Fair trade laws are statutes passed in the United States that gave manufacturers the authority to set minimum retail prices for the commodities they produced. The adoption of these laws was prompted by the need to protect retailers from unfair price-cutting competition largely initiated by bigger chain stores (Factmonster, 2007).
Fair trade laws were repealed later because of their growing unpopularity. Many manufacturers faced difficulties in enforcing these laws and slowly abandoned them forcing many jurisdictions to repeal them (Factmonster, 2007). Still, antitrust studies revealed that fair trade pricing would eventually lead to elimination of competition. It was assumed that this was defiance to the principles of a free trade system therefore repeal of the laws was necessary (TIME, 1955).
Manufacturers should not be allowed to force retailers to sell their products at specified prices. To retailers, this would cut out the competition that characterizes a free market thus interfering with the marketing strategies that different retailers would wish to lay down. Consumers are also bound to lose since a non- competitive market implies standard prices for goods. With competition in the market retail outlets are bound to set prices differently and consumers are at liberty to shop wherever the prices are comfortable for them (Net Industries, 2009).
Manufacturers on the other hand may stand to lose if they are not permitted to set minimum prices for their products. This is because some retailers may sell their products at very low prices which may affect the good will of the products as consumers may become cynical about the dropping and rising prices (Net Industries, 2009).
Factmonster. (2007). Fair Trade Laws. The Columbia Electronic Encyclopedia, Columbia University Press. Retrieved June 13, 2009 from
Net Industries. (2009). Fair Trade Laws. Retrieved June 13, 2009 from http://law.jrank.org/pages/6724/Fair-Trade-Laws.html
TIME (1955 April 11). Repeal fair trade? Retrieved June 12, 2009 from http://www.time.com/time/magazine/article/0,9171,891471,00.html