The Core of Antitrust and the Slow Death of Dr. Miles

Abstract

In 1911 the Supreme Court held in Dr. Miles that all forms of resale price maintenance (RPM), whether connected to a cartel or not, violated section 1 of the Sherman Act. In 2007, the Court overruled Dr. Miles in Leegin. This decision has been sharply criticized both as a departure from basic antitrust principles and for overruling a precedent that has been widely relied upon for nearly a century. These criticisms are misplaced. The Dr. Miles per se rule was not based on core antitrust principles, and the Court has permitted it to be evaded over most of its history.

In the last generation, the Supreme Court has been returning antitrust law to its statutory core: the problem of monopoly artificially created by cartels, large mergers and predation. In the process, it has produced a body of doctrine that is far more internally coherent and faithful to the original antitrust statues. Unless used to facilitate a cartel, RPM and other forms of intrabrand distributional restraints are not part of the core of antitrust. By the time of Leegin, Dr. Miles’ per se rule was so inconsistent with the rest of section 1 doctrine and so eroded in its scope that, far from being an example of unprincipled judicial activism, the Court’s decision was a textbook example of the law working itself clear.

Keywords: antitrust, Leegin, Dr. Miles, RPM, resale price maintenance, restricted distribution, intrabrand restraints, stare decisis, precedent, Sherman Act

JEL Classification: K21, L14, L15, L42, L81, N41, N42