Retailers will feel impact of new 'minimum price' court decision

This week, the U.S. Supreme Court gave product manufacturers more control over setting minimum prices for their products on retail shelves. While that may not sound very significant, don't tell that to large discount chains like Target Corp.(NYSE:TGT) and Wal-Mart Stores, Inc. (NYSE:WMT). These two retailers, which daily set prices on certain products lower than what manufacturers would like, are destined to see some significant blowback because of this court ruling. It may take some time, though -- but come the "back to school" and winter holiday shopping seasons (which will be here before we know it) -- the pinch will start.

Using a 5-4 vote, the U.S. Supreme Court basically turned back the dial to the year 1911, which was the year that the same court declared manufacturer-set minimum prices were illegal practice. There is no doubt that the retail landscape (which practically did no exist then) has changed in that time, and that the power discount and regular retailers have over pricing on their shelves causes friction with many manufacturers currently.

It's my guess that both Target and Wal-Mart have irked many a vendor by stating a minimum price for a certain product before it is allowed on the shelf. As such, manufacturers either take the bait (err, business) and capitulate or walk away and sell to someone else that's more into a retail "partnership" than for providing the absolute lowest price to all customers. Which tactic is right? There isn't one. It remains to be seen how giving manufacturers more control over pricing will affect sales to customers (if at all), but I have a feeling this specific variable will become ultra-important in retail during the latter half of 2007 and into 2008.