THE END OF THE LEEGIN SAGA AND THE BEGINNING OF DEVELOPMENT FOR THE RULE OF REASON IN RPM CASESResale Price Maintenance Agreement • April 18th, 2017
Resale Price Maintenance (“RPM”) is a type of vertical agreement made among economic entities on the different levels of distribution for the sale of products or services, by setting the minimum price below which the products or services cannot be sold. Generally speaking, vertical restraints of trade have been treated less severely than horizontal restraints of trade, such as price fixing among competitors, which always, or almost always, tend to restrict competition and reduce output without any rewarding virtues. However, the only exception to the lenient rule for the vertical restraints was RPM. RPM had been treated illegal per se, just like horizontal restrains since Dr. Miles in 1911, until the Leegin Court overruled the longstanding precedent in 2007. During that period, many arguments against the per se illegal treatment for RPM had emerged from mostly antitrust economists who regarded promotion of the interbrand competition of different brands as more important compared to int
LEEGIN’S UNEXPLORED “CHANGE IN CIRCUMSTANCE”: THE INTERNET AND RESALE PRICE MAINTENANCEResale Price Maintenance Agreement • April 9th, 2008
For almost a century, agreements between retailers and suppliers fixing a minimum resale price, also known as minimum resale price maintenance (RPM) or vertical minimum price fixing agreements,1 were considered per se violations of the Sherman Act.2 For example, Polo could not have entered into a contract with Macy’s requiring Macy’s to sell a particular shirt for at least sixty dollars. However, over time the Supreme Court slowly relaxed the restrictions on other types of vertical agreements, such as vertical maximum price fixing3 and nonprice restrictions.4 In addition, economists posited procom- petitive justifications for the use of RPM. It was unsurprising, there- fore, when the Court held in Leegin Creative Leather Products, Inc. v. PSKS, Inc.5 that RPM agreements should not be prohibited as per se unlawful, but rather should be subject to rule of reason analysis.6 Re- actions to the decision ranged substantially. Some predicted doom for low-priced retailers like Wal-Mart,7 while
