Final answer:
The claim about maximum vertical price fixing controls resulting in lower prices being legal is false. The Supreme Court's ruling in Leegin Creative Leather Products v. PSKS focused on minimum vertical price fixing and suggested that it could be lawful under certain circumstances. The decision did not address the legality of maximum price fixing controls.
Step-by-step explanation:
The statement that maximum vertical price fixing controls that result in lower prices for consumers are legal is false. In the case of Leegin Creative Leather Products v. PSKS, the Supreme Court held that minimum vertical price fixing, also known as resale price maintenance, may not always be illegal under antitrust laws. Prior to this case, such agreements were considered per se violations of the Sherman Antitrust Act. The Court's decision in Leegin suggested that a more flexible, rule-of-reason approach should be applied to resale price maintenance agreements, potentially allowing them under certain circumstances where they could promote competition and benefit consumers. However, the decision wasn't a blanket statement that all vertical price fixing, including maximum price controls, is legal.
It is important to note that a minimum price contract is illegal because it restricts competition among dealers. Manufacturers can suggest minimum prices but cannot enforce them through contracts. This distinction aims to balance the need to promote competition with the interests of manufacturers and retailers to engage in beneficial marketing and sales practices.
In economic terms, a price floor set substantially above the equilibrium price has the largest effect, creating a surplus as it prevents the price from falling to the market-clearing level. Conversely, a price ceiling will have the largest effect if it is set substantially below the equilibrium price, leading to a shortage as it prevents the price from rising to the market-clearing level.