Trade Regulation Tidbits

This posting was written by John W. Arden.

News, updates, and observations:

 Last year’s landmark Supreme Court decision on resale price fixing is having an effect on the marketplace, according to a front page article in today’s Wall Street Journal (“Price Fixing Makes Comeback After Supreme Court Ruling”). “Manufacturers are embracing broad new legal powers that amount to a type of price fixing—enabling them to set minimum prices on their products and force retailers to refrain from discounting,” writes Joseph Pereira. These “new legal powers” stem from the decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2007 CCH Trade Cases ¶75,753), holding that agreements to set minimum resale prices must be judged under the rule of reason. The ruling overturned a 96-year-old precedent—Dr. Miles Medical Co. v. John D. Park & Sons Co.(220 U.S. 37)—applying the per se rule to vertical price fixing. New minimum pricing policies are creating challenges for retailers such as BabyAge.com, which reports that nearly 100 of its 465 suppliers now dictate minimum prices. The company is suing a half-dozen manufacturers and retailers, alleging price collusion. Home improvement retailer WorldHomeCenter.com is bringing suit against lighting manufacturer L.D. Kichler in New York State court, alleging that Kichler’s resale pricing policy has caused the retailer to lose substantial profits. Critics of the new pricing rules say that resale price fixing will limit consumer choice, cost consumers $300 billion per year, and “feed inflation.” The article appears here on Wall Street Journal online.

 Twenty-seven Internet, telephone, and cable companies have responded to a request for information about their collection and use of consumer data by leading members of the House Committee of Energy and Commerce who are looking into online behavioral advertising. Although a number of these companies answered that they do not tailor advertising or facilitate the tailoring of advertising based on a consumer’s Internet surfing, others indicated that they have used Internet tracking technology without notifying consumers or seeking their consent. Broadband providers Cable One and Knology stated that they both have tested a third-party behavioral advertising system, which uses deep packet inspection technology, but did not provide access to any personally identifiable information. Yahoo! responded that it “participates in a number of businesses related to Internet advertising and each business facilitates the customization of advertising to some degree.” Yahoo! added that it is working on finalizing an expanded consumer opt-out mechanism, due by the end of August. Microsoft admitted to displaying relevant advertising based on consumers’ use of an Internet search service or browsing web site owned by Microsoft or its advertising partners, but made clear that it does not engage in “deep packet inspection" or “any other tailoring of advertising based on users’ online behavior obtained through a network operator or an Internet service provider.” The 27 letters appear here on the webstie of the House Energy and Commerce Committee. Further information on the Committee’s initial inquiry appears in an August 11, 2008 posting on “Trade Regulation Talk.” A news release on the inquiry appears here.

 State breach notification laws are causing chief information officers, security officers, and privacy officers to work more closely than ever before, according to Harriet P. Pearson, vice president of corporate affairs and chief privacy officer of IBM. These laws require companies to provide notice to consumers whose electronic personal information may have been compromised as a result of a breach. “Part of the challenge is that there are 25 states [with breach notification laws],” she told Computerworld.com. “If you look at each of them, you will see that each one is slightly different, and that does cause challenges. It creates the requirement that if you are doing business across states, you have to go through and try to rationalize them across states.” These laws require different types of notices, have different triggering events, and use different definitions of personal information, she said. The most interesting development is that “nobody wants to become really good at knowing how to notify when there’s a breach.” Rather, corporate officers want to address the breaches themselves. An interview with Ms. Pearson appears here at Computerworld.com. Text of all state breach notification laws appear in CCH Privacy Law in Marketing.