Call for Papers
Special Issue of the Antitrust Bulletin
Resale price maintenance (RPM), otherwise known as vertical price fixing refers to agreements or other practices between marketers at different levels in a distribution network establishing the resale price of products or services. RPM can take the form of either setting a price floor below which sales cannot occur as in the case of minimum resale price maintenance, or a price ceiling as in maximum resale price maintenance.
Supreme Court’s Decision in Leegin
Minimum RPM had been per se unlawful since 1911 under the Supreme Court’s decision in Dr. Miles Medical Co. v. John D. Park & Sons Co. The Court’s 2007 decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc. reverses that decision, ruling that RPM is no longer per se illegal, but must be evaluated applying a “rule of reason” analysis. Under this rule, the fact finder weighs all of the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition. In its design and function the rule of reason is intended to distinguish between restraints with anticompetitive effect that are harmful to consumers and restraints that stimulate competition and are in the consumer’s best interest.
Changes in Economic Understanding of RPM and its Competitive Effects. An important consideration in the Court’s decision to reject Dr. Miles was the evolving changes in our understanding of the nature and competitive effects of RPM. Since Dr. Miles, drawing on theoretical insights mainly developed in economics, a number of procompetitive (as well as anticompetitive) explanations for vertical distribution arrangements that restrain competition including RPM have been advanced in the literature. Observing that the “economics literature is replete with procompetitive justifications for a manufacturer’s use of resale price maintenance” and “even those more skeptical of resale price maintenance acknowledge it can have procompetitive effects,” the majority found that “nothwithstanding the risks of unlawful conduct, it cannot be stated with any degree of confidence that resale price maintenance ‘always or almost always tend[s] to restrict competition and decrease output.” Finding that “vertical agreements establishing minimum resale prices can have either procompetitive or anticompetitive effects, depending upon the circumstances in which they are formed,” and considering other reasons the Court ruled that “vertical price restraints are to be judged according to the rule of reason.”
Limited Recent Research. Although persuaded by the existence of theory explaining the procompetitive benefits of RPM, the Court also recognized that there were “few recent studies documenting the competitive effects of resale price maintenance” and that “empirical evidence on the topic is limited.” This absence was also recognized by the Minority Court where Justice Breyer observed that “The upshot is, as many economists suggest, sometimes resale price maintenance can prove harmful; sometimes it can bring benefits” “but before concluding that courts should consequently apply a rule of reason, I would ask such questions as, how often are the harms or benefits likely to occur? How easy is it to separate the beneficial sheep from the antitrust goats?” To these questions Justice Breyer concluded: “I can find no economic consensus.”
Future Antitrust Analysis of RPM. To help guide future courts in their application of a rule of reason analysis to RPM cases, the Court counseled that, “appropriate factors to take into account include ‘specific information about the relevant business’ and ‘the restraint’s history, nature and effect” and “whether the businesses involved have market power” According to the Court “as courts gain experience considering the effects through applying the rule of reason …, they can establish the litigation structure to ensure the rule operates to eliminate anticompetitive restraints from the market and to provide more guidance to businesses.” Since Leegin, the challenge of establishing a framework for future application in litigation has been observed by others as well. As stated by one commentator, “the challenge now becomes figuring out how to balance asserted pro-competitive justifications and potential anticompetitive effects”
Special Issue of the Antitrust Bulletin
This current state of affairs provides the impetus for the Antitrust Bulletin special issue: Antitrust Analysis of Resale Price Maintenance after Leegin. . The objective of the special issue is to inform antitrust analysis of RPM after Leegin through assembling the most recent thinking and research on RPM and its competitive effects in the marketplace. Topics of interest for the Special Issue include, but are not limited to:
§ Analysis and interpretation of the Supreme Court’s decision in Leegin
§ Examination of the importance of intrabrand competition its interplay with interbrand competition
§ Critical reviews of existing and new theory explaining the nature and effects of RPM
§ Analysis of the nature, extent and competitive impact of free-riding
§ Original research on the nature, antecedents and effects of RPM
§ Case studies, surveys and analyses of applications of RPM in practice
§ Frameworks for the antitrust analysis of RPM arrangements following Leegin
Submitted manuscripts must be prepared in accordance with the requirements of the Antitrust Bulletin and electronically received by the Guest Editor (Greg Gundlach Ggundlac@unf.edu) no later than May 1, 2009.
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