Continued lack of clarity on the legality of resale price maintenance
06 June 2012Antitrust, Competition and Economic Regulation Alert
Recent cases in Kansas and New York have illustrated the continued uncertainty of state law concerning resale price maintenance (RPM) in vertical agreements. This patchwork of laws presents companies with national resale networks continued risks if they choose to use these types of agreements even though the U.S. Supreme Court found them not per se unlawful under federal antitrust law in 2007 in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007). On 4 May 2012, the Kansas Supreme Court in O’Brien v. Leegin Creative Leather Products, Inc., No. 101,000, 2012 WL 1563976 (Kan. 4 May 2012), held that RPM agreements are per se unlawful under state law notwithstanding the treatment of such agreements under federal law. Days later on 8 May 2012, the Appellate Division of the New York Supreme Court, First Department, in People v. Tempur-Pedic International, Inc., 2012 WL 1583575 (N.Y. App. Div. 8 May 2012), upheld a lower court’s decision rejecting the New York Attorney General’s claim that RPM agreements were unlawful under New York law. The companies in these cases faced very different results because of the state laws governing these agreements. These recent decisions, in conjunction with prior actions in other states like the enactment of strong statutes in Maryland and California that explicitly make RPM terms unlawful,1 emphasize the need for companies to perform careful state-by-state analyses of statutes and case law before using RPM language. Companies should also be aware that certain language may pose more of a risk than other language. Hewing closely to the guidance contained in the U.S. Supreme Court’s decision in Colgate, which stands for the proposition that unilateral business decisions concerning pricing policies are not unlawful, is a good approach for companies who still wish to retain some influence over resale pricing in the murky waters of today’s RPM state jurisprudence. Nevertheless, any resale policies or agreements with RPM language should be reviewed by antitrust counsel before use.
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