There are several reasons why manufacturers may want to support fair trade laws. At first glance, however, they are not readily apparent. Since manufacturers are free to set the wholesale price of their particular product, they derive more income by selling more goods. A way to do this would be to minimize the price the consumer pays for the product (retail price), thus increasing (wholesale) demand. Fair trade laws, however, require the retailer to sell the manufacturer’s products at no lower than a specified (by the manufacturer) mandatory minimum price. Manufacturers should theoretically oppose these measures, as they either reduce or have no effect on their profits (certainly would not increase them). However, this argument holds only in competitive markets or where products are undifferentiated. It has been postulated that fair trade laws are highly unsuccessful in these types of markets. In concentrated markets and/or where “brand names” are important, fair trade laws do present advantages, both to manufacturers and to retailers. Since “brand name” is important in this case, fair trade laws offer retailers a measure of security. Under this system, a retailer knows that other retailers cannot undersell them on particular “brand name” and their share of the market is guaranteed (unless others engage in price discrimination). Also, under this system, the retailer can enjoy larger profit margins (with fixed wholesale price) than in a “price war” situation, where they may barely make enough to cover costs (or less!). Thus the manufacturer finds it to their advantage to set a fair trade price to keep retailers happy (and to maintain distribution channels). For the same reason, large retailers may force manufacturers to set a fair trade price by refusing to market their goods (and possibly turn to other producers) unless they comply. To the contrary (from the manufactures’ point of view), if retailers could lower the retail price (even with a fixed wholesale price), the possible increase in sales could result in greater profits and a supply of capital for retailers. They could then expand into chains, other products (from other manufacturers) or, as a worst case scenario, may market their own brand names to “compete” with the manufacturers. Fair trade laws, of course, prevent retailers from passing savings on to consumers and effectively limit retailer’s capital, preventing this situation (expansion) from occurring. Therefore, fair trade laws help manufacturers keep retailers “under their thumb”. In this same thread, fair trade provides a legalized form of price-fixing for major manufacturers, assuring each a “piece of the pie (profits)”, and forestalling “cutthroat” competition. Fair trade laws thus result in more retailers and fewer chains with each retailer dealing in a smaller volume of business than non fair trade situations. Evidence of this is especially evident in the drug industry. A final subtle impetus for manufacturers to support fair trade laws lies in consumer preferences. With no fair trade, certain retailers could develop a reputation for low prices and attract business on this basis. This would result in a shift in consumer preference from the manufacturer’s product to the particular retailer, who may still sell other lines as well (“buy at Joes” not “buy Brand X”, for example). This could lead to a reduction in sales of the brand-name product (consumers also buy other items in this store, since they are also inexpensive).Taken over the entire market, this may cut into a manufacturer’s monopoly power. In summary, it is seen that manufacturers support fair trade laws primarily because it maintains their distribution system and preserves their monopoly power. In large volume industries, however, manufacturers find fair trade prices increasingly hard to enforce and may abandon this policy. With the growth of large retailers (in spite of fair trade laws), manufacturers actually find them detrimental, as these retailers have the option of selling their own brand-names if the fair trade price of the manufacturer’s goods are too high.