In other words, the maintained price must be a fair one or the manufacturer Will lose business.
3. Is price maintenance unreasonable restraint of maintenance is said to be in unreas onable restraint of trade because it tends to restrict competitive activities of merchants, discourages com petition and retards development of merchandising generally. The basic assumption behind this conten tion is that unrestricted price competition is always of benefit to the and that trade is always fos tered by it.
The assumption is wrong. Unrestricted price competition is often bad for the public. Many of the so-called trusts were built up largely hy putting a competitor out of business thru selling below cost in his town, and making up this loss by higher prices in other communities. The absolute independence of each dealer is a fiction. Unrestricted price compe tition has proved a failure in encouraging competi tion; it has fostered trusts and inonopolies.
It should be remembered always that price main tenance does not forbid all price competition; it for bids only a small part of it, because only a compara tively few manufacturers have had in the past, or will have in the future, any interest in controlling their resale prices. As long as the law keeps those manu facturers from conspiring to maintain a uniform price on competing goods, there can be no danger to the con Winer.
4. Does price maintenance encourage monopoly?— The foes of fixed prices assume a relation between price maintenance and monopoly. This argument is similar to those that have gone before. The gen eral charge that prices controlled by the manufac turer are similar to conspiracy prices, that they con stitute unreasonable restraint of trade, and that they are therefore likely to lead to monopoly, is that which is most often heard in the price maintenance contro versy. Specifically it is charged that the manufac turer who is permitted to control resale prices is thereby given a form of monopoly. He dictates to distributors all down the line, and makes it impossible for consumers to get his goods except at his arbitrary price. Similar to this is the rather vague charge that price maintenance is for the big and strong, that it is in their favor, and that it is dangerous to the small man in business and is likely to weaken his position.
With respect to patented goods the first conten tion is more or less true. The man with a patent
has a legally recognized monopoly. No one else can make his goods. He can make his price to dealers as high as he wants to, taking into consideration, of course, the relation between price and volume of sales. Whether or not be is granted the right to control the resale price, it is admitted that his is largely a monopoly price, and must continue to be so from the nature of the case. The law recognizes this form of monopoly and encourages it.
Most manufactured articles are not patented, or if patented, are in close competition with other goods differing only slightly from them. In the case of such articles there is not the slightest element of mo nopoly in price maintenance; nor is the manufac turer's fixed resale price either an arbitrary or a monopoly price—it is fixed strictly by competition.
Suppose that all the manufacturers of flour in the United States and Canada should form a combina tion for the purpose of fixing a uniform price on flour; that would be a real monopoly, and dangerous in prin ciple and practice. The combined manufacturers could, if they wanted to, raise the price of flour to the highest possible point which would not result in a falling off in consumption. People would have to pay the price or go without flour.
How does this situation differ from the situation under price maintenance? It differs fundamentally. Under price maintenance there is no combination among manufacturers. They are still kept apart by law. In price maintenance we are concerned only with the individual manufacturer. He decides that it will be good for his business and for his distributors to have all the people who sell his flour sell it at the same price. Is such a price an arbitrary or mo nopoly price? Far from it. It is fixed strictly by competition. Consumers do not have to buy the flour of the one manufacturer, or go without flour en tirely. If the price he fixes is too high, they can buy from any one of a thousand competing flour manu facturers. The individual manufacturer's price, therefore, is not fixed by monopoly considerations. There is no danger of its being extortionate. It must stand competition in the open market—it must be in harmony with the principles of competition and of business ethics.