Corporate & Securities Law

Leegin, General Electric, and Agency

By David Fischer

Yesterday, the U.S. Court of Appeals for the Fourth Circuit issued an opinion in a RPM case.  According to the Court: 

In this Sherman Act suit, plaintiffs, who provide pest control services to individual customers, allege that defendants, who manufacture pesticides, illegally conspired with their distributors to set minimum resale prices of certain termiticide products. Specifically, plaintiffs claim that defendant manufacturers Bayer CropScience LP and Bayer Corp. (hereinafter collectively referred to as “Bayer”) and BASF Corp. each engaged in the practice known as “resale price maintenance” or “vertical price fixing” ? Bayer with its product Premise and BASF with its product Termidor. Defendants counter that United States v. General Electric Co., 272 U.S. 476 (1926), held that a manufacturer may lawfully set minimum prices for its products when there is a genuine principal-agent relationship between the manufacturer and its distributors, and that such relationships existed here. Plaintiffs rejoin that Leegin Creative Leather Products, Inc. v. PSKS, Inc. , 127 S. Ct. 2705 (2007), implicitly overruled General Electric, and in the alternative argue that the agency relationships between defendants and their distributors were a sham. Because Leegin did not eliminate the agency defense to a claim of resale price maintenance and the agency relationships between defendants and their distributors were genuine, we find no basis for antitrust liability and thus affirm the district court?s grant of summary judgment to defendants.

… Plaintiffs insist in their briefs and at oral argument that afterLeegin the agency defense under General Electric to a claim of resale price maintenance is no longer viable. This argument fails because the two cases dealt with two separate elements of antitrust liability: General Electric addressed what types of relationships constitute agreements to set prices for purposes of the Sherman Act, while Leegin concerned whether such agreements, once proven, should be considered per se unlawful.

You can read the whole opinion here.

Full post as published by Antitrust Review on March 26, 2009 (boomark / email).