On March 14, 2013 Pennsylvania State Senator Stewart Greenleaf announced that he is reintroducing Senate Bill 1565 which, if enacted, would establish comprehensive antitrust legislation in Pennsylvania. The bill, which stalled in the judiciary committee in 2012, includes a provision that defines “Prohibited Acts” to include “(t)o contract, combine or conspire to establish a minimum price below which a retailer, wholesaler or distributor may not sell a commodity or service.” This prohibition could apply to minimum resale price maintenance (“RPM”) policies pursuant to which manufacturers or distributors prohibit retailers from reselling their products below designated minimum prices.  Although under the Colgate doctrine unilaterally imposed policies are not generally subject to the antitrust laws because there is no concerted action, in practice the operation or enforcement of such policies frequently results in concerted action that subjects their application to antitrust scrutiny.

In 2007, the United States Supreme Court decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc. d/b/a Kay’s Kloset overturned 100-year-old precedent under which minimum RPM was considered a per se violation of federal antitrust law.  As the result of Leegin, federal courts now assess minimum RPM under the more lenient “rule of reason” standard, which considers whether the anti-competitive effects of the arrangement outweigh its potentially pro-competitive effects.  Prosecutors or plaintiffs seeking to prove an antitrust violation under the rule of reason have a much more difficult time than under the per se standard and, consequently, are much less likely to institute such a legal proceeding.

The controversial Leegin decision is under attack in an increasing number of states. In 2009, Maryland was the first state to enact a “Leegin –repealer” statute expressly stating that minimum RPM remains a per se violation of the Maryland Antitrust Act.  Courts and prosecutors in other states (e.g., California, New York and more recently Kansas) continue to interpret their state antitrust laws as including a per se prohibition against minimum RPM.  The passage of Senate Bill 1565 would add Pennsylvania to the states that consider minimum RPM a per se violation of state antitrust law.

These state laws effectively preclude the nationwide application of the rule of reason standard to minimum RPM, thereby shutting doors once opened by Leegin. As a result, manufacturers and distributors cannot simply rely on federal law in fashioning their distribution and pricing policies, but must be mindful of the antitrust laws of all of the states in which their policies have effect.  With the ever accelerating irrelevance of geographic limitations on retail sales, especially by internet retailers, there are increasingly fewer products that are not being distributed on a nationwide basis and, therefore, subject to the minimum RPM laws of every state.

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents.