Leegin Creative Leather Products, Inc. v. PSKS, Inc.: The Strange Career of the Law of Resale Price Maintenance
Lino A. Graglia
University of Texas at Austin School of Law
U of Texas Law, Law and Econ Research Paper No. 115
The article tells the long, fascinating and sometimes hardly credible story of the law of resale price maintenance (RPM). The 1911 Dr. Miles decision, overruled by Leegin, was one of the oldest and most important in the history of antitrust in that it extended the coverage of the Sherman Act from competitor ("horizontal") to buyer-seller ("vertical") agreements, holding manufacturer-dealer RPM agreements illegal per se. Eight years later the Court in effect overruled Dr. Miles in the Colgate case (at the urging of defendant's counsel, former Justice Charles Evan Hughes, the author of Dr. Miles) by making a non-existent distinction between express and tacit agreements. It then effectively overruled Colgate in turn by ignoring the supposed distinction. In 1937 Congress negated Dr. Miles by authorizing the states to pass "fair trade" legislation permitting RPM, but in 1975 repealed the authorization, restoring Dr. Miles to full health. Two years later, Dr. Miles was again effectively overruled by the Court's adoption in the seminal Sylvania decision of the Chicago school of economics' skeptical view of antitrust and per se rules. It was further undermined, if possible, by the Court's revival of the Colgate doctrine and by making the necessary agreement hard to prove. The seemingly shocking Leegin decision, therefore, in fact merely made the overruling explicit. Justice Breyer, joined by Justices Stevens, Souter, and Ginsberg, vigorously dissented, apparently relying more on stare decisis than on the merits of Dr. Miles, a reliance much weakened by the Court's prior overruling of two cases on closely related issues. The paper also briefly discusses the very limited present day relevance and usefulness of the traditional per se/rule of reason distinction, and debunks the Court's conventional assertion that it adopts a per se rule only after long experience with the restraint.
The history of the law of RPM illustrates, at its end and at its beginning that ideology can have more to do than economics or logic with the making of antitrust law, paralleling its role in constitutional law. Leegin also makes clear that the newly reconstituted Court remains committed to the Chicago school view of antitrust and has a flexible approach to stare decisis.
Number of Pages in PDF File: 54
Keywords: resale price, antitrust, fair trade, states
JEL Classification: D4, E3working papers series
Date posted: November 9, 2007
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