Legal News

The Legacy of Leegin: Price-Fixing, the Comeback Kid of Antitrust Law

By Dan Slater

It’s been more than a year since Justice Kennedy, writing for a 5-4 majority in Leegin, upset a 96-year-old antitrust rule that assumed agreements between manufacturers and retailers to set minimum resale prices were per se illegal. In dispensing with the so-called “Dr. Miles rule,” Kennedy’s opinion urged a rule of reason standard — a case-by-case analysis of whether manufacturers are violating antitrust laws by demanding minimum resale prices. The dissenting justices in Leegin warned that the holding would drive up retail prices.

So what does a year of experience teach us about the legacy of Leegin? On today’s front-page, the WSJ’s Joseph Pereira checks in on the state of things, and finds that manufacturers are embracing their newfound pricing power — sometimes to the chagrin of retailers, who claim that the minimum-pricing dictated by manufacturers makes it hard to compete. (Note that it’s still illegal for a group of manufacturers or retailers — or both — to band together and fix prices.)

Jacob Weiss of BabyAge.com, which specializes in maternity and children’s gear, says nearly 100 of his 465 suppliers now dictate minimum prices, and nearly a dozen have cut off shipments to him. “If this continues, it’s going to put us out of the baby business,” he says. BabyAge is now suing about a half-dozen major baby-gear makers and retailers alleging price collusion.

State attorneys general sided with the dissenters in Leegin, warning that minimum pricing, also known as “resale price maintenance,” will feed inflation. In his dissent, Justice Breyer estimated that legalizing price-setting could add $300 billion to annual consumer costs. In May, attorneys general from 35 states wrote to Congress urging passage of a law to make policies like these illegal.

For shoppers, says Lino A. Graglia, a professor at the University of Texas Law School, the reality is that there’s little to be done about minimum-pricing policies. “It’s going to be so difficult to prove that these resale-price-maintenance agreements are anticompetitive,” he says.

Full post as published by Law Blog - WSJ.com on August 18, 2008 (boomark / email).