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Discounters say supplies have been cut since Supreme Court ruling

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In just two months, Priba Furniture's sales have dropped by 50 percent. Owner Priscilla Knox says that because her full-service store in Greensboro, N.C., sells upscale furniture at a discount, full-price competitors have pressured manufacturers to restrict or cut off her supplies.

Now, she can no longer sell certain lines of furniture and, because of supplier restrictions, can only sell other items to customers when they are actually in the store.

A wide range of other discount retailers - home-entertainment companies, camera stores, shoe stores, and clothing factories - complain that since the Supreme Court ruled in May that vertical price fixing is not automatically illegal, they have felt a similar squeeze.

Although manufacturers deny any change in their behavior, some discounters say that ``they've been informed by their suppliers that if they don't agree to sell their merchandise for at least as high as a minimum price, the supplier will terminate them,'' says Richard Kelly, a lawyer for the National Association of Catalog Showroom Merchandisers. (Catalog showrooms sell products at a lower cost than full-price stores.)

The practice of full-price retailers making their suppliers choose between them or their competing discounters has increased dramatically, he says, since early May, when the court ruled in Business Electronics Corporation vs. Sharp Electronics Corporation that vertical price restraints are not automatically illegal. Under the ruling, such allegations must be judged on a case-by-case basis, and terminated companies have to prove in court that the termination harmed competition.

The case arose when Sharp Electronics stopped supplying calculators to Business Electronics, which was selling them at a discount in the Houston area. Business Electronics alleged that its supply was cut off because another Houston retailer - selling Sharp calculators at full price - complained to Sharp that it was being undercut.

Michael Waldman, legislative director at Public Citizen's Congress Watch, a consumer group, says a lot of retailers aren't protesting because they are afraid of alienating their manufacturers or prejudicing various pending legal cases.


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