Corporate & Securities Law

SCOTUS Denies Cert in Leegin II

From the WSJ:

The U.S. Supreme Court on Tuesday refused to take another look at its controversial 2007 antitrust ruling that allowed manufacturers to set retail prices for their products.  The court, without comment, rejected an appeal by the Texas boutique retailer that was on the losing end of the court’s 5-4 decision nearly four years ago, which was condemned by consumer advocates.

The ideologically divided ruling overturned nearly 100 years of legal precedent and held that manufacturers did not automatically violate federal antitrust law by imposing pricing restraints on retailers. Such restraints can bar stores from selling a manufacturer’s products at a discount.  The high court said in its 2007 ruling that pricing agreements should be judged individually to determine whether there are valid pro-competitive reasons for imposing the price restrictions.

The decision reverberated quickly as manufacturers in sectors like baby goods, consumer electronics, home furnishings and pet food blocked discounters.  Texas retailer Kay’s Kloset, which challenged the pricing policies of Brighton Inc., a maker of handbags and other accessories, said a lower court had taken the Supreme Court’s ruling too far, effectively rendering all vertical price-fixing policies legal.

The retailer enlisted the help of a noted Harvard law professor for its second effort at the Supreme Court.

Lawyers for Brighton said the lower courts faithfully applied the Supreme Court’s ruling. The company said its pricing agreements were pro-competitive because higher prices for Brighton goods encouraged retailers to invest more in marketing, displays and customer service.

This is consistent with our earlier analysis here, in which we observed that “I do not think that such a ruling threatens the ability of plaintiffs, in the appropriate case with appropriate evidence, to bring a rule of reason RPM case.  Further, there does not appear to be much for the Supreme Court to do here.”

Full post as published by Truth on the Market on February 22, 2011 (boomark / email).