Resale Price Maintenance After Leegin: The Continuing Economic Debate

Since 2006 the U.S. Supreme Court has decided more than a half-dozen antitrust cases. Most of these decisions have been unanimous, or nearly unanimous, except for Leegin Creative Leather Products v. PSKS (2007). As the 5 – 4 split vote of the members of the Court seemed to predict, Leegin has turned out to be the most controversial of the recent antitrust decisions, and it could have the greatest impact on business behavior and social welfare. The decision overruled the 1911 Dr. Miles precedent that minimum resale price maintenance (RPM) is per se illegal and replaced it with a rule of reason evaluation of RPM on a case-by-case basis. The paper proposed here will use a public choice approach to describe and analyze the reactions of various groups to the Leegin decision. For example, in the aftermath of the Leegin decision, (1) attorneys general of several States have said that despite the Supreme Court decision, minimum RPM continues to violate their State antitrust statutes and they will enforce these prohibitions of RPM; (2) some members of the U.S. Congress have introduced legislation that would overrule Leegin by amending the Sherman Antitrust Act so as to outlaw minimum RPM; (3) the Obama administration has appointed people to run the federal antitrust agencies who favor per se illegal treatment of minimum RPM; and (4) some antitrust experts have argued that the Leegin decision may be interpreted in a way that calls for a truncated quick look review in minimum RPM cases, which would place the primary burden of proof on defendants. An attempt will be made to relate the public choice analysis of the paper to the various economic arguments “for” and “against” overruling Dr. Miles that were made by various economists prior to the Leegin decision. It is hoped that the analysis in the paper will provide some predictions about where all of this will lead with regard to the legal treatment of vertical price-fixing in the future and whether it will be consistent with the promotion of economic efficiency and consumer welfare.