Leegin Creative Leather Products, Inc. v. PSKS, Inc.

Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007), is a US antitrust case in which the United States Supreme Court overruled Dr. Miles Medical Co. v. John D. Park & Sons Co.[1] Dr Miles had ruled that vertical price restraints were illegal per se under Section 1 of the Sherman Antitrust Act. Leegin established that the legality of such restraints are to be judged based on the rule of reason.

Leegin Creative Leather Products, Inc. v. PSKS, Inc.
Argued March 26, 2007
Decided June 28, 2007
Full case nameLeegin Creative Leather Products, Inc. v. PSKS, Inc.
Docket no.06-480
Citations551 U.S. 877 (more)
127 S. Ct. 2705; 168 L. Ed. 2d 623
Case history
PriorCertiorari to the United States Court of Appeals for the Fifth Circuit
Holding
Vertical price restraints are to be judged by the rule of reason, rather than being treated as illegal per se.
Court membership
Chief Justice
John Roberts
Associate Justices
John P. Stevens · Antonin Scalia
Anthony Kennedy · David Souter
Clarence Thomas · Ruth Bader Ginsburg
Stephen Breyer · Samuel Alito
Case opinions
MajorityKennedy, joined by Roberts, Scalia, Thomas, Alito
DissentBreyer, joined by Stevens, Souter, Ginsburg
Laws applied
Sherman Antitrust Act
This case overturned a previous ruling or rulings
Dr. Miles Medical Co. v. John D. Park & Sons Co. (1911)

Facts

Leegin, a manufacturer of leather apparel, concluded that its interests would be best served by opting out of a price war "race to the bottom," focusing instead on quality and brand cachet. Accordingly, with specific exceptions, it decided to refuse sale to retailers if they intended to discount its products below their recommended retail price. Five years after this policy was introduced, Leegin discovered that Kay's Kloset was violating the policy by marking down the Leegin products by 20%. When Kay's refused to comply with Leegin's policy, Leegin cut them off. PSKS, the parent company of Kay's, sued charging that Leegin had violated antitrust laws when it entered into "agreements with retailers to charge only those prices fixed by Leegin." After the district court refused to hear testimony describing the procompetitive effects of Leegin's pricing policy, Leegin appealed seeking to have Dr. Miles overruled.

Judgment

Dr. Miles had become obsolete almost as soon as it was decided; the court started moving away from rigid per se rules in antitrust, both generally, see Standard Oil v. United States (decided only a month after Dr. Miles), and in the particular area of vertical restraints, see United States v. Colgate & Co. (1919). After a brief mid-century hiatus in which the court imposed a more social goals-oriented jurisprudence,[2] the court tacked back to an understanding of antitrust based on economics and allocative efficiency, primarily under the influence of Robert Bork's book The Antitrust Paradox. As this process rolled through cases like Continental Television, Inc. v. GTE Sylvania, Inc. (1977), State Oil Co. v. Khan (1997), and Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP (2004), Dr. Miles became more and more anomalous.

In Leegin, the court resolved the tension by overruling Dr. Miles. Citing Bork, Ronald Coase, and others, the Court held that manufacturer-imposed minimum resale prices can lead retailers to compete efficiently for customer sales in ways other than cutting the retail price.

See also

References
  1. Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911).
  2. United States v. Alcoa (2d Cir. 1945), for example, which inveighed that antitrust serve "the helplessness of individual before" "great aggregations of capital" by restricting industry to "small units"; see also United States v. Columbia Steel Co., 334 U.S. 495, 535-36 (1948) (Douglas, J., dissenting).

Further reading
  • Adams, Ronald J. "A Brief Review and Assessment of the Leegin Decision: Who Wins and Who Loses When Manufacturers Are Free to Set Retail Prices?". Business and Society Review. 116 (2): 213–236. doi:10.1111/j.1467-8594.2011.00383.x.
  • Grimes, Warren S. (2008). "The Path Forward After Leegin: Seeking Consensus Reform of the Antitrust Law of Vertical Restraints". Antitrust Law Journal. 75 (2): 467–504. JSTOR 27897585.
  • Harris, Nathaniel J. (2013). "Leegin's Effect on Prices: An Empirical Analysis" (PDF). Journal of Law, Economics, and Policy. 9 (2): 251–276.
  • Tor, Avishalom; Rinner, William J. (2011). "Behavioral Antitrust: A New Approach to the Rule of Reason after Leegin" (PDF). Illinois Law Review. 2011: 805–864.
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