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Apr

22

Kansas Enacts Legislation Making Resale Price Maintenance Subject To The Rule Of Reason

Posted by : Matthew Wild | On : April 22, 2013

Category: Antitrust, Resale Price Maintenance, Rule of Reason, State Antitrust and Consumer Protection Claims

Overruling the recent Kansas Supreme Court decision in  O’Brien v. Leegin Creative Leather Products, Inc.  discussed in the May 8, 2012 Post, the Kansas legislature has mandated that resale price maintenance is subject to the rule of reason.  This legislation is remarkable in light of all the uproar over the United States Supreme Court’s decision in Leegin Creative Leather Products v. PSKS, 127 S.Ct. 2705 (2007), that made resale price maintenance subject to the rule of reason.  For example, as discussed in previous posts of May 4, 2009 and October 29, 2009, the Maryland legislature enacted the first Leegin repealer statute making resale price maintenance per se unlawful and 41 state attorneys general have urged Congress to repeal Leegin.

Author: Matthew S. Wild, Wild Law Group PLLC

 

May

08

Resale Price Maintenance Is Per Se Unlawful In Kansas

Posted by : Matthew Wild | On : May 8, 2012

Category: Antitrust, Per Se Analysis, Resale Price Maintenance, Rule of Reason, State Antitrust and Consumer Protection Claims

On May 4, 2012, the Kansas Supreme Court held in O’Brien v. Leegin Creative Leather Products, Inc. that resale price maintenance is a per se offense of the Kansas antitrust law.  The Kansas statute differs meaningfully (with express prohibitions on agreements involving the pricing of goods) from the general language of § 1 of the Sherman Act (prohibiting only agreements in “restraint of trade”).  As noted in earlier Posts, the U.S. Supreme Court’s decision in, Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007), which held that resale price maintenance is subject to the rule of reason under §1 of the Sherman Act, has not been favorably received.  Congress has proposed legislative repeal; several state attorneys’ general have obtained consent decrees prohibiting such practices as per se offenses of their state antitrust laws; and Maryland repealed Leegin.  It remains to be seen how long Leegin survives.  Companies should remain cautious in imposing RPM programs because they may still face substantial liability under state law.

Author: Matthew S. Wild, Wild Law Group PLLC

Jan

19

California Attorney General Halts Resale Price Maintenance

Posted by : Matthew Wild | On : January 19, 2011

Category: Antitrust, Consent Decrees, Government Investigations, Per Se Analysis, Resale Price Maintenance, Rule of Reason, State Antitrust and Consumer Protection Claims, State Attorneys General

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On January 11, 2011, Bioelements and the California Attorney General entered into a consent decree that enjoins Bioelements from entering into any agreements with retailers and distributors concerning what price they may charge for Bioelements’ products and to send notice to all retailers and distributors that any such polices are immediately rescinded.  The action was brought in California Superior Court under the Cartwright Act, which the California Attorney General has interpreted to provide per se treatment for resale price maintenance in contrast to Section 1 of the Sherman Act after Leegin.  See March 12, 2010 Post.  Notably, the injunction extends to all of Biolelements’ transactions even if they take place outside of California.  Bioelements also had to pay $51,000 in fines and expenses.  This action is a cautionary tale that companies cannot rely on Leegin that resale price maintenance will be subject to lenient rule of reason treatment.  A number of state attorneys general have brought resale price maintenance actions under their state laws and Maryland amended its antitrust law expressly to prohibit resale price maintenance.

Mar

12

Resale Price Maintenance Is a Per Se Violation of California Law

Posted by : Matthew Wild | On : March 12, 2010

Category: Antitrust, Consent Decrees, Per Se Analysis, Resale Price Maintenance, Rule of Reason, Section 1 (Sherman Act), State Antitrust and Consumer Protection Claims, State Attorneys General

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On February 23, 2010, the California Attorney General entered into a consent decree with Dermaquest, Inc., which prohibits Dermaquest from engaging in resale price maintenance.  Specifically, the order enjoins Dermaquest from requiring resellers to charge a specified price or to increase their prices.  The action was brought under the Cartwright Act and the Unfair Competition Law.  California now joins Illinois, New York and Michigan (see March 31, 2008 Post) in treating resale price maintenance as a per se offense in violation of its state antitrust law even though such conduct is subject to rule of reason review under section 1 of the Sherman Act after Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007).  This case reinforces the dangers to a manufacture when it implements a resale price maintenance program under the belief that because such conduct might be permissible under the Sherman Act, there is no genuine exposure.  The California complaint and consent decree appear here:Dermaquest Complaint  and Dermaquest Judgment.

Oct

29

41 State Attorneys General Ask Congress to Prohibit Resale Price Maintenance

Posted by : Matthew Wild | On : October 29, 2009

Category: Antitrust, New York Cases, Per Se Analysis, Resale Price Maintenance, Rule of Reason, Section 1 (Sherman Act), State Antitrust and Consumer Protection Claims, State Attorneys General

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In letters dated October 27, 2009 (State AG Letter re HR 3190; State AG Letter re S 148), 41 state attorneys general wrote to Congress asking them to overrule Leegin Creative Leather Product, Inc. v. PSKS, Inc., 551 U.S. 877 (2007).  In Leegin, the Supreme Court held that resale price maintenance — the practice in which a manufacturer requires a retailer to sell its products at a certain price — was subject to the rule of reason.  In doing so, the Court overruled Dr. Miles Medical Co. v. John D. Park & Sons, Co., 220 U.S. 373 (1911), which held that resale maintenance is a per se violation of section 1 of the Sherman Act.  The state attorneys general urge passage of H.R. 3190, which provides that “[a]ny contract, combination, conspiracy or agreement setting a minimum price below which a product or service cannot be sold by a retailer, wholesaler or distributor shall violate section 1 of the Sherman Act.”  As reported in the May 23, 2008 Post, 35 state attorneys general wrote to Congress on May 8, 2008 asking that it enact nearly identical legislation (S. 2261).

Practitioners should know that resale price maintenance can still be a per se violation of state antitrust laws.  As reported in the May 4, 2009 Post, Maryland enacted such a law.  And as reported in the March 31, 2008 Post, the New York, Michigan and Illinois attorneys general brought an action against Herman Miller in which they alleged that Herman Miller’s resale price maintenance program was a per se violation of their state antitrust laws.  Herman Miller entered into a consent decree.

May

04

Maryland Enacts the First Leegin Repealer Statute

Posted by : Matthew Wild | On : May 4, 2009

Category: Antitrust, Resale Price Maintenance, Rule of Reason, Section 1 (Sherman Act), State Antitrust and Consumer Protection Claims, State Attorneys General

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Maryland has amended its antitrust law to make resale price maintenance agreements per se illegal, thus overruling Leegin Creative Leather Products v. PSKS, 127 S.Ct. 2705 (2007).  In Leegin, the Supreme Court overruled Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373 (1911), and held that a resale price maintenance agreement in which the manufacturer requires a reseller to sell at a certain price is no longer a per se violation of Section 1 of the Sherman Act but instead is subject to rule of reason analysis.  Application of the rule of reason creates a burden on plaintiffs because they have to show that the restraint had an adverse effect on the relevant market and not just the price of the manufacturer’s goods that were subject to restraint.  This abrupt change in the law has been poorly received by state antitrust authorities.  As reported in the May 23, 2008 Post, 35  state attorneys general petitioned Congress to amend the Sherman Act to overrule Leegin.  And as reported in the March 31, 2009 Post, the state attorneys general of New York, Illinois and Michigan obtained a consent decree against Herman Miller in the United States District Court for the Southern District of New York for resale price maintenance involving the Aeron chair.  Their position was that their state antitrust law do not recognize the departure by Leegin and still provide that resale price maintenance is a per se offense.


Jul

11

The Third Circuit Reverses Summary Judgment Against Franchisee on Resale Price Maintenance Claim but Affirms Dismissal of Robinson-Patman Act Claim

Posted by : Matthew Wild | On : July 11, 2008

Category: Antitrust, Relevant Markets, Resale Price Maintenance, Robinson-Patman Act, Rule of Reason, Section 1 (Sherman Act), State Attorneys General

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Resale price maintenance liability remains alive even after Leegin Creative Leather Products v. PSKS, 127 S.Ct. 2705 (2007) (holding that rpm agreements are now subject to the rule of reason). On June 17, 2008, the Third Circuit held that a Mack truck franchisee raised a triable issue of fact under the rule of reason concerning an alleged resale price maintenance scheme. Toledo Mack Sales & Serv. v. Mack Trucks, No. 07-1811, 2008 WL 2420729 (3d Cir. June 17, 2008). In particular, the Court held that the plaintiff came forward with sufficient evidence to show that the existence of an agreement between the manufacturer and dealers to stop discounting and the agreement may have caused prices to increase violating the rule of reason. Relying on Monsanto v. Spray-Rite Serv., 465 U.S. 752 (1984), the dealers’ frequent input and complaints about discounting were sufficient to raise a triable question over the existence of an agreement. With respect to the showing under the rule of reason, the dealer established that the manufacturer had sufficient power in the engine placed in front of the cab and the low cab over engine truck markets to control prices in those markets. Accordingly, its efforts to reduce intrabrand competition could have affected interbrand competition and caused prices to increase in the relevant markets. The Third Circuit rejected the R-P- Act claim holding that the statute does not apply to custom made goods of the type that were at issue in this case. The Third Circuit also rejected the statute of limitations defense holding that the plaintiff could rely on evidence of overt acts that took place before the limitations period to prove the existence of the conspiracy during the limitations period. Counsel must be careful in advising their clients about resale price maintenance. In addition to liability that can arise as demonstrated by this decision, state attorneys general remain active in this area. See March 14 and May 23, 2008 Posts.

May

23

35 State Attorneys General Ask Congress to Make Resale Price Maintenance a Per Se Violation of the Sherman Act

Posted by : Matthew Wild | On : May 23, 2008

Category: Antitrust, FTC Actions, New York Cases, Per Se Analysis, Resale Price Maintenance, Rule of Reason, Section 1 (Sherman Act), State Antitrust and Consumer Protection Claims, State Attorneys General

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The state attorneys general continue to be hostile to the Supreme Court’s decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 127 S.Ct. 2705 (2007), which overruled Dr. Miles Medical Co. v. John D. Parke & Sons. Co., 220 U.S. 373 (1911), and made resale price maintenance subject to the rule of reason under Section 1 of the Sherman Act. 35 state attorneys general have written to Congress asking that it pass S. 2261 which would make resale price maintenance a per se violation of Section 1.  State Attorney General Letter; S. 2261.  The March 31, 2008 post reported that the New York, Michigan and Illinois attorneys general obtained a consent decree under state law against Herman Miller for its resale price maintenance scheme. The May 8,2008 post reported that although the FTC modified Nine West’s consent decree that had prohibited resale price maintenance, the FTC reminded Nine West that it was still subject to state restrictions. This most recent letter further confirms that counselors must be cognizant of state law when they advise clients about the legality of resale price maintenance. It would be prudent for clients to act unilaterally and follow the Colgate doctrine rather than rely on Leegin.

May

08

FTC Modifies Nine West’s Consent Decree to Allow Resale Price Maintenance

Posted by : Matthew Wild | On : May 8, 2008

Category: Antitrust, Consent Decrees, FTC Actions, Per Se Analysis, Resale Price Maintenance, Rule of Reason, Section 1 (Sherman Act), State Antitrust and Consumer Protection Claims

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On May 6, 2008, the FTC granted Nine West’s petition to modify its consent decree to allow Nine West to engage in resale price maintenance with its dealers. In 2000, Nine West — a footwear manufacturer — had entered into a consent decree with the FTC and several state attorneys general to resolve allegations that it fixed the prices at which its retailers may sell its shoes. Because of the Supreme Court’s recent decision in Leegin Creative Leather Products v. PSKS, 127 S.Ct. 2705 (2007), which allowed such agreements to be treated under the rule of reason rather than subject to per se condemnation, the FTC allowed Nine West to engage in resale price maintenance but did not rule that such conduct would be necessarily lawful. Rather, the consent decree requires to Nine West to provide periodic reports to the FTC of prices and output during periods when it has engaged in resale price maintenance. As a practical matter, modification of the consent decree may be bring little comfort as some state attorneys general have taken the position that resale price maintenance is still a per se violation of their antitrust statutes. Herman Miller (discussed in the March 31, 2008 post) is an example of such an application of the state antitrust antitrust laws.  Attached is the FTC’s order in Nine West.  Nine West (Order)


Mar

31

Three State Attorneys General Obtain Consent Decree Against Herman Miller for Resale Price Maintenance

Posted by : Matthew Wild | On : March 31, 2008

Category: Antitrust, Consent Decrees, New York Cases, Per Se Analysis, Resale Price Maintenance, Rule of Reason, Section 1 (Sherman Act), State Antitrust and Consumer Protection Claims, State Attorneys General

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On March 21, 2008, Herman Miller, Inc. entered into a consent decree with the attorneys general for New York, Michigan and Illinois to resolve allegations of resale price maintenance over its Aeron chair — an ergonomic desk chair. Filed in the United States District Court for the Southern District of New York, the Complaint alleged that Herman Miller used its Suggested Retail Price policy to enforce a resale price maintenance scheme over the Aeron chairs. According to the Complaint, Herman Miller coerced retailers to agree not to advertise or discount Aeron chairs below Herman Miller’s Suggested Resale Price or a pre-determined discount set by Herman Miller. The states alleged violations of Section 1 of the Sherman Act and the New York, Illinois and Michigan antitrust statutes. Although this action was brought after the Supreme Court in Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 S.Ct. 2705 (2007), held that resale price maintenance was subject to analysis under the rule of reason (and no longer a per se violation of Section 1), the Complaint pled only a per se violation. The consent decree requires Herman Miller to refrain from resale price maintenance and enforcement of its Suggested Retail Price policy for all of its products. Herman Miller also was required to pay a $750,000 fine. This case serves as a cautionary tale to manufacturers who take too much comfort from Leegin. With aggressive enforcement by state attorneys general and potential litigation by terminated retailers under more stringent state laws, manufacturers would be well advised to act unilaterally under the Colgate doctrine. They are free to terminate discounters unilaterally but should not require retailers to agree to adhere to resale prices as a condition of receiving shipments. Similarly, to reduce the chance that any termination of a discounter could be considered the product of a conspiracy between the manufacturer and other retailers, manufacturers should refuse to listen to complaints from retailers about discounting. The Herman Miller Complaint and Consent Decree are attached. Herman Miller Complaint; Herman Miller Consent Decree