Kansas Supreme Court Declares All Vertical Minimum Resale Price Agreements Violate State Antitrust Law
In 2007, the U.S. Supreme Court overruled its own 1911 decision in the Dr. Miles case and held that a manufacturer does not necessarily violate the antitrust laws by establishing a minimum resale price for its products and enforcing the policy by terminating a wholesaler-distributor or other reseller who sells below the minimum price. (Leegin Creative Products, Inc., v. PSKS, Inc. d/b/a Kay’s Kloset… Kay’s Shoes, Docket No. 06-480).
The Court ruled that vertical agreements between a manufacturer and a distributor establishing minimum resale prices can have either procompetitive or anticompetitive effects, depending upon the circumstances in which they are formed. Thus, these agreements should no longer be per se (or automatically) unlawful, as previously ruled in the Dr. Miles case. Rather, federal courts should apply the “rule of reason” standard to decide, on a case-by-case basis, whether a particular vertical price restraint violates federal antitrust law.
Hostility to the U.S. Supreme Court decision is likely to continue at the state level. Thirty-seven states filed an amicus brief in the Leegin case, arguing in favor of the Supreme Court continuing the ban on all vertical minimum resale price agreements. In 2009, Maryland amended its state antitrust law to ban all such agreements. Congressional action to amend federal antitrust law and reverse the Leegin decision is also a possibility.
