A U.S. Supreme Court decision could mean higher discount prices
for some products, but doesn't automatically approve every
manufacturer's attempt to set minimum prices, anti-trust attorneys
In Leegin Creative Leather Products Inc. v. PSKS Inc., the court
overruled a 96-year-old precedent that barred agreements between
manufacturers/distributors and retailers to set minimum prices.
However, the high court's ruling, one of the last announced this
term, does not mean that all bets are off when it comes to pricing.
Kent Meyers, an attorney with Crowe and Dunlevy who also teaches
antitrust law, said the Leegin decision addresses just one kind of
restraint on trade - vertically imposed minimum resale price
maintenance agreements. He said that vertical chain involves
manufacturers, distributors and retailers.
"The manufacturer can say 'I'm selling this to you for a dollar
on the condition you won't sell it for less than $1.50,'" Meyers
Under the 1911 decision in Dr. Miles Medical Co. v. John D. Park
& Sons Co., known as the Dr. Miles rule, vertical price restraints
were deemed per se illegal, with defendants given no opportunity to
"If the finding is simply, 'yes, I did it,' then the manufacturer
is liable," Meyers said. "It doesn't get to defend itself."
Under Dr. Miles, Meyers said, once a manufacturer or other seller
parted with goods, it could not dictate the price for which a buyer
could resell them.
The Leegin majority disagreed with that interpretation, saying
that these agreements should be subject to the rule of reason, under
which defendant companies are allowed to outline why they are not
unlawful in their situation.
"If it's the rule of reason, the defendant can say, 'yes, I did
it, but here's why I did it and here's why it made economic sense
for me to do it," he said. "The defendant basically gets to explain
their actions, and gets to bring forward any pro-competitive aspects
that it sees in its conduct."
Meyers said most restraints today are judged by the rule of
reason, including agreements setting maximum resale prices.
"Everybody who is involved in this area of practice was kind of
expecting this to happen the next time an issue got to the Supreme
Court about this," he said. "Most of the economic literature for a
number of years had been opining that it is silly to judge this
under the per se rule, because there are an awful lot of economic
motivations that someone might want a minimum resale price
maintenance in order help itself competitively."
Meyers expressed surprise that the vote was 5-4, one of many
close decisions to come out of the court since the retirement of
Justice Sandra Day O'Connor. Meyers said he expected, if not a
unanimous decision, maybe a 7-2 split at the closest.
Meyers said the Leegin decision could mean higher prices on some
products at discount stores, as they negotiate agreements with
manufacturers and distributors.
"That's a possibility," he said.
At the same time, Meyers said some of these agreements may be
found unlawful under the rule of reason. …