Ever since the United States Supreme Court ruled in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007), that resale price maintenance (i.e., agreements to set minimum resale prices) (RPM) is not per se illegal under federal antitrust law, businesses have faced the uncertain question of whether RPM could still be deemed per se unlawful under state antitrust laws. In particular, the attorneys general of a number of states – most prominently New York and California – have taken the position that their state antitrust statutes continue to condemn RPM as per se illegal even after the Leegin decision. On June 22, 2011, the United States District Court for the Southern District of New York weighed in on this debate, holding that New York state antitrust law follows Leegin and does not make RPM per se unlawful. Moreover, the court held that, regardless of the per se question, a minimum advertised pricing policy does not amount to RPM.
In Worldhomecenter.com, Inc. v. Franke Consumer Products, Inc., plaintiff, an Internet seller of home products, sued defendant, a luxury brand sink manufacturer, for alleged violations of New York state antitrust law. Plaintiff’s theory was that it was terminated as an authorized reseller of defendant’s products for failing to follow defendant’s minimum advertised price policy, which plaintiff characterized as an RPM policy that is per se illegal under New York state antitrust law. Defendant moved to dismiss.
The court granted the motion and dismissed the case. The court noted that plaintiff was exclusively pursuing a claim based on the alleged per se illegality of defendant’s policy, and did not allege a claim in the alternative under the rule of reason. Thus, unless RPM was per se illegal under New York law, plaintiff’s case failed as a matter of law.
The court noted that New York courts have historically followed federal law in construing New York’s “Little Sherman Act” statute. The court further rejected plaintiff’s argument that New York law departed from federal law as to RPM because of N.Y. Gen. Bus. Law § 369-a, which provides that “any contract provision that purports to restrain a vendee of a commodity from reselling such commodity at less than the price stipulated by the vendor or producer shall not be enforceable or actionable at law.” The court reasoned that “under the plain language of the statute, contracts between supplier and seller to set prices are unenforceable, but not illegal. ... If the New York legislature had intended to make such contracts illegal, it plainly could have done so” (emphasis in the original). In support of its interpretation, the court cited to the recent New York state court decision in New York v. Tempur-Pedic Int’l Inc., 2011 WL 198019 (Sup. Ct. N.Y. Cty. Jan. 14, 2011).
In the alternative, the court held that, even if RPM were per se unlawful, defendant’s minimum advertised pricing policy does not constitute RPM. The court reasoned that the policy only restricted advertised prices, not actual resale prices. The court noted in particular that a “Q&A” that accompanied the policy pointed out multiple, specific ways that Internet sellers like plaintiff could communicate and offer lower resale prices directly to consumers.
While the Southern District of New York’s opinion in Worldhomecenter does not settle the open question of the legality of RPM under New York law, it does offer manufacturers some reassurance that courts may try to harmonize federal and state law and avoid a patchwork of conflicting regulations in different states. Moreover, the court also clearly endorsed the use of minimum advertised pricing policies with Internet resellers as an alternative to RPM that should be lawful regardless of the treatment afforded RPM.