The fall of the per se vertical price fixing rule

In mid-2007, the U.S. Supreme Court overturned a 1911 precedent prohibiting manufacturers from setting prices at the retail level. That earlier decision put resale price maintenance (vertical price fixing) into the category of 'per se' violations of the Sherman Act. Per se violations cannot be justified by findings of benefits to competition. The 2007 Leegin decision moved such cases into the other category under the Sherman Act: the rule of reason. Under this category, proof of a violation is often very difficult because of the type of evidence required. Such cases rarely succeed, with the effect that manufacturers can now set retail prices. In this case, Leegin, manufacturing apopular line of women's accessories, disputed the right of a Dallas area retailer Kay's Kottage to discount Leegin's products. Leegin was enforcing a minimum price policy on many, if not all, of its retailers. When Kay's Kottage refused to stop the discounting, Leegin cut off its supply, depriving the store of substantial sales. This article analyzes the opinions of the lower courts and the Supreme Court. Finally, it argues that the decision is mistaken because it breaks long standing precedent, ignores legislative intent, and leads to higher prices for certain types of products.
INTRODUCTION Recent years have seen the decline of the per se rule in the interpretation of Section 1 of the Sherman Act dealing with restraints of trade (1890). Now vertical [...]