Supreme Court Changes The Rules On Vertical Price Fixing

By Penelope M. Lister, Andrew Edison, Jacqueline R. Java, Kristin K. Berkland and J. Clifford Gunter III

The Supreme Court has issued what may be its most significant antitrust opinion of the summer: it relaxed the century old prohibition against vertical minimum resale price agreements, or agreements between manufacturers, distributors and retailers regarding prices. In Leegin Creative Leather Products, Inc. v. PSKS, Inc., the Court reversed a 1911 decision and explicitly held that vertical price agreements will no longer be considered per se illegal under the Sherman Act, but rather will be analyzed under the rule of reason. Unlike the per se rule, which condemns vertical price fixing without any consideration of business justifications, the rule of reason evaluates each individual agreement by balancing its pro-competitive benefits against its anti-competitive effects. Leegin significantly increases the ability of manufacturers to influence the resale prices at which their products are sold to consumers. Until yesterday, manufacturers who wished to impact resale prices of their products were generally advised to take extraordinary steps to ensure that their policies were...