A Stitch in Haste

Totally overshadowed by the race-based cases yesterday was another minor victory at the Supreme Court, in the case of Leegin Creative Leather Products v. PSKS, No. 06-480 (June 28, 2007). The Court reversed -- although "revised" might be the better term -- the standard of review for antitrust cases involving so-called "retail price maintenance."

In RPM, a manufacturer or wholesaler on one side of a contract requires the retailer on the other side of the contract to charge a minimum price to final consumers. For almost a century, any and all RPM agreements were deemed illegal under the antitrust laws -- see Dr. Miles Medical Co. v. John D. Park and Sons, 220 U.S. 373 (1911).

Now the Court has "overturned" Dr. Miles and held that RPM, while not necessarily permissible in all contexts, is to be subject to the so-called "rule of reason," which just means that antitrust regulators now need to go through the motions of evaluating RPM contracts and deciding -- somehow -- whether such contracts are -- somehow -- "bad."

Hardly reason for libertarians to dance in the streets.

It's quite simple really: Private parties (i.e., manufacturers and retailers) should be free to enter into voluntary contracts amongst themselves regarding how their products are to be sold. Consumers, meanwhile, are free to accept or reject the price offered, just as in any other context. The notion that consumers, through their regulatory henchmen, have a pre-emptive right to block a contract, to which they are not even a part, is preposterous and insolent. How the price on the shelf came to be is not the customer's concern. Stated differently, how I run my business is none of your business. You have no more right to pry into my warehouse than you do my bedroom. The price is the price -- take it or leave it.

How nice it would have been if just a smidgen of economic substantive due process (i.e., the right to freedom of contract) could have wedged its way back into Supreme Court jurisprudence via this case. Sadly, no. The opinion is strictly "antitrust is still perfectly hunky-dory -- just be 'reasonable' about it." As if "reasonable antitrust law" were not an oxymoron.

The right to enter into voluntary contracts (a corollary of the right to be free from coercion) is one of the two most fundamental human rights, along with the right to own property (which, incidentally, is also abrogated by RPM restrictions -- the right to own presumes the right to sell). To suggest that these basic human rights should be subject to any restriction -- even one obnoxiously labeled a "rule of reason" -- is a disgrace in a supposedly free economy.

More thoughts at Truth on the Market.