Antitrust Alert: Recent Developments Highlight Need for Continuing Caution in Implementing Minimum Resale Price Maintenance Programs Post-Leegin
The recent enactment of a Maryland state antitrust law prohibiting minimum resale price maintenance (RPM) agreements and U.S. House of Representatives Judiciary Committee hearings on similar pending federal legislation are reminders that minimum RPM programs must be approached with caution. Notwithstanding the Supreme Court's 2007 decision in Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 S.Ct. 2705, which reversed the longstanding per se prohibition on such agreements, such agreements remain a potential enforcement target, even under the rule of reason. By joining a number of other states that have retained per se treatment for RPM agreements under state law, the recent Maryland action makes it more difficult for manufacturers to implement national RPM policies.
The new Maryland statute will be effective as of October 1, 2009. Maryland Commercial Law Section 11-204(a), which parallels Section 1 of the federal Sherman Act, provides that "[a] person may not ... [b]y contract, combination, or conspiracy with one or more other persons, unreasonably restraint trade or commerce." New section 11-204(b) now adds, "For purposes of subsection (a)(1) of this section, a contract, combination, or conspiracy that establishes a minimum price below such a retailer, wholesaler, or distributor may not sell a commodity or service is an unreasonable restraint of trade or commerce." Thus, the amendment effectively makes minimum RPM agreements between a supplier and its reseller customers per se illegal in lawsuits brought under Maryland state antitrust law.
At the federal level, the House of Representatives Judiciary Committee, which is considering proposed legislation to amend Section 1 of the Sherman Act to incorporate a per se standard, recently held hearings at which FTC Commissioner Pamela Jones Harbor counsel for E-Bay, and a representative of the American Antitrust Institute testified in favor of per se treatment for minimum RPM. The former Assistant Solicitor General who argued for the government in Leegin testified in opposition in the legislation. In addition, the American Bar Association Section of Antitrust Law submitted written comments opposing the legislation and urging retention of the current rule of reason standard.
This continuing debate about the appropriate legal standard for RPM shows no signs of ending soon. If additional states enact legislation adopting a per se standard, it will become increasingly difficult to implement national RPM programs. Careful attention to future developments in this area will be required.
For more information, please contact your principal Jones Day representative or the lawyer listed below.
Kathryn M. Fenton
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