On June 28th, the Supreme Court issued a ruling that now permits manufacturers to adopt so-called “resale price maintenance agreements”. The ruling has essentially reshaped a 96-year-old ban on manufacturers, distributors, and retailers setting price floors for products. In a 5-4 decision, the Supreme Court said that agreements on minimum prices are legal if they promote competition.
The Supreme Court ruled in 1911 that although manufacturers could suggest a retail price, federal anti-trust laws prohibited them from requiring minimum pricing agreements.
The Court’s latest decision was based on an appeal brought by Leegin Creative Leather, a luxury leather goods company in California. The company had been ordered by a lower court to pay close to $4 million in damages after it stopped shipping handbags to a Dallas-area retailer. Leegin’s stopped sending products to the retailer after it repeatedly discounted a popular line of handbags by as much as 20 percent. The retailer sued Leegin, arguing that he discounted the handbags to stay competitive and that losing the line – its best selling product – caused “permanent” damage to his business.
However, Leegin Creative Leather argued that a complete ban on minimum pricing agreements is out of step with modern economics. Leegin’s owner argued that his ability to set a minimum price is one of the few ways his company can actually establish its brand – particularly when compared with much larger corporations.
The Supreme Court, in it its traditional conservative and liberal split, agreed with Leegin’s arguments. With its ruling, the Court replaced the old antitrust standard that automatically assumed that minimum pricing agreements were illegal. Instead, the opinion authored by Justice Anthony Kennedy, creates a new rule that requires courts to do a case-by-case analysis on whether pricing agreements for a particular product violates federal antitrust laws. “Vertical agreements establishing minimum resale prices can have either procompetitive or anticompetitive effects, depending upon the circumstances in which they are formed”, Kennedy said.
The case is Leegin v. PSKS.
For more information, contact PBA's government affairs department at 800.468.2274 x118 or visit us online at http://www.probeauty.org/advocacy
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http://www.probeauty.org/
posted: sam leyvas
professional beauty association
