The U.S. Supreme Court rejected the Jones v. Harris Associates excessive mutual fund fee case Tuesday, essentially vacating the Chicago federal appeals court’s rejection of the case on the basis that such cases can only be heard when they involve fraud.

The Supreme Court has asked the lower court to reconsider the case.

Dating back to 2004, the lawsuit claims that Harris Associates charged retail investors of its Oakmark Funds twice what it charged institutional investors.

In its Tuesday ruling, the Supreme Court upheld Gartenberg v Merrill Lynch Asset Management, a standard the mutual fund industry has embraced for protecting its practice of setting fees. The standard is the result of a 1982 decision from the 2nd U.S. Circuit Court of Appeals that allows fund company boards to determine fees as long as they are comparable to what would be set at an arm’s-length distance.

The Chicago federal appeals court had ruled in Harris Associates’ favor, but not based on the Gartenberg standard. Instead, the court concluded that competition in the free market keeps mutual fund fees low, pointing out that thousands of mutual funds compete.

“Sophisticated investors” can simply “move their money elsewhere” when fees as “excessive in relation to the results,” thereby creating competitive pressure to keep fees low, the lower court said.

The Investment Company Institute immediately applauded the closely watched decision of the high court.

“The Supreme Court’s unanimous decision brings stability and certainty for mutual funds, their directors and almost 90 million investors, by endorsing the Gartenberg standard under which courts have long considered claims of excessive fund advisory fees,” said ICI President and CEO Paul Schott Stevens. “This standard has well served the interests of funds and fund shareholders, who have seen their cost of investing fall by half in the last 20 years.”

Likewise, Michael S. Scofield, independent director of Evergreen Funds and chairman of the Independent Directors Council, said, “The Supreme Court’s decision recognizes and endorses the oversight provided by mutual funds’ independent directors. Acting as fiduciaries for fund shareholders, independent directors conduct a thorough, rigorous review before they approve a manager’s advisory contract and fees.”