Saturday, May 2, 2009

Maryland Bans Minimum Resale Pricing

In a move that could affect retailers and manufacturers across the country, Maryland recently enacted a law prohibiting resale price maintenance. (WSJ).

The law was enacted April 14 and goes into effect on October 1, 2009. The law provides:

A contract, combination, or conspiracy that establishes a minimum price below
which a retailer, wholesaler, or distributor may not sell a commodity or service
is an unreasonable restraint of trade or commerce.

Md. Code, Commercial Law, § 11-204(B).

The new pricing law essentially restores the law regarding minimum resale pricing to how it existed prior to the Supreme Court's 2007 decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., which held that it was not inherently anti-competitive for a manufacturer to dictate minimum pricing to retailers. Rather, minimum pricing could be acceptable under the rule of reason, as the effect could be to promote inter-brand competition.

While state antitrust law does not always follow federal antitrust law, Maryland is one of a number of states with a statute providing that state court interpretations of state antitrust law should be guided by federal courts' interpretations of federal antitrust statutes. See Md. Code, Commercial Law, § 11-202.

The Maryland law only affects retailers doing business in Maryland, but this includes transactions in which Maryland consumers make internet purchasers from out-of-state retailers. Thus, the impact of the law could have repercussions for manufacturers and retailers across the country.

Moreover, the implementation of the Maryland law could be a prelude to broader legislative reform, as there has been substantial criticism of the Leegin decision. The American Antitrust Institute sponsored a conference on December 4, 2008 criticizing Leegin as harmful to consumers (reported here), and the FTC recently held workshops regarding how resale price maintenance could harm consumers (reported here and here).

There is a bill pending in Congress – the Discount Pricing Consumer Protection Act, S.148 – that is similar to the Maryland law and is likely to receive hearings next month. That bill states that its purpose is "to correct the Supreme Court's mistaken interpretation of the Sherman Act in the Leegin decision."


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