Sunday, March 2, 2008

State Resale Price Maintenance Laws and Leegin

State laws governing resale price maintenance have gained in importance after last year's Supreme Court's decision in Leegin Creative Leather Products v. PSKS (.pdf), which weakened the applicable federal standard. Leegin applied a rule of reason analysis to vertical price restraints rather than a per se rule.

Chart of State RPM Laws - A useful chart that will assist in understanding applicable state laws governing resale price maintenance is available (.pdf) from the ABA's most recent Antitrust magazine, as mentioned by the Antitrust & Competition Policy Blog. The chart includes not only the numerous applicable state statutes, but also the varying case law interpreting the statutes.

Sources of Confusion - For those not familiar with the controversy surrounding resale price maintenance, I previously posted Daniel Kotchen's article discussing how Leegin has affected trade promotion management programs. As he discussed in his article, Leegin has caused significant confusion and uncertainty among consumer goods manufacturers for several reasons. First, Leegin is not binding on state courts. While most states are likely to follow Leegin, their interpretation of the various state laws may vary. Second, the rule of reason analysis is inherently less certain than a per se analysis, opening the door for price maintenance agreements, but only in certain situations. Third, there is pending legislation that, if passed, would overturn Leegin. Legislation sponsored by Senator Herb Kohl and co-sponsored by Senators Biden and Clinton would reinstate the per se prohibition on such price agreements. See Discount Consumer Protection Act, S. 2261. With the legislation pending, it may make long-term planning difficult for manufacturers.

While Leegin presents an opportunity to manufacturers by offering greater flexibility, it also presents greater challenges in designing appropriate programs, which will almost certainly require the involvement of legal counsel.

For more detail, there is an article regarding Leegin and pricing in Inside Counsel magazine's March issue.

Related post: Developing Legally-Compliant Trade Promotion Management Programs; FTC's Nine West Order Explores Resale Price Maintenance Under Leegin


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