Overruling Dr. Miles: The Supreme Trade Commission in Action

Published date01 September 2007
DOI10.1177/0003603X0705200307
AuthorRichard M. Brunell
Date01 September 2007
Subject MatterA Continuing Symposium on Antitrust and the Roberts Court
THE
ANTITRUST
BULLETIN:
Vol.
52, Nos. 3&4/FIlI/-Winter 2007
475
OverrUling
Dr. Miles:
The Supreme
Trade
Commission
in action
BY
RICHARD
M.
BRUNELL
*
INTRODUCTION
In
Leegin
Creative
Leather
Products,
Inc.
v. PSKS, Inc., a
sharply
divided
Supreme
Court
abolished
the
per se
rule
against
resale
price
maintenance
(RPM),
overruling
the
venerable
case
of Dr. Miles
Medical
Co.
v.
John
D. Park&Sons Co.'
Leegin
is
important
not
merely
for its impact on resale price maintenance,
but
also for
what
it
says
about
the
Supreme
Court's
role in
making
national
antitrust
policy
and
whether
traditional
jurisprudential
limitations
on
the
Court's
power, such as
stare
decisis
and
the
intent
of Congress, matter.
It
is a
commonplace
that
the
federal
courts
have
significant
discretion
in
applying
the
Sherman
Act's
vague
mandate
prohibiting
"[e]very
Director of Legal Advocacy
and
Senior Fellow,
American
Antitrust
Institute, Washington, D.C.
AUTHOR'S NOTE: The American Antitrust Institute filed an amicus
curiae
briefwhich
I
drafted,
urging theCourt in Leegin notto ouerrule Dr. Miles. I am graieju! to Bert
Foer,
Harrv
First,
Steve Calkins,
Wllrren
Grimes,
and Rudy Peritz for their helpful
commentson
1111
earlier
draft.
127 S. Ct. 2705 (2007).
220
u.s.
373 (1911).
©
2007/>.'1
Federal
LegalPublicntions, Inc.
476 THE
ANTITRUST
BULLETIN:
Vol.
52, Nos. 3 & 4/Fall-Willter 2007
contract, combination
...
, or conspiracy, in restraint of
trade
....
"3
Indeed, the Act
has
famously
been
likened to
"a
charter of freedom
[with] agenerality
and
adaptability
comparable
to
that
found
to be
desirable
in
constitutional
provisions."~
However,
the
courts'
policymaking
discretion
has
frequently
been
tempered
by
jurisprudential
concerns
associated
with
the
fact
that,
at
bottom,
courts
applying
the
Sherman
Act
are
engaged
in
statutory
construction. In
Leegin,
the battle
between
policy
and
jurisprudential
concerns
was
joined,
and
policy
triumphed.
Iwill
argue
in
part
III
that
abandoning
the
perserule is
bad
policy
and
that
the
Court's
policy
analysis
was
woefully
inadequate
primarily
because the
Court
failed to
consider
all the relevant costs
and
benefits of moving from the per se rule to the rule of reason. But
even
those
who
oppose the per se rule on policy
grounds
ought
to be
troubled by the
Court's
jurisprudential
analysis, which I
argue
in
part
II
marks
a
new
height
in
antitrust
judicial activism. A
growing
chorus
of scholars of various ideological stripes
has
criticized the extent to
which
the
Court
ads
as a free
agent
in
interpreting
the
Sherman
Act.'
Leegin
promises
to
provide
new
fodder
for their critique. I
begin
in
15 us.c.§1 (2006).
Appalachian
Coals, Inc. v. United States, 288 U.S. 344, 359-60 (1933).
Professor
Arthur
is the leading critic of the conception of the
Sherman
Act as a
standardless
delegation of
authority
to the
Court
to
make
national
competition
policy. See
Thomas
C.
Arthur,
Farewell to the Sea of Doubt:
Jettisoning the Constitutional Sherman Act, 74 CAL. L.
REV.
263, 270 (1986)
(contending
that
Congress
did
not
authorize
the federal judiciary to
make
the
basic
policy
choices in
antitrust).
More
recent
critiques
include: Daniel A.
Farber
&Brett H. McDonnell, "Is
There
a Text in This Class?" The Conflict
Between Texiualism and Antitrust, 14
J.
CONTEMP.
LEGAL
ISSUES
619 (2005)
(arguing
that
the
reigning
approach
to
interpreting
the
antitrust
laws
as a
delegation of
lawmaking
power
to the
courts
is indefensible from textualist
and
historical perspectives);
Andrew
S.
Oldham,
Sherman's
March
(Iiuto
the
Sea, 74 TENN. L.
REV.
319, 324 (2007)
(arguing
that
"the
common
law
monstrosity
that
federal
courts
have
created
atop
the
Sherman
Act's
unadorned
text is
unconstitutional"
under
separation
of
powers
doctrine);
David
F.
Shores, Antitrust
Decisions
and
Legislative
Intent, 66 Mo. L.
REV.
725
(2001)
(questioning
the
legitimacy
of
the
shift
away
from
reliance
on
legislative history or
other
sources of congressional intent in
antitrust
cases).
OVERRULING
DR.
MILES
477
part
I
with
some
background
on
the
per se rule against resale price
maintenance
and
the
Court's
decision.
I. BACKGROUND
A.
Short history of the
per
se rule against
resale
pricemaintenance
The per se rule against resale price maintenance originated in
1911
with
Dr.
Miles,
which
held
that an agreement between amanufacturer
and
its
distributors
to
set
the
minimum
price the
distributors
must
charge for the manufacturer's goods was invalid." Eight years later, the
Court
established
what
is
now
known
as the
"Colgate
doctrine," namely
that amanufacturer could refuse to deal with distributors that
did
not
adhere
to suggested retail prices.' Congress enacted the Miller-Tydings
Act in 1937, amending section 1 of the Sherman Act to allow resale price
maintenance agreements that were lawful
under
state fair trade laws,"
and
in 1952 passed the McGuire Act, expressly extending this exception
to
allow
manufacturers
to
enforce
minimum
resale
prices
against
retailers
that
had
not
signed any resale price maintenance agreement,
where
permitted
by state law." The Warren Court sharply limited the
Colgate
doctrine in
Parke,
Dains," limited the consignment exception to
Dr.
Miles in
Simpson."
and
extended the per se rule to nonprice vertical
restraints in Schunnn,"
and
to
maximum
resale price maintenance in
Albrecht:" In 1975,
Congress
enacted
the
Consumer
Goods
Pricing
Dr. Miles, 220us. at 409.
United States v.Colgate &Co., 250
Ll.S,
300 (1919).
50 Stat. 693 (1937). The Miller-Tydings Act is the
only
substantive
amendment
to section 1 of the
Sherman
Act in its entire history.
66 Stat. 631 (1952). The McGuire Act was passed in response to the
Court's
narrow
reading
of the Miller-Tydings Act in
Schwegmann
Bros. v.
Calvert
Distillers Corp., 341 us. 384 (1951).
'"
I
~
13
United States v. Parke, Davis &Co., 362 U.s. 29 (1960).
Simpson
v. Union Oil Co., 377 u.s 13 (1964).
United States v.Arnold, Schwinn &Co., 388 U.S. 365 (1967).
Albrecht v. Herald Co., 390
u.s.
145 (1968).

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