Resale Price Maintenance for Beginners: Beware of the Pitfalls

• Date: 01 June 2010
• DOI: 10.1177/0003603X1005500208
• Published date: 01 June 2010
• Author: Salvatore A. Romano
• Subject Matter: Article

Resale price maintenance for

beginners: Beware of the pitfalls

BY SALVATORE A. ROMANO*

The Supreme Court’s 2007 Leegin decision provided that minimum

resale price maintenance (RPM) agreements are to be evaluated under

the rule of reason. However, the Court’s rule of reason analytical

approach does not provide clear guidance for practitioners to advise

clients considering the adoption of such programs. The decision has

faced resistance from its inception, including proposed legislation in

Congress, which would reinstate the per se rule, and opposition from a

number of states, whose laws, case precedent, or interpretation could

support future application of the per se approach. This article points out

the obstacles confronting suppliers looking to adopt RPM programs. The

lower courts and enforcement agencies have thus far failed to devise

clear guidance for practitioners regarding the application of Leegin’s rule

of reason analysis to the implementation of RPM programs. The article

examines the obstacles and recommends alternatives to consider in

advising clients who are entertaining the adoption of RPM policies.

Resale price maintenance (RPM) programs involve agreements

between a supplier and its retailers that require the retailers to charge

resale prices determined by the supplier. Almost 100 years ago, in the

Dr. Miles case, such agreements were held to constitute a per se viola-

THE ANTITRUST BULLETIN:Vol. 55, No. 2/Summer 2010 :513

* Partner, Porter, Wright, Morris & Arthur LLP, Washington, DC. Mem-

ber of the New York and District of Columbia bars.

AUTHOR’S NOTE: I wish to thank my colleague, Helen Kim, Esq., for her assistance

in the research and preparation of this article.

© 2010 by Federal Legal Publications, Inc.

514 :THE ANTITRUST BULLETIN:Vol. 55, No. 2/Summer 2010

tion of the antitrust laws.1Except the period during which certain

resale price agreements were exempted under the antitrust laws and

authorized under state Fair Trade laws, suppliers have been permit-

ted to employ only suggested resale price programs.2The Supreme

Court’s five to four decision in Leegin Creative Leather Products, Inc. v.

PSKS, Inc.3sounded the judicial “death knell” of the per se approach

to minimum resale price fixing agreements. The Supreme Court had

previously discarded the per se rule with respect to maximum resale

price maintenance programs.4Although Leegin appears to have

opened the door to minimum resale price maintenance programs, the

rule of reason analytical approach adopted by the Court does not pro-

vide a clear, unobstructed path to the adoption of such programs by

suppliers.

The obstacles and impediments facing the adoption of a success-

ful minimum resale price maintenance program in the near future,

despite the Leegin decision, are rather daunting, and perhaps, in

many instances, even insurmountable. There have been negative reac-

tions by Congress and the states. In addition, the newly installed

leadership of the enforcement agencies have indicated continued

heightened scrutiny of RPM programs under the rule of reason.

I. THE LABYRINTHINE LEGACY OF LEEGIN

The Supreme Court majority’s analysis in Leegin of the theoretical

economic pluses and minuses of resale price maintenance make it dif-

ficult to analyze which pluses outweigh which minuses and vice

versa under the rule of reason. Thus, the Supreme Court’s Leegin deci-

sion does not provide guidance for the facile, wholesale initiation of

minimum resale price maintenance programs. Indeed, it may not

even create a palpable ripple effect in the waters of retail marketing in

1Dr. Miles Med. Co. v. John D. Park & Sons, 220 U.S. 373, 408–09 (1911).

2The Miller-Tydings Amendment to the Sherman Act and the McGuire

Act Amendment to the Federal Trade Commission Act were repealed in 1975.

15 U.S.C. § 1, 45(a) (1975).

3551 U.S. 877 (2007).

4State Oil Co. v. Khan, 522 U.S. 3 (1997).