Assorted Anti-Leegin Canards: Why Resistance Is Misguided and Futile
65 Pages Posted: 7 May 2016
Date Written: September 1, 2013
In Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007), the Supreme Court reversed Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911), which had banned minimum resale price maintenance (“minimum RPM”) as unlawful per se. This article critiques the various arguments that Leegin’s detractors have made for reinstating Dr. Miles and/or treating minimum rpm as “inherently suspect” and thus subject to “truncated” or “quick look” analysis under Section 1. Leegin, it is shown, was a straight-forward exercise of the Court’s long-recognized authority, implied by the Sherman Act’s rule of reason, to adjust antitrust doctrine in light of new economic learning. In particular, Leegin invoked the teachings of transaction cost economics (“TCE”), which holds that many non-standard agreements, including minimum RPM, are voluntary mechanisms that reduce the transaction costs that manufacturers incur when they rely upon independent dealers to distribute their goods. By overruling Dr. Miles, the Court adhered to the rule of reason’s requirement, articulated in Standard Oil Co. v. United States, 221 U.S. 1 (1911), that courts adjust antitrust doctrine when “more accurate economic conceptions” undermine previous decisions.
Nonetheless, some chose to resist Leegin to the utmost. Scholars, enforcement officials, and forty-one state attorneys general sought to convince Congress and/or state legislatures to reinstate the per se rule by statute, for instance, and many have contended that minimum RPM is unlawful per se under existing state antitrust laws. Many have also argued that, pending Leegin’s reversal, courts should subject minimum RPM to a “quick look” rule of reason, whereby the practice is presumed unlawful, immediately casting upon the defendant a burden of justification. Legislation that would have reversed Leegin and codified Dr. Miles was proposed in Congress in 2011.
This article refutes the various arguments that Leegin’s detractors have made for reinstating Dr. Miles and/or “quick look” treatment of minimum rpm. TCE undermined the central premise of the per se rule, namely, that minimum RPM is economically indistinguishable from a naked horizontal cartel between dealers. This realization casts upon those who resist Leegin a burden of articulating and supporting an alternative rationale for per se condemnation. Leegin’s detractors have not met this burden. Instead, their various arguments contradict TCE, basic antitrust principles, or both. Taken to their logical conclusion, these arguments would require the Court to abandon decades of jurisprudence based upon TCE and/or the long-standing test for per se illegality. However, Leegin’s detractors have offered no argument in favor of such radical changes. Thus, far from correcting Leegin’s purported antitrust error, reimposition of the ban on minimum RPM would constitute a rejection of the “more accurate economic conceptions” that should drive antitrust doctrine and thus be akin to a welfare-reducing special interest exemption from the Sherman Act.
Keywords: Dr. Miles, Leegin, Minimum Resale Price Maintenance, Transaction Cost Economics, Oliver Williamson
JEL Classification: D21, D23, K21, L14, L22, L42
Suggested Citation: Suggested Citation