Regulation of the Day 57: Minimum Price Agreements

A new Maryland law makes it illegal for manufacturers to set a minimum retail price for their products in sales contracts. The law is meant to increase competition. Unfortunately, it will have the opposite effect.

As Wayne Crews and I explain in the The American Spectator, it could prevent retailers from competing with each other on non-price grounds, such as customer service, product demonstrations, and advertising.

Some products, such as televisions or cars, have high information costs. Customers want to know a lot about these products before they commit to a purchase. They want to know what they’re getting. Try before they buy.

By forcing retailers to compete against each other to give customers more and better information and service, minimum price agreements can help consumers get what they want and boost sales at the same time.