Why every time an old statute gets turned over (Glass – Steagall) the consumer gets ‘screwed’?

‘It gives manufacturers and dealers a weapon to use against discounters, which will raise prices and stifle innovation,’ he said.

High Court Overturns Century-Old Antitrust Rule
Manufacturers Gain Say on Retail Prices

By Ylan Q. Mui and Robert Barnes
Washington Post Staff Writers
Friday, June 29, 2007; Page D01

The U.S. Supreme Court yesterday overturned a nearly century-old ruling that prohibited manufacturers from dictating the minimum prices retailers must charge for their goods, saying such agreements could spark competition rather than stifle it.

The 5 to 4 opinion, delivered by Justice Anthony M. Kennedy, found that minimum-pricing requirements by manufacturers do not constitute an automatic violation of the Sherman Antitrust Act. Instead, the agreements must be judged on a case-by-case basis according to a ‘rule of reason’ to determine whether they interfere with market competition.

The 5 to 4 opinion found that minimum-pricing agreements must be judged on a case-by-case basis. (By Win Mcnamee — Getty Images)
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Chief Justice John G. Roberts Jr. and Justices Antonin Scalia, Clarence Thomas and Samuel A. Alito Jr. joined Kennedy in the opinion. Justice Stephen G. Breyer filed a dissenting opinion with Justices John Paul Stevens, David H. Souter and Ruth Bader Ginsburg, arguing that little has changed in the U.S. economy to warrant overruling a decision that has held up since 1911.

The reach of that previous case, Dr. Miles Medical Co. v. John D. Park & Sons Co., has been vast. In his dissent, Breyer described it as being embedded in antitrust law. It has covered the price of perfume, the cost of cars and countless other goods. The decision is why manufacturers can only offer suggested retail prices.

But some free-market economists have argued that Dr. Miles outlived its usefulness and is unnecessary as an antitrust weapon in a modern economy.

Their analysis holds that minimum-resale pricing would ensure retailers make enough profit to provide better service to customers and promote the manufacturer’s products. It would eliminate ‘free riding,’ in which a consumer might try out the latest tennis racket at the local pro shop and then hit the Internet to find a cheaper price.

Even if minimum-price requirements were to hurt retail competition, free-market economists say it doesn’t affect competition among brands. No manufacturer would want to price itself out of business.

In its opinion, the court found that reasoning to be persuasive, at least in some instances.

Mallory Duncan, general counsel for the National Retail Federation, said the justices ‘put a thumb on the scale in favor of those manufacturers who would like to set resale prices.

‘It doesn’t guarantee them the right to do it,’ he said. ‘But it gives them a little more ammunition.’

Consumer groups counter that the restriction has saved shoppers hundreds of billions of dollars over the years. Mark Cooper, director of research for the Consumer Federation of America, said yesterday’s ruling will make it more difficult for discounters and small businesses to challenge large manufacturers.

‘It gives manufacturers and dealers a weapon to use against discounters, which will raise prices and stifle innovation,’ he said.

Glass-Steagall Act
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Two separate United States laws are known as the Glass-Steagall Act. The Acts (Glass & Steagall) were both reactions of the U.S. government to cope with the economic problems which followed the Stock Market Crash of 1929.

Both bills were sponsored by Democratic Senator Carter Glass of Lynchburg, Virginia, a former Secretary of the Treasury, and Democratic Congressman Henry B. Steagall of Alabama, Chairman of the House Committee on Banking and Currency.

1 First Glass Steagall Act of February 1932
2 Second Glass-Steagall Act (officially called: Banking Act of 1933) (June 16, 1933)
3 Repeal of the Acts
4 Note
5 Emergency Banking Relief Act of 1933 (March 9, 1933)
6 External link

[edit] First Glass Steagall Act of February 1932
This act allowed that government obligations as well as commercial paper can be used as reserve in banks. Therefore, banks were able to increase credit, and more money was in circulation. It was enacted under President Herbert Hoover. Do not confuse this act with the second Glass Steagall Act of 1933.

See: [http://www.u-s-history.com/pages/h1504.html ]

[edit] Second Glass-Steagall Act (officially called: Banking Act of 1933) (June 16, 1933)
This act introduced the separation of bank types according to their business (commercial and investment banking), and it founded the Federal Deposit Insurance Company for insuring bank deposits. Literature in economics usually refers to this Glass Steagall Act, since it had a stronger impact on US banking regulation.


Original Text of the act: ‘Banking Act of 1933’, (= Glass Steagall Act), in: Walsh, Gerard P. Jr. (ed.), Federal Reserve Act of 1913. With Amendments and Laws Relating to Banking, Washington 1981, pp. 163-199. A pdf is available here (downloading takes a while): [1]

‘Understanding How Glass-Steagall Act Impacts Investment Banking and the Role of Commercial Banks’ [2]

[edit] Repeal of the Acts
On November 12, 1999, President Bill Clinton signed into law the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act of 1933. One impact of this repeal is that certain advisory activities of the banks are now regulated by the Investment Advisers Act of 1940.

[edit] Note
Do not confuse those two acts with this one:

[edit] Emergency Banking Relief Act of 1933 (March 9, 1933)
This act authorizes President Roosevelt to forbid hoarding of gold coins. It authorizes the Treasury to request all people and companies of the U.S. to send in their gold reserves (transportation will be paid by the Treasury.) In addition, this act rules that all banks stop their business (bank holiday) until the Comptroller of the Currency has examined the soundness of such banks and has approved reopening. This act has nothing to do with the Glass Steagall Acts, however, it has often been mixed up.


President Franklin Roosevelt’s Bank Holiday Declaration, 1933: [3]

Original Text of the Emergency Banking Relief Act of 1933: [4]

[edit] External link
Back to the Twenties Through the Looking Glass – Steagall Hour long Wizards of Money MP3 explaining the Glass-Steagall Act, background to it and impact of it.
Retrieved from ‘http://en.wikipedia.org/wiki/Glass-Steagall_Act’
Categories: 1932 in law | Legal history of the United States | United States federal banking legislation | History of the United States (1918–1945) | Federal Deposit Insurance Corporation