to get Wal-mart's business. Wal-mart will even visit suppliers and teach them ways to shave more cost out of a product. Look at when they demanded RFID for all their suppliers. I agree that the bill would not be much help to small retailers, but I don't see your point about large retailers either. That is why I was asking if Kohl was thinking about a particular industry. This, combined with the legal aspect makes me wonder what the point of this bill is.
Jay Sykes November 04, 2011 at 02:57 PM
Normally, you only see controllable/minimum pricing structure at the retail level with 'premium branded products' like Sony,Sub-Zero,Polo and Coach. Products not generally found at BigBox.
Bob McBride November 04, 2011 at 04:29 PM
Bill, it's not a matter of a manufacturer dictating prices to Walmart, it's a matter of Walmart using this as hammer on manufacturers to further squeeze discounts out of them. I'm very familiar with Walmart and have number of clients who sell to them. If you are as well, you know they literally will pick apart every aspect of your business, suggest you move stuff overseas (and, in fact, refuse to deal with some companies if they don't have facilities overseas achieving the kinds of costs their analysts have projected for them) and, after all that, demand even further concessions, extract monetary penalties for late deliveries, defect products, etc (they have an entire revenue center dedicated to finding such instances and enforcing the penalties). The first sign of a smaller retailer attempting to out price them on something will result in them demanding more of a discount from the manufacturer and undercutting the smaller retailer. The smaller retailer has then, effectively shot himself in the foot to no avail while making himself even more vulnerable. Once the manufacturer has effectively discounted per Walmart's request, there's essentially no going back. Frankly, I don't think Kohl has played the tape to the end - i don't think he gets it. As a consumer, I'm all for this, but it amazes me that those who want all sorts of regulations to protect jobs and financial consumers can't see down the road apiece on this one.
Bob McBride November 04, 2011 at 04:42 PM
Jay, I think you'll find Sony and Apple products (another company that I believe operates with a minimum markup policy) at big box stores, like Target. Currently, some of the larger chains get around this to an extent by offering gift cards with a purchase, but the consumer actively looking to purchase, say an iPad 2 WIFI with 16GB, for the most part is going to find that the advertised price is $499.00 (I think that's the current price), and probably assume its the same price everywhere. The degree to which this is an issue may be relatively small in the grand scheme of things and, ultimately, the more significant competition may be between smaller retailers, but the net effect on smaller retailers (i.e. "the little guy") is not a positive one. In light of the kinds of regulations the left is always in favor of, it seems odd to me that the removal of one that essentially now protects the profit margins of smaller retailers isn't something they'd find fault with. I'm still not convinced that if this was something being proposed by Ron Johnson, you wouldn't see such an outcry. As far as I'm concerned, anything that ends up costing me less is a bonus, so I personally have no real problem with it. If I were more sentimental about the smaller, "mom and pop" operations this may effect, I might.
Bob McBride November 04, 2011 at 04:46 PM
Bill, This bill doesn't really make sense even if one were to assume Kohl had any love for his namesake. It actually benefits internet sales over B&M. I honestly just think he hasn't thought this through beyond the savings to consumers. Again, personally, I have no problem with it.
Steve November 04, 2011 at 04:53 PM
What is this? As a manufacture and reseller of products MAP or MSRP pricing ensures fairness across the market. From a small business to a large business. This bill will bennifit Kohl's and hurt a smaller store as the larger store has more volume and purchases from the start at a lower transfer price. Keep your fingers off the free market Kohl, for the little guy lol. Your chain of stores would bennifit the most from a bill like this.
Steve November 04, 2011 at 05:05 PM
Internet sales is the biggest reason for MAP pricing. It keeps the value of the product up and allows smaller shops in the game. If a small shop purchases and iPod only 5% lower than best buy is selling one online, game over. There is no way to compete as a smaller operation. Best Buy purchases hundreds of thousands of iPods, a smaller shop maybe just a few hundred or 1 thousand. The transfer price to the smaller shop is much higher because they buy less. Best Buy can not sell at whatever they want say mark it up 20% almost at what the small shop is purchasing at. This super discounted pricing destroys the integrity of the market and the product. The only control now is increased transfer price, which a manufacture would be forced to do to keep it's brand integrity high and ultimately no discount would be offered to the end user.
James R Hoffa November 04, 2011 at 06:28 PM
Interesting how the left and Patch itself was running stories about how Robin Vos was supposedly self-benefiting from a recent piece of legislation he authored and is sponsoring, but not the same treatment for Herb Kohl on this one. WHY??? Me thinks that Patch authors are showing their bias here. Not good and highly disappointing, as I thought fair and balanced was the guiding philosophy. Clearly, as other commentators have pointed out, this bill does nothing but benefit the large volume retailers/discounters, allowing them to gain an even greater advantage over the ‘little independent guy’ than they already have. Where’s the liberal outrage here? Instead, the only liberal comment I’ve seen on here is actually in support of the legislation while claiming that Kohl is once again looking out for the little guy. Honestly, has the left really become that STUPID? Without a doubt, Kohl’s department stores would greatly benefit from this bill while the little guy would suffer even more, if not be driven out of business all together. The HYPOCRISY of the left never ceases to amaze me!
James R Hoffa November 04, 2011 at 06:43 PM
@St. Swithin - The Legislative branch can always overturn a decision of the Supreme Court. Remember, the Court just interprets the law. The Legislature makes the law. If the Legislature isn't happy with a decision of the Supreme Court, all they have to do is enact the law in such a way that it skirts around what ever defect the Court happened to find in it previously. Of course, that doesn’t mean that the new law couldn’t once again come before the Court and again be overturned, albeit on completely different grounds. Welcome to our system of government, the best in the world!
Jay Sykes November 04, 2011 at 06:52 PM
Herb and family have not owned Kohls since 1974.
235301 November 04, 2011 at 10:15 PM
I would love a coherent response from someone on the left why this change makes sense and overall is better for the economy. Kohl's assertion that this helps the consumer in these tough times is just a level of BS that's epic. I wonder who is pushing this behind the scenes, Walmart? This change is incredibly anti-competitive. And if anyone on the right came up with this one the left would be screaming from the rooftops. The good news is folks like Walmart and Home Depot have driven their low-rent theme all the way to the customer experience. Many of us have decided to completely skip the big boxes because the experience there is so low rent. I don't care if I have to pay a few bucks more. I use the local Ace, Target, Costco instead of Sam's, etc. So even if Walmart can now lead with their loss leaders the consumer will still ignore them.
James R Hoffa November 05, 2011 at 03:14 AM
@Jay Sykes - Many of Herb's investment trust and holding companies hold large blocks of KSS (Kohl’s) stock. So while he may no longer be a majority shareholder in the publicly traded company that now is the company that he and his brother originally inherited, to say that he has no involvement what so ever wouldn't be necessarily correct either. Even if such involvement is indirect through front private trust and holding companies.
James R Hoffa November 05, 2011 at 03:21 AM
@235301 - Yeah, cause Target and Costco are nothing like Walmart and Sam's! I see way more American made goods for sale in Target and Costco vs the comparable offering from Walmart and Sam's! And let’s not forget the perennial Wisconsin favorite, ShopKo! P.S. - In case you couldn't tell, I’m being sarcastic here :-)
patchreader 123 November 05, 2011 at 04:39 AM
"My bill would overturn the Supreme Court’s Leegin decision, ensuring that stores can sell products at a discounted rate, helping consumers save more of their hard earned money." Ouch. To understand why this is bad for jobs, see the below link: http://www.pbs.org/wgbh/pages/frontline/shows/walmart/view/ If you do not have time to view the entire program, watch the video as follows: 1) Walmart's Revolutionary Power: see 10:00 and 11:30 into the segment; 2) Muscling Manufactureres: watch entire segment; 3) The Strategy: Low Costs & Go Global: see 8:00 into the segment; and 5) Taking the Hits: see 3:00 into the segment. Thanks, Herb, for sponsoring a bill that ensures U.S. manufacturing jobs will go to China.
patchreader 123 November 05, 2011 at 04:58 AM
FYI, regarding the Act: http://www.govtrack.us/congress/bill.xpd?bill=s112-75
Thurston Howell III November 05, 2011 at 11:03 AM
You "Free Marketeers" make me laugh. You always espouse Free Marketeering until it affects your bottom line.
Bob McBride November 05, 2011 at 12:27 PM
Thurston's missus is excited by the prospect of discounted Coach bags.
Jay Sykes November 05, 2011 at 12:49 PM
Just curious JRH, how do you know the contents of his blind trust? Herb, Allen, and Sidney may not own any shares.
Lyle Ruble November 05, 2011 at 01:47 PM
Unless I missed something, I don't see how this will benefit "mom & pop". I am one lefty that can't support Herb on this. Over the years I have seen the devastation that big box retailers have done all in spirit of saving the consumer money. At one time the saying was "better to have a sister working in a house of ill repute than be a supplier to Walmart"!
M.S. November 05, 2011 at 04:02 PM
I am a progressive, and a true believer in the middle class. I believe that the policies of the right hurt the middle class, including these types of small businesses. I also believe that Mr. Kohl is misguided on this one. We need to protect the small businessman against the predatory pricing of large corporations that will drive small competitors out of business. I know that I am not the only progressive who feels this way.
235301 November 05, 2011 at 04:08 PM
Was not at all talking about where the goods come from....it's more customer experience. Look at how a Target or Costco is maintained compared to Walmart or a Sam's. Night and day. Costco has a reputation for treating their employees well, Sam's/Walmart, well that's an entirely different story. I am willing to pay a bit more at a store if I feel safe and the store is clean.
Bob McBride November 05, 2011 at 04:42 PM
Misguided? How is this misguided when you're the wealthy heir to a family owned retail food chain that got to be the size it was by being able to price in a fashion that drove small, independent mom and pop grocers out of business and who essentially bought your way into your elected position using your inherited wealth? Sound vaguely familiar? Decidedly different tone you "progressives" take with our other senator cut from the same cloth, but with an "R" rather than a "D" embroidered on his sleeve.
James R Hoffa November 05, 2011 at 07:29 PM
As a publicly traded company, it's not difficult to obtain a list of shareholders from Kohl’s. And as a Senator, Kohl has to disclose his holdings in order to preface any potential conflicts of interest that may arise, just as all Senators must do. If you don't believe me, just check out his L & R Trust, or Fiduciary Management.
Jay Sykes November 06, 2011 at 12:36 PM
@JRH... I was hoping you could point me to the place that disclosed the actual and/or beneficial number of Kohls shares Herb owns.
Tj November 06, 2011 at 11:23 PM
Most clothes are made in Chinese prison camps by kidnapped, crack-addicted Tibetan children who are starved, beaten and killed by the Red Army if they try to escape. These prisons exist in government-backed "industrialized zones," which are funded by fashion-forward American clothing corporations like Nike, Tommy Hilfiger, and Chess King. To fashionistas like Senator Kohl, know this-- every discounted piece of crap clothing retailers you sell here results in the construction of yet another prison camp in China. So by all means, support this "consumer friendly" bill and spend your days shopping for discounts this Holiday season.
235301 November 07, 2011 at 02:59 AM
Tj, have you been to China? And observed their factories? There are probably examples similar to what you describe here but the vast majority are working at factories of their own free will, making $0.80 to $1.00/hr. Cheap by our standards but a decent living wage over there.
David November 09, 2011 at 09:25 PM
I am shocked to read all the comments -against- this bill. As a small business owner, this now legal price fixing is hurting my business tremendously. This practice is so pervasive in the consumer electronics segment, that its -uncommon- to not have to deal with it. In other words, most everything is price fixed. Few things aren't. How overturning this decision benefits a big box store, in any way, as opposed to a small business is beyond me. If "John's Audio" is selling xyz component at the same price as "Best Buy", why would you ever choose to purchase from John? Furthermore, how would you even know about John? You've taken away John's only bargaining chip -- price. He can run a small ad, right next to Best Buy's massive ad, with the same pricing. Why would you pick him? Who's he? Nobody. But, if John can beat Best Buy's price, you may go and shop at John's, and then you'll learn about how great John's services are. Price is a major factor to most consumers, and the major attractant for small business owners to use. Allowing manufacturers to dictate pricing to their resellers removes their most powerful bargaining chip.
Steve November 09, 2011 at 09:57 PM
The problem is that Best Buy will always beat John on the price after MAP is taken away. They purchase more units at a lower cost than John ever could because of that volume. Pricing structure sold to the retalier: 1-20 units: $100 ea (John) 20-70 units: $90 ea (Maybe John has a good year) 70-150 units: $80 ea - - - - - 2000+ units: $50 ea (Best Buy) Best Buy has the purchasing power and unless John can invest all his cash into one product they will sell at a lower cost than he purchases is 1-20 units at. John needs something else to market to customers if he wants to compete with the big boys. Possibly electronics repair, better technical service, cheaper warranties, selling over the internet. When I go into Best Buy I know more than the guy helping me 98% of the time which is anoying. John picked a business that has big competition, and if he started years ago before it was there then he missed the opportunity. Best Buy didn't start big, or did Walmart.
James R Hoffa November 09, 2011 at 10:53 PM
@Jay Sykes - In all fairness, it's difficult to say exactly how many shares Herb holds via his private holding and trust companies, as in most cases, Herb isn't the sole partner involved in such legal and autonomous entities. My only point is that to say his interest in Kohl's has been all together completely divested isn't exactly the reality of the situation, just like saying that he and his brothers are still the owners and beneficiaries of such namesake wouldn't be the truth of the situation either.
Nikki Smith April 30, 2012 at 09:46 AM
I agree to some extent as I found some little defect in the deals product. Though everybody is interested in obtaining the deal irrespective of the quality and type of product as it attracts the customers. In start I was bothering about the quality of these products but now I have evaluated that not all the deals are of low quality but now I have checked that not all deals are of low quality rather some people give discount on quality products because I have used coupons from http://www.ezcouponsearch.com/Sears-Coupons_cm_2183.aspx and I had a good experience of discounted shopping.

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