Court Permits Price Agreements
Updated: The U.S. Supreme Court has overruled a nearly 100-year-old precedent barring retail price fixing.
The court in a 5-4 decision said agreements on minimum prices are legal if they promote competition, according to Associated Press.
The majority opinion by Justice Anthony M. Kennedy said challenges to vertical price restraints should be judged by a rule-of-reason analysis, SCOTUSblog reports. The decision overruled Dr. Miles Medical Co. v. John. D. Park & Sons, 220 U.S. 373 (1911), which had deemed retail price fixing to be per se illegal.
Kennedy wrote that minimum price agreements can promote competition, Bloomberg News reports.
“Minimum resale price maintenance can stimulate interbrand competition,” he wrote. The practice “has the potential to give consumers more options so that they can choose among low-price, low-service brands; high- price, high-service brands; and brands that fall in between.”
The New York Times writes that the decision represents a trend in many respects. “The decision was the latest in a string of opinions this term to overturn Supreme Court precedents,” the Times says. “It marked the latest in a line of Supreme Court victories for big businesses and antitrust defendants. And it was the latest of the court’s antitrust decisions in recent years to reject rules that had prohibited various marketing agreements between companies.”
The decision is a loss for a Texas store known as Kat’s Kloset, which had discounted Brighton handbags. The maker of the leather products cut off shipments in retaliation, prompting the retailer to sue for price fixing under the Dr. Miles standard.
Leegin Creative Leather Products had urged the court to overrule Dr. Miles, maintaining that the rule against price fixing is antiquated, according to the ABA Journal’s March 2007 article, “Paging Dr. Miles: Antitrust Law Examined.”
The ruling is Leegin Creative Leather Products v. PSKS, No. 06-480 (PDF posted by SCOTUSblog).
