Important Antitrust Law Development
June 15, 2007
On June 28, 2007, the U.S. Supreme Court issued an important federal antitrust decision. In Leegin Creative Leather Products v PSKS, Inc., the Court overturned the "per se" prohibition of "vertical minimum resale price agreements." Under a "vertical minimum resale price agreement," a supplier and a distributor or dealer agree on the distributor/dealer's minimum resale price for a product.
Since the 1911 case Dr. Miles, vertical minimum resale price agreements have been per se illegal under federal antitrust law. In Leegin, the Court overruled Dr. Miles in a 5/4 decision.
Following the Leegin decision, vertical minimum resale price agreements will be evaluated under the "rule of reason" for federal antitrust law purposes. Under the "rule of reason," courts weigh the "procompetitive" impact of a practice against the "anticompetitive" impact of that practice. As a general rule, the "rule of reason" is much more favorable to defendants than "per se" treatment.
Leegin is an important case. It presents opportunities for suppliers to be more aggressive in their resale price policies. However, some caveats are in order:
- The Court has not ruled that vertical minimum resale price agreements are always legal. Rather, it has ruled that those agreements should be evaluated under the rule of reason.
- We may see a backlash to Leegin, in the form of legislation that would attempt to overturn or scale back the decision.
- Leegin only concerns vertical agreements (agreements between suppliers and distributors/dealers). Horizontal price agreements (price agreements between competitors or potential competitors) remain per se illegal.
- In addition to the federal antitrust laws, states also have antitrust laws. Some states may not follow the rule announced in Leegin for purposes of their state antitrust laws. For example, it is not clear whether Tennessee courts will follow Leegin in interpreting Tennessee's antitrust laws.
- Other countries also have antitrust laws (often referred to as competition laws). In many countries, vertical minimum resale price agreements are considered a serious offense.
If you would like more information or have any questions about this article, please do not hesitate to contact Hugh Moore at (423) 757-0243 or email@example.com.