Guiding the Lower Courts in the Aftermath of Leegin Creative Leather Products, Inc. v. PSKS, Inc.

AuthorAngela M. Opalenik
PositionJ.D. 2009
In the s ummer of 2007, the Suprem e Court overruled a ninety-six year
old precedent when it overruled the h istorical decision of Dr. Miles1 in
Leegin Creative Leather Products, Inc. v. PSKS, Inc.2 Relying on
economists’ views, the majority took a drastic measure and held that t he
per se illegality standard should no longer be implemented with respect to
minimum resale pri ce maintenanc e, but that the rule of reason should be
Part II examines the cases and leg islation that have form ed the
jurisprudence of an titrust law. Beginning in 1 911, Dr. Miles established
the per se illegality standard4 and Stand ard Oil Co. establish ed the rule of
reason.5 These rul es have been the b asis of antitru st law and Part II
analyzes how thes e rules have progres sed throughou t time.
Part I II examines Leegin itself and anal yzes t he majority and
dissenting opinion. It examines the facts o f the case and the case’s
progression throughout the trial and appellate stages. In Part IV both the
majority and the d issenting opinions are analyzed. The majority’s opinion
consists of three arguments. First, it critiques Dr. Miles and explains why
Copyright © 2009, Angela M. Opalenik.
* J.D. 2009. The author wo uld like to thank Prof essor Regina Burch. With out her
wisdom and guidance, this p aper would not be possible.
1 Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911).
2 127 S. Ct. 2705 (2007).
3 Id.; see also BLACKS LAW DICTIONARY 1332 (8th ed. 200 4) (R esale price
maintenance is def ined as a “form of pric e-fixing in which a manufactur er forces or
persuades several d ifferent retailer s to sell the manufacturer’s product at th e same price,
thus preventing competition. Resale price maintenance [was] per se illeg al under antitrus t
law. But a manufactur er [was] permitted to suggest a retai l price as long as i t [did] not
compel retailers at that pric e.”).
4 Dr. Miles, 220 U.S. at 408 .
5 Standard Oil Co. of N.J. v. Un ited States, 221 U.S. 1, 61–62 (1911).
it is no longer pract ical to fo llow.6 Second , the majori ty’s opi nion consists
of an econ omic analys is of res ale price m aintenance an d discusses the pro -
competitive and an ti-competitive arguments for the use of them.7 Third,
the majo rity d iscusses why stare decisis is not a valid argument for
adhering to Dr. Miles.8 The dissent ing opinion led b y Justice Breyer
argues in support of the per s e rule and explains why the principle of stare
decisis should be adhered to in this case.9 Part I V also consists of an
analysis of the streng ths and w eaknesses of both th e majority an d
dissenting opinions.
In Part V , the sign ificance of the case is analyzed . Because the
majority did not set forth a guide for the lower courts to follo w, thi s wil l
adversely affect the co urt sy stem because i nconsistent decisions are likely
to result. Thu s, workable p rinciples must be introduced to help gui de these
lower courts. Professors Areeda and Hovenkamp have recommended a
structured rule of reason approach fo r resale price maintenance.10 When
the approach is applied to the facts of Leegin, the analysis demonstrates
that the approach creates more certainty and is better than the bright-line
per se illegality rule. 11
Part V also examines the impact on public policy issues, such as how
the average consumer will suffer in the short-term. Th is is becau se l arge
low-price retailers will most likely have to raise pr ices because whole
sectors of the economy (such as large low-price retailers) have com e to
rely on the per se ru le.12
Although there are many reasons not to allow resale price maintenance
agreements, there a re many pro-competitive ben efits t hat result from them
as well.13 When it overruled Dr. Miles , the Supreme Court to ok an
innovative approach t o help further o ur economy. The majority was
6 Leegin, 127 S. Ct. at 2713 –14.
7 Id. at 2714–20.
8 Id. at 2720–25.
9 Id. at 2725–37.
(2d ed. 2004).
11 Id. ¶ 1633e, at 337–39.
12 See Leegin, 127 S. Ct. at 2735.
13 Id. at 2715–16.
correct in rul ing that t he Dr. Miles rule is i nconsistent with a principled
Antitrust l aw developed from a series of cases which began as earl y in
1911 when Dr. Miles was decided. 14 These cases established the two
dominant rules of la w for anti trust viol ations: per se illegality and the rule
of reason approach. Practices are per se illegal when they are “so plain ly
anticompetitive and so often lack . . . any rede eming virtue th at they are
conclusively presumed illegal without further examinat ion.”15
“The . . . rule o f reason req uires an antitrust p laintiff to s how that th e
challenged conduct has t he effect, or at least the po tential, of
‘unreasonably’ restricting competition, that is, of being net anticompet itive
after all poss ible p ro-competitive effects are taken into account.”16 These
series of cases hav e shaped the juri sprudence of ant itrust law.
A. Per Se Jurisp rudence
1. Dr. Miles Medi cal Co. v. John D. Park & Sons Co.
In Dr. Miles Medical Co. v. John D. Park & Sons Co. the Court
established the rule t hat it is per s e illegal under section 1 of the Sherman
Act17 for a manufacturer to agree with its distributor to set the minimum
price the distributor can charge for the manufacturer’s goods.18 In Dr.
Miles, a man ufacturer of proprietary medicines so ught to enforce an
agreement whi ch set forth minimu m prices fo r all of the sales of it s
products, bo th at wholesale an d retail.19 The Cou rt relied on t he common-
law rule th at a “gener al restraint u pon alienation is ordinari ly invalid.”20
The Court con cluded that pri ce fixing agre ements are injuri ous to the
14 Id.
15 Broad. Mu sic, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 7–8 (1979) (internal
quotations omitted).
16 Lino A. Graglia, L eegin Creative Leather Products, Inc. v. PSKS Inc.: The Stran ge
Career of the Law of Resale Price Maintenanc e 1, 23 (Nov. 2007) (unpublished Law and
Econ. Research Paper No. 1 15) (available at 8562).
17 Monopolies and Combinations in R estraint of Trade, 15 U.S.C. §§ 1–38 (20 06).
18 220 U.S. 373, 408 (1911).
19 Id. at 394.
20 Id. at 404.

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