Supreme Court: vertical retail price maintenance no longer per se violation of antitrust law

July 02, 2007
Post by Blog Staff

Overruling a nearly century old decision, the Supreme Court Thursday held that a manufacturer may, in some instances, enter into a vertical agreement with its retailers to set minimum retail prices for the manufacturer's goods. The court overruled the venerable decision in Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911), which held that such agreements were a per se violation of Section 1 of the Sherman Act.

Instead, the Court, in a 5-4 decision, overruled Dr. Miles, and held that such agreements are subject to "rule of reason" analysis. The justification for doing so was that such arrangements can have both procompetitive effects as well as anticompetitive ones, and as a result should not be illegal in all cases as mandated by the per se rule.

In dissent, Justice Breyer, joined by Justices Stevens, Souter, and Ginsburg, did not think Dr. Miles should have been overruled. This was in part because of the rule of stare decisis and in part because of the expense and difficulty of using the rule of reason analysis to "separate the beneficial sheep from the antitrust goats."

Interesting tidbit: Justice Kennedy, who wrote the majority opinion, was in the majority of all of the Supreme Court's 5-4 decisions this term, and only dissented in 2 of the 71 cases in which he participated.

To read the full decision in Leegin Creative Leather Prods., Inc. v. PSKS, Inc., click here.

Further commentary from various sources:

Antitrust & Competiton Policy Blog

Wall Street Journal

Wall Street Journal law blog

University of Chicago Faculty law blog

ACS Blog

Update (7/6): offers this piece regarding the tough Supreme Court term for antitrust plaintiffs.

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