Janice E. Rubin
Published: 2007
Total Pages: 12
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The Plaintiff in Leegin Creative Leather Products v. PSKS, Inc. successfully asked the Supreme Court to soften the longstanding treatment of resale price maintenance (RPM, verticial imposition of direct, minimum price restraints) as per se (automatic, and not capable of being justified) antitrust offense. RPM had been so analyzed since the Court decided in 1911 that a manufacturer of patent medicines could not lawfully agree with retailers of its products on the prices at which these products would be sold (Dr. Miles Medical Company v. John D. Park & Sons Company, 220 U.S. 373). Such agreements, the Court had said in Dr. Miles, constituted both unlawful restraints of trade under the common law, and violations of the Sherman Act's prohibition against "contract[s] or combination[s] . . . in restraint of trade" (15 U.S.C. 1). Leegin's practice of entering into contracts with its retailers of the Brighton line of leather products to set the prices at which the dealers would resell those products was challenged by a discounting retailer whose replacement shipments were terminated; the trial court found a per se violation of section 1 (2004 WL 5254322) and the Court of Appeals for the Fifth Circuit affirmed that decision (2006 WL 690946). Leegin argued in the Supreme Court that because RPM may sometimes be pro-consumer (might, for example, allow the retailers to profitably provide extra services desired by some consumers), the practice should not be conclusively presumed unreasonable "without elaborate inquiry as to 'its precise harm or business justification for its use.'" Agreeing with Leegin, the Court overruled Dr. Miles, stating that allowing RPM to be analyzed as a Rule of Reason violation (pursuant to which the procompetitive effects of a judicially determined antitrust violation are weighed against the anticompetitive results of the challenged activity) should be allowed: "Notwithstanding the risks of unlawful conduct, it cannot be stated with any degree of confidence that [RPM] always tend[s] to restrict competition . . . " This report will not be updated.