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Dr. Miles Medical Co., maker of relaxants and other medicines, sues a distributor for selling at cut-rate prices, but loses when the Supreme Court says it is treading too close to cartel-like price-fixing.
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As big retailers rush to underprice and crush little shops during the Depression, Congress passes the Fair Trade Law, letting states selectively allow price-fixing to protect small retailers from predatory pricing.
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Economist Lester Telser argues that manufacturers should be allowed to set minimum prices, to protect retailers that promote their products from discounters that benefit from a 'free-ride' on the promotions.
Department of Justice studies conducted in the late 1960s indicate that prices are between 18-27% higher in the states that allow vertical price fixing, costing consumers billions in the form of higher prices.
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Congress repeals the Fair Trade Law, saying it harmed the free market. The only price protection allowed is the 'manufacturer suggested retail price,' or MSRP, which can't be enforced.
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In a suit over alcohol pricing, the Supreme Court rules that the Fair Trade Law's repeal makes the Dr. Miles ban on vertical price fixing effective again.
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In a lawsuit involving handbags, Supreme Court overrules Dr. Miles. It says manufacturers' price restraints aren't unlawful automatically, but should be judged case-by-case.
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