For 96 years it had been per se illegal for manufacturers to enter into minimum resale price maintenance (MRPM) agreements with retailers.1 Three years ago, in a contentious 5-4 decision, the Supreme Court in Leegin Creative Leather Products Inc. v. PSKS Inc.2 decided that MRPM should no longer be treated as per se illegal, but should instead be evaluated under its “rule of reason” Sherman Act precedents.
The Court attributed its abandonment of MRPM per se illegality to two principal reasons: first, a number of other manufacturer-imposed vertical restraints with downstream price effects had been converted from per se to rule of reason violations of the Sherman Act; and second, the Court accepted the opinions of a number of respected economists that MRPM agreements can have pro-competitive justifications. Specifically, the Court noted that MRPM contracts can facilitate market entry for new brands and can encourage beneficial retailer services that would otherwise not be provided if the retailer did not have a guaranteed profit margin. Thus, the bare majority holding instructed (unfortunately, with no guidance) the lower courts to devise rules or presumptions in order to “make the rule of reason a fair and efficient way to prohibit anticompetitive restraints and to promote procompetitive ones.”3
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