As reported in Dykema’s Antitrust and Trade Regulation Developments (Summer 2007), the United States Supreme Court in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007), held that minimum resale price agreements are no longer per se illegal under federal antitrust laws, but would instead be decided under the “rule of reason” on a case-by-case basis. For a century prior to the Leegin decision, courts ruled that such decisions were per se, or automatically, illegal and did not attempt to undertake a market analysis to determine whether the agreements decreased output or reduced competition in order to increase price. The Leegin decision represented a major change in federal antitrust laws and is supported by the American Bar Association and many leading practitioners.
The State of Maryland, on April 14, 2009, enacted an amendment to the Maryland antitrust laws declaring that, effective October 1, 2009, resale price maintenance agreements would be per se illegal under the Maryland Antitrust Act. This represents the first legislative action to reverse the impact of Leegin. While the Leegin decision still governs federal antitrust laws, each of the 50 states has its own antitrust laws. For example, if a national franchisor or consumer products company requires franchisees or dealers to set prices at or above a certain minimum price, any such agreements with franchisees or distributors located in Maryland would be deemed per se illegal and subject the company to state law actions for damages and injunctive relief.
Maryland’s action is another sign that the Leegin decision may soon be effectively overruled, because numerous states have taken the position that resale price maintenance should remain per se illegal. The laws of several states, including New York, continue to treat such agreements as per se violations. In amicus (friend of the court) briefs filed in the Leegin decision, Maryland and 36 other states (including Michigan) urged the Supreme Court to continue the per se treatment of these agreements. Bills have also been introduced in both houses of Congress to enact legislation reinstating the per se classification. State law “repeals” of Supreme Court decisions interpreting federal antitrust law could have a major impact. For example, the Supreme Court issued a landmark decision in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), prohibiting indirect purchasers from suing under federal antitrust laws, and 18 states enacted “Illinois Brick Repealer” statutes extending their own state antitrust laws to encompass suits by indirect purchasers. Those states have proven to be popular jurisdictions in which to initiate follow-on indirect purchaser lawsuits for the growing number of cartel and other high-profile antitrust suits, such as the various Microsoft matters.
Firms that have, or are considering, resale price maintenance agreements should carefully review the current status of the antitrust laws in states where they operate or have such agreements. Dykema’s antitrust attorneys will be monitoring legislative developments and provide you with future updates.