The Supreme Court’s 5-4 decision in Leegin Creative Leather Products, Inc.v. PSKS Inc., 551 U.S. 877 (2007), reversing nearly 100 years of authority holding resale price maintenance per se unlawful under Section 1 of the Sherman Act, continues to resonate. On May 4, 2012 the Kansas Supreme Court in O’Brien v. Leegin Creative Leather Products Inc., M. 101,000 (Sup. Ct. Kan. May 8, 2012) reversed a lower court and held that resale price maintenance in the State of Kansas was henceforth to be judged by the per se standard.
On April 16, 2012, Kansas Governor Sam Brownback signed into law a bill overruling the May 2012 Kansas Supreme Court decision. In addition to implementing a “rule of reason” standard into Kansas State Court consideration of resale price maintenance efforts, the bill also requires that state law should be “construed in harmony” with federal antitrust law.
The new Kansas law reduces the number of states still requiring per se treatment of resale price maintenance. Maryland passed legislation in 2009 making resale price maintenance in Maryland unlawful despite the U.S. Supreme Court’s Leegin decision. See Md. Code Ann. Com. Law Sec. 11-204(a)(1) (2009). While not acting legislatively, the California Attorney General filed two actions in 2011 challenging resale price maintenance utilizing a per se standard under California state law. See, e.g., California v. Bioelements, Inc., Case No. 10011659 (Cal. Super. Filed Jan. 11, 2011) (permanent injunction entered by agreement).
The Kansas statute is an encouraging development for manufacturers and distributors seeking clarification of their ability unilaterally to take reasonable steps to control downstream pricing, so as to permit legitimate and procompetitive vertical price measures. Unfortunately it appears likely that the potential for per se treatment of vertical price restraints in Maryland and California will affect how manufacturers and distributors will behave across the rest of the country, especially where a number of other states have not weighed in on this issue by statute or court decision under state law.