On 16 April 2013, the Kansas legislature enacted a law that reestablishes that resale price maintenance (RPM) agreements would be subject to a rule-of-reason analysis under Kansas antitrust law. The legislation was a direct response to the Kansas Supreme Court’s recent decision in O’Brien v. Leegin Creative Leather Products, 294 Kan. 318 (Kan. 2012), which held that, contrary to the U.S. Supreme Court’s decision in Leegin Creative Leather Products v. PSKS, Inc. (Leegin), 551 U.S. 877 (2007), RPM agreements were still considered per se unlawful under Kansas antitrust law. The new legislation brings Kansas antitrust law more in line with the U.S. Supreme Court’s decision, which permits RPM agreements whose procompetitive benefits outweigh their anticompetitive effects, if any. Similarly, the Kansas law provides that RPM agreements will not be deemed unlawful if they are reasonable. The law permits the use of RPM agreements when their use is “reasonable in view of all the facts and circumstances of the particular case and does not contravene public welfare.” S.B. 124, 58th Leg., 2013 Reg. Sess. (Kan. 2013) (enacted). The legislators’ notes evince their intent to specifically overturn the state supreme court’s decision, which was a blatant departure from 60+ years of Kansas precedent that had applied a rule-of-reason analysis and condemned only unreasonable restraints of trade. See Okerberg v. Crable, 341 P.2d 966, 971 (Kan. 1959); Heckard v. Park, 188 P.2d 926, 931 (Kan. 1948).
Although the new law harmonized Kansas antitrust law with existing U.S. Supreme Court precedent and the antitrust laws of most states, companies with national resale networks are wise to proceed with caution. Minimum RPM agreements still are per se unlawful under the laws and case law of certain states—California, New York, and Maryland, among others—and other states have begun to move in that direction. In March 2013, for example, a Pennsylvania state senator reintroduced an antitrust bill that, if enacted, would make RPM agreements per se unlawful in Pennsylvania. See S.B. 848, Gen. Assemb., 2013-14 Reg. Sess. (Pa. 2013). Because Pennsylvania currently does not have its own comprehensive antitrust law and thus applies federal law to antitrust actions, the proposed legislation would dramatically alter the landscape of permissible business practices for companies conducting business in the state. Moreover, the U.S. Congress has repeatedly introduced legislation that would overturn the U.S. Supreme Court’s Leegin decision and declare minimum RPM agreements per se unlawful. See, e.g., Discount Pricing Consumer Protection Act of 2011, H.R. 3406, 112th Cong. (2d Sess. 2011). In 2011, 41 state attorneys general wrote to Congress in support of such legislation. The law did not pass but demonstrates the widespread skepticism attached to the procompetitive benefits of minimum RPM agreements. These sentiments were echoed by William Baer, the head of the Department of Justice Antitrust Division, during his confirmation hearing in July 2012. United States Senate Committee on the Judiciary: Hearings & Meetings (webcast of July 19, 2012 confirmation hearing).
Companies with RPM policies also risk violating international antitrust laws. In China, for example, there has been a recent increase in enforcement activity against RPM agreements and practices. See Moutai, Wuliangye Hit with CNY 449 Mn Antitrust Fine, CHINA SCOPE FINANCIAL, Feb. 19, 2013. Additionally, the European Union’s Regulation No. 330/2010—the Block Exemption Regulation—prohibits suppliers from fixing the minimum price at which distributors can resell their products. See Commission Regulation No. 330/2010 of 20 April 2010, 2010 O.J. (L 102) 1, 2. This “hardcore restriction” applies regardless of the market shares of the supplier and buyer.
It has been nearly six years since the U.S. Supreme Court’s Leegin decision, and dissent still percolates in many states and the international community. During that time, most of the action to override Leegin occurred at the state level. The Kansas example is interesting because, despite the state court’s attempt to ignore Leegin and deem all RPM agreements per se unlawful, the state legislature stepped in to prevent a departure from U.S. Supreme Court precedent and prior state-court decisions. Nonetheless, companies should take these divergent policies into account and are well-advised to consult antitrust counsel before implementing any resale policies or agreements with RPM language.