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for Bioelements’ products and to send notice to all retailers and distributors that any such polices are immediately rescinded.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.
Oct
29
Posted by : | On : October 29, 2009
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
Posted by : | On : May 4, 2009
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
Posted by : | On : July 11, 2008
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
Posted by : | On : May 23, 2008
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.