The Future of Resale Price Maintenance
Presented by:
Robert M. Langer
Wiggin and Dana LLP
Conference of Western Attorneys General
Park City, Utah
July 23, 2014
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Per Se Treatment of
Resale Price Maintenance “RPM”
• Classic form of overregulation because
– Legitimate problems of free-riding
– Increases interbrand competition
– Facilitate new entry and new products
– Vast majority of economists, as well as
DOJ and FTC, support Rule of Reason
treatment
– Absent significant market power, it provides
for consumer choice
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Per Se Treatment of RPM, cont.
• Interbrand/intrabrand distinction drawn in Continental T.V.,
Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977) in vertical
non-price context is equally applicable with respect to RMP
• Administrative convenience is not a justification for per se
treatment of a restraint that may be either procompetitive
or anticompetitive, depending on the particular facts and
circumstances, Leegin Creating Leather Products, Inc. v.
PSKS, Inc., 551 U.S. 877, 894-95 (2007).
• Even when RPM was per se lawful under certain state
laws adopted in accord with the federal Miller-Tydings and
McGuire Acts (1937-1975), “no more than a tiny fraction of
manufacturers ever employed [RPM] contacts,” Leegin,
551 U.S. at 907.
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Post-Leegin
Default position still per se rule
• Companies understand that some states have challenged and will
continue to challenge RPM agreements as per se unlawful under
state antitrust acts, e.g., New York, California and Maryland
– Colgate doctrine, see United States v. Colgate & Co., 250 U.S.
300 (1919) and Minimum Advertised Price (“MAP”) policies are
still ubiquitous
• Colgate compliance is incredibly complex and very
expensive
– Subsequent to O’Brien v. Leegin Creative Leather Products,
Inc., 277 P.3d 1062 (Kan. 2012), the Kansas legislature
amended law to establish a Rule of Reason standard for RPM
under the Kansas Restraint of Trade Act, Kan. Stat. Ann. § 50163 (b)-(c).
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Post-Leegin, cont.
• There has been very little exploration of the contours
of Leegin because of the dichotomy between federal
and state antitrust law and enforcement and as a
consequence, the obvious risks associated with RPM
“agreements”
• Many states are “guided by” interpretations of federal
law and thus Leegin obtain in their states
– See, e.g., Navien American, Inc. v. Allen, 2011 WL
3925729 (Conn. Super. Ct. 2011)
– Michael A. Lindsay, “Overview of State RPM,” THE
ANTITRUST SOURCE, ABA Section of Antitrust Law
www.antitrustsource.com
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Query? Does current situation make
sense? Should there be uniformity?
• Proposed legislation drafted by the ABA Section of
Antitrust Law “Indirect Purchaser Task Force,”
recommended establishing a uniform standard throughout
the U.S., which would have overruled Illinois Brick Co. v.
Illinois, 431 U.S. 720 (1977) and Hanover Shoe, Inc. v.
United Shoe Machinery Corp., 392 U.S. 481 (1968), while
establishing a presumption that the ultimate indirect
purchaser was the injured party and granting state
attorneys general authority to bring such claims [see 63
ANTITRUST L.J. 993 (1995)]
– Position supported by three Chairs of the NAAG
Multistate Antitrust Task Force, Michael Brockmeyer,
Laurel Price and me, each of whom served on the
Indirect Purchaser Task Force; I also served as Chair
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Query? . . . , cont.
• There are profound risks associated with significant differences
in state and federal substantive antitrust law
– R. Langer, S. Wachsstock & E. Amarante, “So You Think
You’re Safe Under the Antitrust Laws? A Word of Advice to
Those Who Would Ignore the States,” ANTITRUST REPORT
(Matthew Bender, Fall 2002)
http://www.wiggin.com/files/Langer%20Bender%2011-02.pdf
– R. Langer, E. Amarante & E. Zwicker, “So You Think You’re
Safe Under the Antitrust Laws? Another Word of Advice to
Those Who Would Ignore the States,” ANTITRUST REPORT
(Matthew Bender, Issue 4, 2010)
http://www.wiggin.com/files/19547_Antitrust%20Report,%2012.
30.10,%20Langer,%20Amarante,%20Zwicker.pdf
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What of the Commerce Clause and
the Supremacy Clause?
• California v. ARC America Corp., 490 U.S. 93 (1989)
addressed difference in remedy not liability, citing
California v. Zook, 336 U.S. 725 (1949) and Silkwood v.
Kerr-McGee, 464 U.S. 238 (1984)
• Cases preempting state antitrust law
– Flood v. Kuhn, 443 F.2d 264 (2d. Cir. 1971)
– Robertson v. NBA, 389 F. Supp. 867 (S.D.N.Y. 1975)
– Partee v. San Diego Chargers Football Company, 668
P.3d 674 (Cal. 1983)
– Cornell Constr. Co. v. Plumbers & Steamfitters Local
Union No. 100, 421 U.S. 616 (1975)
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Commerce/Supremacy Clause, cont.
•
Importance of Rice v. Norman Williams Co., 458 U.S. 654, 661
(1982)
– “[A] state statute when considered in the abstract, may be
condemned under the antitrust laws only if it mandates or
authorizes conduct that necessarily constitutes a violation of the
antitrust laws in all cases, or if it places irresistible pressure on a
private party to violate the antitrust laws in order to comply with
the statute. Such condemnation will follow under § 1 of the
Sherman Act when the conduct contemplated by the statute is in
all cases a per se violation. If the activity addressed by the
statute does not fall into that category, and therefore must be
analyzed under the rule of reason, the statute cannot be
condemned in the abstract. Analysis under the rule of reason
requires an examination of the circumstances underlying a
particular economic practice, and therefore does not lend itself
to a conclusion that a statute is facially inconsistent with federal
antitrust laws.” [Emphasis supplied]
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Commerce/Supremacy Clause, cont.
• Importance of Rice v. Norman Williams Co., 458 U.S. 654, 661
(1982)
– RPM situation is, however, the converse of Rice, i.e., conduct
permitted under federal law that is prohibited under state law
– Query? Are Rice and ARC America the appropriate
methodologies to evaluate the constitutionality of state
antitrust laws that provide for per se treatment of RPM postLeegin? See, e.g., Pliva v. Mensing, 131 S. Ct. 2567, 2577
(2011) (“‘[S]tate law is naturally preempted to the extent of
any conflict with a federal statute.’ We have held that state
and federal law conflict where it is ‘impossible for a private
party to comply with both state and federal requirements.’”)
• Does Leegin thus create such a conflict within the
meaning of the Supremacy Clause?
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Speaker Background
• Served as Assistant Attorney General – Connecticut
Attorney General’s Office (“CT AGO”) for 21 years; head of
Antitrust and Consumer Protection Department
• Adjunct law professor since 1979 teaching antitrust, trade
regulation, consumer protection and constitutional law –
University of Connecticut School of Business
Administration, MBA Program; University of Connecticut
School of Law
• Chair – NAAG Multistate Antitrust Task Force, 1990-1992
• Helped to pioneer multistate enforcement (“Chevymobile”
case-1977) [1978 New York Times op-ed piece-next slide]
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Speaker Background, cont.
• Vigorously pursued RPM cases while in CT AGO
• Coined phrase “RPM Central,” see R. Langer, “A
Cautionary Tale: State Enforcer’s Perspective on Vertical
Restraints,” ANTITRUST (ABA Section of Antitrust Law, Vol.
8, No. 2, Spring 1991)
• Entered private practice in 1994
• Began advising business clients on distribution issues
• Represented PING; assisted with PING’s amicus brief in
U.S. Supreme Court in Leegin, which overruled Dr. Miles
Medical Co. v. John D. Park & Sons Co., 220 U.S. 373
(1911)
– Not being compensated by PING or any other client
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