The Rule of Reason After Leegin

law. as a common-law statute, the act continues to evolve in light of shifting 74. see psks, inc. v. leegin creative leather prods., inc., 171 fed. app'x. 464, 466-67 (5th cir. 2006) the applying complex economic principles in merger cases). therefore able to fix the price of crude and refined petroleum and restrain and monopolize all interstate maintenance); see also supra note 91 and accompanying text (describing anti-competitive uses of resale price se illegal under sherman act); see also khan, 522 u.s. at 10 (stating not all price restraints assessed according unlawful "only if it unreasonably restrained or suppressed competition." id. the court recognized the favorable impact maximum retail price schemes may have on trade and competition, and (2) a failure to a re-examination of the consumer-welfare hypothesis, 53 j. econ. hist. 359 (1993) (describing consumer- restraints to promote product quality, brand name image, and interbrand gallon. id. although the plaintiff could charge its customers any amount for gasoline, an amount in excess of this early interpretation, the word "trade" is synonymous with "competition" abandon the formalistic line drawing exhibited in schwinn (and by the district court in this case) in favor of an monopoly-like producers familiar with antitrust regulation are unlikely to 65. see khan v. state oil co., 93 f.3d 1358, 1360 (7th cir. 1996) (holding price restriction per se sherman act where they may receive treble damages and the cost of suit, including reasonable attorney's fees. often necessary and superior result of competitive unregulated markets). u.s. 373 (1911). according to the court, "`stare decisis reflects a policy judgment that in most matters it is in fact, many economic scholars and price restraints in dr. miles, subsequent supreme court decisions have largely scheme); but see also leegin, 127 s. ct. at 2727-30 (breyer, j., dissenting) and accompanying text (noting anti- prices and limit market manipulation thus benefiting the consumer. id. likewise, these controls benefit despite its objectivity, however, the court concluded that the by producers). but see id. at 2717 (suggesting producer cartel may employ unlawful resale price maintenance relationship will evolve in light of the leegin decision.86 from the market and to provide more guidance to businesses. courts can, for the dr. miles holding was significant because the court reduces its competitiveness and market share because consumers will `substitute a different brand of the same 66. see khan, 522 u.s. at 15-18 (overruling albrecht decision). the court's disagreement with the language of section i of the sherman act); see also standard oil co. v. united states, 221 u.s. 1, 59-60 (1910) and price, the supreme court has not expressly identified which factors the rule of reason requires to establish generally speaking, the leegin court characterized the rule of reason the same as prior supreme court dissenting) (discussing administrative impact of applying rule of reason), overruling dr. miles med. co. v. court's latest antitrust regime.68 id. the clayton act, enacted in 1914, extended the right to sue under the antitrust laws to "any person who in fact, these changes are the result of the court's economic literature and supreme court commentary. see supra note 75 and accompanying text (reviewing have such a `pernicious effect on competition and lack . . . any redeeming virtue' and therefore should be prove ambiguous and largely indeterminate in court.116 opinions utilizing the rule. see id. at 2712 (adopting rule of reason standard articulated in cont'l t.v.). both the supreme court affirmed the ninth circuit's ruling, the court based its reversible error by excluding testimony regarding the pro-competitive effects of the retail pricing policy. id. for horizontal restrictions and the rule of reason for vertical restrictions. id. any mechanism used to artificially curtail trade and competition in the role in defining precisely what conduct the act proscribes.21 ability of buyers to compete and survive in that market." id. reason will condemn it." id. (quoting arizona v. maricopa county med. soc., 457 u.s. 332, 344 (1982)) their incentive is to maintain competitive prices amongst dealers that will encourage buyers to purchase their 86. see infra part iii.b (analyzing possible implications of leegin decision). with foreign nations, shall be deemed guilty of a felony . . . . scheme is known generally as a minimum retail price maintenance scheme. id. articulated in the schwinn decision a year earlier, the court held that section i 107. see leegin creative leather prods., inc. v. psks, inc., 127 s. ct. 2705, 2712 (2007) (citing opposition] (observing higher prices result from resale price maintenance). 49. see id. at 409 (holding minimum retail price maintenance scheme per se illegal). economic data and its effect.11 reason, is often lauded because it is a bright-line test. see leegin, 127 s. ct. at 2736 (breyer, j., dissenting) restraints). determine if the court's current use of the rule of reason best diminishes these adversely affect price and/or competition. id. for example, a manufacturer would likely refrain from of the vague language employed by the statute. id. at 51. the court determined that the act proscribed all maximum retail price scheme in violation of section i of the sherman act.65 indeed, rule of reason analysis may avoid overbroad on producers and other corporate entities likely to employ such schemes.12 states, and monopolizing the said commerce. effect on each party's market segment.92 36. see standard oil co., 221 u.s. at 49-62 (interpreting meaning of sherman act based on common law 102. see leegin, 127 s. ct. at 2715-17 (describing common use of vertical price restraints by retailers); see dealers to manipulate profits. id. at 116. lockerby also notes that courts must be aware of non-price vertical industry will undoubtedly influence the way businesses interact and will in rule of reason analysis), overruling dr. miles med. co. v. john d. park & sons co., 220 u.s. 373 (1911). trade and commerce of those goods. id. at 377-78. the court based this holding largely on its prior ruling in employed by the herald company.55 fundamentally restricted trade in violation of section i of the act.53 the supreme court's transition to a rule of reason regime began with the rule of reason analysis). to establish the rule, the dr. miles court relied on the common-law notion that sale of of antitrust). the court determined its precise meaning in light of the common law of antitrust in recognition act. id. at 2715. interbrand competition is the competition that ordinarily occurs between various brand-name commerce in those products. id. 48. see id. at 406-09 (defining rule of reason standard and per se exception). the court took care to interestingly, the court's dr. miles opinion appears more thus limited to such restraints.105 24. see 15 u.s.c. �� 1-2 (2004). congress first enacted the sherman act on july 2, 1890. id. the act, despite its corporate wealth in the late nineteenth century.26 prices stipulated in its retail price agreement.71 the sherman act); see also n. pac. ry. co., 356 u.s. at 5 (holding all horizontal price restraints per se illegal id. at 1361. "squeezing" a retailer's margins beyond competitive levels for risk of losing the retailer to another purposes of this analysis, those employing vertical restraints are referred to as assessment.94 manifestly anti-competitive effect.77 effects unreasonably outweigh its potentially pro-competitive effects.4 given this ambiguity, courts must refrain from engaging in purely economic ruling and initially characterized the defendant's restriction as a de facto assessing alleged sherman act violations, and (2) how the producer-dealer and sellers, an essential market component often restricted by maximum price first trusts regulated under the act.30 restraint on alienation). also bus. elecs. corp. v. sharp elecs. corp., 485 u.s. 717, 725 (1988) (examining common use of vertical precise economic effect a minimum price restraint will have on the parties 70. see id. (describing plaintiff's business). kay's kloset purchased products from about 75 because of the court's comprehensive discussion of the rule of reason and the d. park & sons co., 220 u.s. 373 (1911); khan, 522 u.s. at 7 (holding vertical maximum retail price fixing majority also failed to recognize that manufacturers may resist setting maximum retail prices sufficiently low to 55. see id. at 153 (holding defendant's price restriction per se illegal). like the eighth circuit court of 95. see leegin, 127 s. ct. at 2716-17 (describing common uses of resale price maintenance schemes). the best quality goods.28 (no. 06-480) [hereinafter brief for economists] (noting "upstream" seller often manufacturer and reseller must find the restriction per se unlawful if it determined that the defendant, by violations, the mere possibility of pro-competitive effects may prove 94. see leegin creative leather prods., inc. v. psks, inc., 127 s. ct. 2705, 2729 (2007) (breyer, j., psks, inc. is the final and perhaps most significant ruling in the supreme courts gain experience considering the effects of these restraints by applying traditionally, courts use the "rule of reason" standard welfare and producer-welfare theories of antitrust regulation). scholars often debate whether the original intent 2009] the rule of reason after leegin 927 the court's rejection of the per se rule as applied to resale price reason.43 states, 524 u.s. 236, 251 (1998)). the court, however, has long considered the sherman antitrust act a business reason or motive . . . . our inquiry is whether . . . the effect upon competition in the marketplace is business, the business's condition before and after it imposed the restraint, and the restraint's history, nature, on appeal, leegin did not argue that its most significant departure occurred in leegin creative leather products, courts almost always apply the rule of reason. see id. 34. see id. at 78 (affirming dissolution of standard oil trust). note 12, at 114 (describing common use of resale price maintenance by monopoly corporations). the court's 2007 decision in leegin creative leather products, inc. v. precluded the "natural" establishment of price through bargaining by buyers 21. infra parts ii.a, ii.b (describing enactment and evolution of sherman act). products.70 differences between horizontal and vertical price restrictions that usually warrant application of the per se rule the court has long considered horizontal price restrictions per se illegal under antitrust law is increasingly difficult to implement due to complex justified, to make the rule of reason a fair and efficient way to prohibit anti- the united states oil market that stifled competition and spawned unfair price 68. 127 s. ct. 2705 (2007), overruling dr. miles med. co. v. john d. park & sons co., 220 u.s. 373 example, devise rules over time for offering proof, or even presumptions where restraints continue to constitute a per se violation of the sherman act. price vertical restraint per se illegal); dr. miles, 220 u.s. at 408 (holding minimum price maintenance scheme the producer can then rebut with evidence of a proper or lawful purpose.99 decision, particularly on the lower federal courts and the judiciary in general.17 this becomes even more evident after nat'l soc'y of prof'l eng'rs v. united states, 435 u.s. 679, 688 (1978). therefore, just as common-law 53. see schwinn, 388 u.s. at 375 (disregarding defendant's lawful business-motive defense). schwinn vertical price and non-price restraints, but after years of reducing its strict a lower price. id. applying the supreme court's dr. miles holding, the united states district guidance as to what specific conduct is prohibited.36 restraints.115 recognized by the court in leegin as a way to provide structure to antitrust litigation. id. competition on a basis other than price.112 64. 522 u.s. 3 (1997). the defendant in khan was state oil company, a supplier of petroleum products and effect" of resale price maintenance schemes is admittedly ambiguous and unrevealing according to both by producers without notable market share presents a fundamentally flawed the act.57 york, ny), july 2007, at 2-3 [hereinafter the doctor is out] (describing potential impact on manufacturers); 4. see state oil co. v. khan, 522 u.s. 3, 10 (1997) (describing rule of reason balancing test). proper the court based its conclusion on based vertical restraints in the majority of cases, and the preceding analysis is thus triggering the per se rule. id. at 408-09. court's rejection of decades of case law is not surprising, though, given its ii. history significant to warrant using excessive time and money necessary to identify them. id. the court in cont'l t.v. 39. see id. (holding "restraint of competition" term synonymous with "restraint of trade"). in reaching remained per se illegal under the sherman act in recognition of their limited or overruled by leegin creative leather prods., inc. v. psks, inc., 127 s. ct. 2705 (2007). the leegin majority v. khan, 522 u.s. 3, 10 (1997)). by large-scale producers.114 44. see khan, 522 u.s. at 22 (describing limited use of per se rule to familiar price restraints); see also per se rule). vertical maximum retail price fixing not a per se violation of sherman act); cont'l t.v., inc. v. gte sylvania, 20. infra part ii.c (describing establishment and use of rule of reason and per se rule by supreme court). underlying theory of the albrecht holding can be categorized in two ways: (1) a failure to recognize the achieve the same results as vertical minimum price restraints. the court could 110. see infra part iii.b.2 (discussing impact of leegin decision on non-monopoly producers). instituted a "retail pricing and promotion policy" discouraging all distributors 23. infra part iii.b (describing likely application of rule of reason to producers). 40. see fletcher, supra note 28, � 4983 (noting strict adherence to language of sherman act). 92. see leegin, 127 s. ct. at 2720 (describing possibility of establishing presumptions in rule of reason dealers, who could also purchase products directly from the defendant, resell those products only to specified 118. see supra text accompanying note 105 (evidencing multiple arguments applicable to resale price nature. common-law statute, as evidenced by the broad and ambiguous language the statute employs. id.; see also most comprehensive interpretation of the act to date.41 leegin holding). 2009] the rule of reason after leegin 923 id. at 3-4. of the sherman act, these restraints are easily identifiable because they are second, any scheme designed to exploit monopoly power will an anti-competitive consequence of price fixing by a producer subject to interbrand competition. id. at 8. the seller cannot place restrictions on the distributor's ability to subsequently market or sell those goods. id. at one of nine major manufacturers of bicycles and bicycle parts in the united states during the 1960s. id. at 368- analysis suggests there are distinct economic differences between these two price agreements. id. the court 2009] the rule of reason after leegin 921 adjudications, an approach that significantly values the non-economic 71. see id. at 2711 (depicting plaintiff's violation of retail price agreement). beginning in december 15(a) (2004) (providing for treble damages and reasonable attorney's fees for antitrust violations). examining non-monopoly producers.110 experience with restraint). the court notes that the per se rule cannot apply unless practical experience person or persons, to monopolize any part of the trade or commerce among the several states, or iii. conclusion id. 43. see, e.g., leegin creative leather prods., inc. v. psks, inc., 127 s. ct. 2705, 2710 (2007) (holding producers and dealers. the dynamics of present economic conditions." leegin, 127 s. ct. at 2720. according to the majority, this the supreme court continued its expansion of the per se rule in 1968 with indicates how individual manufacturers or producers use resale price maintenance schemes, cartels of retailers (acknowledging "restraint of competition" synonymous with "restraint of trade"). 928 suffolk university law review [vol. xlii:919 analysis in order to properly assess the reasonableness of a given restraint.90 present where small-scale market players employ restraints. in sum, the court held certain per se rule.48 price vertical restraints subject to rule of reason due to pro-competitive effects). jason a. casey ordinarily employed by manufacturers to enhance a product or products.9 decisis despite express disagreement with the court's economic assessment in corporations � 4981 (perm. ed. 1999) (describing united states antitrust law generally). but see generally competitive effects of artificial price restrictions.35 several warnings by leegin, kay's continued its practice of discounting items for several additional months. 78. see leegin, 127 s. ct. at 2714 (rejecting majority's justification for per se rule in dr. miles). in dr. alienation generally, like those examined in dr. miles.52 27. see standard oil, 221 u.s. at 50 (articulating economic concerns regarding monopoly corporations 2009] the rule of reason after leegin 925 owning over 90 percent of the refined oil flows in the united states effectively allowed standard oil to control 45. see, e.g., albrecht v. herald co., 390 u.s. 145, 152-54 (1968) (holding maximum retail price scheme manufacturer. id. at 15-16 (quoting chief judge posner of seventh circuit court of appeals). the albrecht while often difficult to identify, these unique situations are institute a minimum price policy if it benefits their bottom line.98 restrictive vertical price agreements per se illegal under the sherman act), overruled by leegin creative because they must compete for the business of dealers. see brief for economists, supra note 19, at 3. thus, if prices.69 example, might request resale price maintenance to forestall innovation in distribution that decreases costs. a for according to basic economic theory, a producer with ample market power is able to manipulate demand while concerns.18 distinguished the defendant's restraint from the unlawful restraint at issue in investigation); white motor co. v. united states, 372 u.s. 253, 263 (1963) (refusing to apply per se rule jurists maintain price and non-price restraints deserve similar treatment under price and non-price restraints demonstrate that factors aside from market share reason is whether the restraint "always or almost always tend[s] to restrict competition and decrease output." 1. leegin creative leather prods., inc. v. psks, inc., 127 s. ct. 2705, 2720 (2007), overruling dr. an exclusive basis." id. note 4, at 1313; cf. buyer power, supra note 4, at 589 (describing consumer-based monopoly designed to lower 75. see id. (affirming district court's ruling); see also leegin creative leather prods., inc. v. psks, inc., c. the per se rule and the rule of reason: a case history the seventh circuit court of appeals relied on the supreme court's albrecht 2726 (breyer, j., dissenting) (noting difficulty of deciding between per se rule and rule of reason). according 31. see standard oil, 221 u.s. at at 33 (detailing extent of standard oil's control over oil production). courts are faced with a difficult, if not fundamentally flawed, approach to reason for vertical minimum price restraints), overruling dr. miles med. co. v. john d. park & sons co., 220 defendant and sold them at retail prices to subscribers. id. the herald required each retail distributor to sell more importantly, the federal courts' analyses of both 57. see albrecht, 390 u.s. at 152-53 (describing adverse effects of maximum retail price scheme). the 51. see id. at 379-80 (holding non-price vertical restraints per se illegal). the defendant in schwinn was longstanding distaste for the overbroad characterizations inherent in per se the benefits of increased interbrand competition among their retailers and dealers. id.; see also supra notes 96- schemes). in doing so, the justices place too much emphasis on generally characterizing resale price schemes, in several landmark cases subsequent to the albrecht decision in 1968. see supra note 14 (listing supreme 14. see, e.g., leegin creative leather prods., inc. v. psks, inc., 127 s. ct. 2705, 2710 (2007) (holding restraints in light of their overwhelmingly negative effect on competition; the used; the court instead relies on a more holistic assessment under the rule of while 111. see infra part iii.b.1 (discussing leegin's impact on monopoly producers). typically discovered by looking to circumstantial evidence.96 it must find the restriction per se unlawful if the defendant restricted the plaintiff's ability to freely market (1976). 19. infra part iii.b (assessing likely use of resale price maintenance by producers in light of leegin to eliminate interbrand competition on the basis of price while increasing the profit margins of inefficient 30. see id. (naming standard oil as first regulated trust under sherman act); see also standard oil, 221 questioned whether certain restraints were consistently anti-competitive in price, territorial restriction had less potential for competitive harm.61 inc. v. psks, inc., 127 s. ct. 2705 (2007). the defendant in dr. miles was a wholesale drug concern involved 920 suffolk university law review [vol. xlii:919 (characterizing per se rule as bright-line standard); cf. derek c. bok, section 7 of the clayton act and the enforcement, and the rule of reason governed few restraints. in addition to price restraints analyzed according to rule of reason), overruling dr. miles med. co. v. john d. park & sons and ultimately the demise of dr. miles.75 maintenance schemes). see also id. at 2727-30 (breyer, j., dissenting) (summarizing theoretical effects of resale price maintenance precedent. the leegin decision simultaneously created a more liberal fixing the price of crude and refined oil and the products thereof, limiting the production thereof, and of a minimum price restraint without significant economic investigation.91 prevent dealers from providing essential services to customers because of the risk of customer loss and the supreme court held that analysis.13 these interpretations have changed significantly over time, particularly in vertical price restraint to rule of reason analysis), overruled by leegin creative leather prods., inc. v. psks, bright-line test of per se illegality. the defendant's proper motive in establishing the restraint and any possibility of according to the court, this agreement the majority and the dissent in leegin, however, painstakingly review the pro-competitive and anti-competitive 105. see infra parts iii.b.1, iii.b.2 (analyzing producer use of resale price maintenance in response to resale prices will have, as a general matter, the information and resources per se rule to vertical price restrictions in dr. miles medical co. v. john d. flows in the continental united states.31 effects is not merely theoretical, but deemed unlawful per se. 522 u.s. at 10. per se treatment is appropriate price maintenance scheme is a challenge for any court. not only are courts ill- identical in effect"); see also leegin, 127 s. ct. at 2715-17 (highlighting use of resale price maintenance to company's horizontal monopoly). that the dr. miles holding is rigid and "formalistic" rather than based on relying largely on reasoning the act.8 according to this integrated monopolies, the language of the act itself still provides little competitive consequences will result from a particular practice, and the severity of those consequences largely manipulate price.117 consequently, courts assess all agreements 26. see standard oil co. v. united states, 221 u.s. 1, 50 (1910) (describing chief concerns leading to plaintiff's original complaint, leegin violated antitrust law by "enter[ing] into agreements with retailers to leather prods., inc. v. psks, inc., 127 s. ct. 2705 (2007). stare decisis against those policies supporting assessment of vertical minimum horizontal price restraints in addition to overruling long-standing antitrust law id. as a result, the leegin decision is unlikely to prompt an increase in the use franchised schwinn accounts" within a specified territory, which were "specifically described and allocated on simply by providing a service more efficiently and at a lower cost than its competitors. id. 104. see leegin, 127 s. ct. at 2715-16 (listing common pro-competitive uses of resale price maintenance criticism by both legal and economic scholars.29 934 suffolk university law review [vol. xlii:919 area. id. at 147. independent carriers purchased large quantities of newspapers at wholesale prices from the 16. see khan, 522 u.s. at 10 (noting rule of reason necessary when restraint's economic impact requires restraint; rather, leegin urged the court to assess the agreement under the less century, however, the per se rule gave way to the rule of reason as courts michael j. lockerby, franchising after leegin: a license to fix prices?, 27 franchise l.j. 112, 115 (2007) restrained trade whether reasonable or unreasonable based on the plain measured yet consistent willingness to recognize the pro-competitive effects of schemes is the potential for increased interbrand competition, which is an essential concern of the sherman the court also recognized, however, the predictable results achieved by the rule of reason when assessing in 1967, in united states v. arnold, schwinn & co.,50 standard oil, this level of horizontal integration resulted in a monopolization of suggesting various ways a minimum resale price maintenance scheme may be used to promote competition and the testimony. id. the judgment entered against leegin amounted to $3,975,000. id.; see also 15 u.s.c. � consistent application to horizontal agreements, the supreme court first applied despite realizing incredible profits for rockefeller and 100. see leegin creative leather prods., inc. v. psks, inc., 127 s. ct. 2705, 2719 (2007) (recognizing maintaining artificially high price levels because they are able to control market supply. see magoo, supra 10. 127 s. ct. 2705 (2007), overruling dr. miles med. co. v. john d. park & sons co., 220 u.s. 373 maximum retail maintenance scheme because the plaintiff had no incentive to exceed the suggested retail price. with property law. see dr. miles med. co. v. john d. park & sons co., 220 u.s. 373, 404-05 (1911), rule, the fact-finder must determine whether the restraint's anti-competitive 93. see continental t.v., inc. v. gte sylvania, inc., 433 u.s. 36, 49 (1977) (describing use of an analogy between the "territorial" restraint in question and restraints on vertical price restraints once disregarded by the court. the implications of this appeals, the supreme court found little distinction between the defendant's maximum price scheme and the production, shipment, refinement, and sale of all petroleum and its products. id. standard oil was 101. see brief for economists, supra note 19, at 5 (noting upstream seller often manufacturer and reseller the court should have used the rule of reason to weigh the pro and anti-competitive effects of the restraint at price restraint is the market share of the entity employing the restraint. id.; see also albert a. foer, mr. magoo 83. see supra part ii.c (describing application of rule of reason and per se rule); see also n. pac. ry. co. 91. see leegin, 127 s. ct. at 2720 (noting courts may rely on presumptions in rule of reason cases). a. economic analysis and the rule of reason courts deemed minimum resale price maintenance schemes per se illegal under 42. see n. pac. ry. co. v. united states, 356 u.s. 1, 5 (1958) (holding all horizontal price restraints per likened minimum retail price maintenance schemes to horizontal price 81. leegin creative leather prods., inc. v. psks, inc., 127 s. ct. 2705, 2720 (2007) (adopting rule of supreme court's expansion of the per se rule. beginning in the late twentieth this reliance is easily traced to the court's increased ability to infer reasonableness. id. notes proper adherence to these principles in white motor co. v. united states, 372 u.s. 253 (1963). see 79. see leegin, 127 s. ct. at 2714-17 (quoting bus. elecs. corp. v. sharp elecs. corp., 485 u.s. 717, 723 easily be characterized two or more ways depending on the method of diligence required to prevent unlawful use of vertical price restraints), overruling dr. miles med. co. v. john this note examines some of the practical effects of the court's leegin the holding); see also brief for economists as amici curiae supporting petitioner at 4-5, leegin, 127 s. ct. 2705 of reason analysis). issue. id. dr miles.80 reason test employed by the court today. id.; see also supra note 4 and accompanying text (describing modern in 1910, john d. rockefeller's standard oil company became one of the dealers or retailers.101 (internal quotations omitted). insufficient to warrant use of the rule of reason. furthermore, other price and though lawmakers doubted if common law governed antitrust shall be injured in his business or property by reason of anything forbidden in the antitrust laws." id. � 15. agreements). the majority states one pro-competitive justification for vertical minimum price maintenance corporations use to eliminate competition within their market. id. but see united states v. eastman kodak competition"). john. d. park & sons co. in 1911. subsequent courts extended the dr. miles for the plaintiff psks, inc. owned and operated kay's kloset (kay's), a the leegin court acknowledged some reverence for the doctrine of stare (1911). 2009] the rule of reason after leegin 931 antitrust act (the act).2 analysis.89 standard oil with violating the sherman act and alleged the following: 108. cf. brief in opposition, supra note 79, at 21-22 (suggesting higher prices ultimate consequence of all vertical non-price restraints as per se unlawful.63 congress to enact section i of the sherman act, as well as the supreme court's schwinn and reversed the district court's prior ruling.60 accurately determining the precise economic implications of a given retail court for the eastern district of texas found for psks and awarded nearly $4 this "demonstrable economic effect."82 purchased goods. id. intent. see leegin creative leather prods., inc. v. psks, inc., 127 s. ct. 2705, 2712 (2007), overruling dr. expanding the notion of per se illegality.51 29. see generally greenspan, supra note 28 (arguing against necessity for antitrust legislation). vertical non-price restrictions per se illegal under the sherman act, further the meaning of "restraint on trade" as used in section i of the act.38 80. see leegin, 127 s. ct. at 2720 (recognizing stare decisis as potential reason to retain per se rule). name, congress did not intend the act to target trusts in particular, but rather economists, supra note 19, at 4-16 (advocating rule of reason because of potential pro-competitive effect of the court opted to overturn dr. miles, however, after weighing million in damages and attorney's fees.73 and requirements underlying the per se rule itself.62 opines that vertical price restraints used by a single manufacturer tend to eliminate price competition among maintenance). generally, non-monopoly producers cannot manipulate prices beyond competitive levels setting when applied by non-economists. see id. at 2730; see also hovenkamp, supra note 84, at 105 objective comparison of the constructive and detrimental economic effects of a employ resale price maintenance schemes designed to exploit their monopoly court notes that the stipulation of a maximum retail price may actually be too low for dealers to furnish cartels.83 unreasonable restraints on trade or commerce and that the rule of reason is the appropriate standard assessing a by-case basis due to their diverse and ambiguous nature. effectively reading the word "unreasonable" into the statute and providing the miles, the court analogized vertical minimum price restraints to restraints on alienation, a term often associated standard oil company dissolved.34 a manufacturer sells goods at a non-competitive price, dealers will look to alternate dealers for similar goods at and vertical price restrictions in assessing their legality under the sherman substantially adverse." id. price restraints by retailer cartels). 2. compare dr. miles med. co. v. john d. park & sons co., 220 u.s. 373, 408 (1911) (subjecting competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore to agreement between dealers designed to destroy competition), overruled by leegin creative leather prods., based on rockefeller violated section i of the act by constructing a type of horizontal schemes articulated by the majority in dr. miles.78 22. infra part iii.a (cautioning against extensive reliance on economic analysis by courts). manipulation.33 to the dissenting justices, "the difficulty arises out of the fact that the different sets of considerations point in retailers who were also discounting brighton products. id. 932 suffolk university law review [vol. xlii:919 structure to ensure the rule operates to eliminate anti-competitive restraints heavily on the supreme court's schwinn decision and instructed the jury that it infringe upon individual liberty and are void as contrary to public policy. see dr. miles, 220 u.s. at 404-07; prices as opposite of producer-based monopoly). a. early "antitrust" law similarities between the restriction in question and the restriction at issue in schwinn and instructed the jury that schemes as the price consistently charged by dealers typically approaches the maximum stipulated price. id. contemporary trend has been to limit those instances where the per se rule is the company's pricing policy did not constitute an unlawful vertical price should not spawn greater economic analysis for lower federal courts when specific outlets or retail stores.59 issues, the decision to enact antitrust legislation grew mainly from concerns economic effect of resale price maintenance). according to justice breyer, "how easily can courts identify developed during the seventeenth century for application in the realm of real property disputes. leegin, 127 s. 61. see id. at 988 (stating rule of reason necessary to assess given restraint). even though the standard oil litigation targeted a particular monopoly, the miles med. co. v. john d. park & sons co., 220 u.s. 373 (1911). instead, the court states, "appropriate supreme court continues to define precisely what conduct the act prohibits in usually retailer). because manufacturers often impose resale price maintenance schemes on their dealers, this court's decision in continental t.v., inc. v. gte sylvania, inc. in 1977.58 producers by increasing competition and limiting the potential for corporate dominance in any given market. although the court initially established the per se rule for vertical aside from constituting a per se violation 1. monopoly producers history, nature, and effect.'" see id. (quoting khan v. state oil, 522 u.s. 3, 10 (1997)). goods. id. price is not typically indicative of unlawful intent by non-monopoly producers because of this and owner of gas stations nationwide. id. at 7-8. the plaintiff and his corporation agreed to lease and operate a assessing its legality under the rule of reason because the restraint these producers do not exhibit dominant market 67. see khan, 522 u.s. at 18 (discarding per se rule as applied in albrecht). transactions from the market. this standard principle applies to vertical price (describing difficulty of litigating rule of reason case); section 7, supra note 6, at 238-47 (describing difficulty 37. see standard oil, 221 u.s. at 49 (interpreting sherman act in light of common law). "often" use the rule of reason and "sometimes" apply the per se rule, thus diverging from the majority view that the restraint may have pro-competitive effects, the rule of reason is better equipped to determine sherman act violations); see also texaco, inc. v. dagher, 547 u.s. 1, 5 (2006) (declaring rule of reason thus ensuring elevated profits. id. at 2717. according to the leegin majority, "a dominant retailer, for part ii examines the history of the supreme court's use of both the per se 127 s. ct. 2705, 2710 (2007) (presenting issue considered by united states supreme court), overruling dr. 2009] the rule of reason after leegin 937 employed by monopoly entities.109 co. v. john d. park & sons co., 220 u.s. 373 (1911); state oil co. v. khan, 522 u.s. 3, 7 (1997) (holding iii. analysis 25. see william l. letwin, congress and the sherman antitrust act: 1887-1890, 23 u. chi. l. rev. 221, leegin refused to sell additional items to kay's when the company because economic impact of restraint not obvious). key pieces of circumstantial evidence indicative of improper intent and is not holding, although not yet fully understood, will be significant for both 930 suffolk university law review [vol. xlii:919 and likely to encounter fatal problems. see id.; see also herbert hovenkamp, the antitrust enterprise: every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or the court, however, was not persuaded to a producer is indicative of collusion among dealers (per se illegal horizontal integration) and an effort by to rule of reason). the court further notes the determination of whether a given restraint lacks pro-competitive 87. see leegin creative leather prods., inc. v. psks, inc., 127 s. ct. 2705, 2717 (2007) (recognizing (1911). the court first adopted the rule of reason in 1911 222-23 (1956) (recognizing trusts as main vehicle of monopolistic power during nineteenth century). around the most commonly cited examples of vertical co., 220 u.s. 373 (1911); dr. miles med. co., 220 u.s. at 408 (holding vertical price restraints subject to rule increase output. id. with the demonstrable economic utility of the vertical non-price restriction in question, led the court to often accompanied by pressure on a manufacturer to employ a similar vertical regardless of its designed to promote economic competition at the end of the nineteenth century. id. available to show the existence of the agreement and its scope of operation. as decision on a prior supreme court holding that assessed the policy rationale person who shall monopolize, or attempt to monopolize, or combine or conspire with any other factors to take into account include `specific information about the relevant business' and `the restraint's 936 suffolk university law review [vol. xlii:919 922 suffolk university law review [vol. xlii:919 to fix, supra note 12, at 115-16 (describing impact of leegin decision on producer-dealer dynamic). its decision in albrecht v. herald co.54 the court also reiterated its view v. pac. stationary & printing, co., 472 u.s. 284, 289-90 (1985)). the per se standard, unlike the rule of most important brand and once accounted for nearly 50 percent of the store's profits. id. admittedly reluctant to conduct. furthermore, market share serves as one of the of leegin products from discounting leegin products below certain stipulated furthermore, based upon its surrounding enormous corporate organization and the ensuing accumulation of i. introduction federal district courts must begin to operate on the premise that businesses retailers. id. at 40. the unlawful use of resale price maintenance schemes by non-monopoly the se rule to non-price restrictions in schwinn. id. at 50. according to the court, n. pac. ry. co. established the manufacturers or producers, while those subject to them are referred to as otherwise, to stifle competition and artificially increase prices.27 product.'" id. (quoting cont'l t.v., 433 u.s. at 52 n.19). states, 356 u.s. 1, 5 (1958). application of the per se rule therefore requires a determination that anti- price restraints under the rule of reason.81 classified as per se violations of the sherman act." white motor co., 372 u.s. at 263. this analysis, coupled as a result, the court's reasoning in continental t.v., and specifically its reliance on restraints. a party alleging injury from a vertical agreement setting minimum 99. cf. leegin, 127 s. ct. at 2719-20 (suggesting increased scrutiny necessary where producers have 9. see leegin, 127 s. ct. at 2715-16 (describing resale price maintenance schemes). 69. see id. at 2711 (describing leegin price policy). according to leegin, the company adopted the price "unreasonable" restraints on trade are unlawful. see infra note 24 and accompanying text (quoting pertinent essential "services and conveniences which consumers desire and for which they are willing to pay." id. at horizontal price restraints because of their consistent economic impact. id. at 408. ultimately, the court restraints if the manufacturer believes it needs access to the retailer's distribution network." id. its home entertainment products division. id. at 38. the restraint employed by gte sylvania required that violation of the sherman act.76 and effect. id. an additional factor to consider when assessing the potential economic impact of a vertical 88. see id. at 2712 (listing relevant factors considered in rule of reason analysis). according to the a particular market.32 reason as the accepted standard to determine whether a practice violates the power for two reasons.106 vertical price restraints.15 agreements with, various persons, firms, corporations, and limited partnerships . . . for the purpose of more important that the applicable rule of law be settled than that it be settled right.'" id. (quoting khan, 522 compete for business on a basis other than price, such as promotional efforts or other tangible services. id. best interest). 72. see leegin, 127 s. ct. at 2712 (naming psks, inc. plaintiff versus leegin, inc.). according to the restriction), with dr. miles, 220 u.s. at 404-07 (comparing defendant's price restriction with common-law natural mechanism and because producers generally act in their own best interest. id. aside from market share controlling the transportation therein, and thereby restraining trade and commerce among the several rather than simply noting that an accurate assessment of their economic effect can only be achieved on a case- this decision, the court noted that restraints on trade are the primary mechanisms that large monopoly different directions." id. (referring to potential anti-competitive and benefits of minimum resale price created by retailers who spend money on promotional services, thus forcing them to maintain higher prices. id. abundance of supreme court antitrust jurisprudence, including the leegin b. the united states supreme court and the sherman act of minimum price restraints by monopoly enterprises.111 41. see dr. miles med. co. v. john d. park & sons co., 220 u.s. 373, 406 (1911) (using reasonable maintenance requires extensive case-by-case analysis that federal courts are consisting of only two sections, states in pertinent part, united states district court for the northern district of california relied given society's interest in consistent and predictable manufacturers, including leegin. id. in particular, kay's carried the brighton brand of leegin products. id. at indeed, this evidence is circumstantial inc. v. psks, inc. in 2007. the leegin decision limited the per se approach to which businesses instituted a vertical price restraint for an improper and illegal principle and execution 105 (2005) (noting complexity of litigating a rule of reason case). the court disregarded inc., 127 s. ct. 2705 (2007), with n. pac. ry. co. v. united states, 356 u.s. 1, 5 (1958) (holding horizontal whether restraint is per se unlawful); infra note 14 and accompanying text (noting court's formalistic view of upscale manufacturer. id. circumstantial evidence in applying rule of reason). the court recognized that, in addition to hard economic under sherman act). d. park & sons co., 220 u.s. 373 (1911). accordingly, courts have rule in light of n. pac. ry. co.). the court elected to re-examine their schwinn holding to determine if use of language contained in sherman act). [hereinafter license to fix] (describing leegin's likely effect on franchisors and manufacturers). rule to both price and non-price vertical restraints, leading ultimately to the 768 (1984)) (stressing importance of market share to rule of reason analysis); see also license to fix, supra price levels for products that the retailer did not intend to reorder, kay's conceded this was not the case. id. data regarding the effect of a given restraint on competition, the fact-finder may use circumstantial evidence to schemes). economic analysis in the antitrust arena courts must standard oil, 221 u.s. at 32. v. united states, 356 u.s. 1, 5 (1958) (holding horizontal price restraints per se illegal under sherman act). non-price restraints. id. at 116. following analysis will focus on two issues: (1) why the leegin decision 28. see 10a william meade fletcher, fletcher cyclopedia of the law of private district court's application of per se rule due to uncertain impact of price maintenance). compare brief for 82. see leegin, 127 s. ct. at 2714 (describing reliance on per se rule in dr. miles as "formalistic"). 127 s. ct. at 2712 (describing central issue considered by court). price maintenance is insufficient to validate application of the rule of reason. see id. at 2728-31 (breyer, j., notions evolve over time, "so too does the sherman act's prohibition on `restraint[s] of trade' evolve to meet overruled by leegin creative leather prods., inc. v. psks, inc., 127 s. ct. 2705 (2007). incentive to act unlawfully). obtained the station's gasoline supply at a retail price set by the defendant less a margin of 3.25 cents per there is strong argument, therefore, to suggest that vertical minimum price visits wal-mart: finding the right lens for antitrust, 39 conn. l. rev. 1307, 1313 (2006) [hereinafter objective than most others that consider vertical price and non-price restraints standard to assess contracts in restraint of trade), overruled by leegin creative leather prods., inc. v. psks, cases). the idea of using circumstantial evidence to establish presumptions is not necessarily novel and is even reason to defendant's non-price restriction), aff'd, 433 u.s. 36 (1977). expert testimony concerning the pro-competitive effects of the retail pricing policy; however, the district court commerce among the several states, or with foreign nations, is declared to be illegal . . . . every producer-dealer relationship). per se unlawful under act); united states v. arnold, schwinn and co., 388 u.s. 365, 379 (1967) (holding non- involved and the market as a whole.88 potential pro-competitive effects of resale price maintenance), overruling dr. miles med. co. v. john d. park large that by 1900, the company controlled almost 90 percent of all refined oil 73. see id. (reciting federal district court's holding in favor of plaintiff). leegin intended to introduce characterizations and allow the court to assess the actual effect of a given restraint on private entities and the market as a whole.16 effects on the market.44 rule and the rule of reason to scrutinize both horizontal and vertical price 377. the court determined this conduct violates section i of the sherman act because it directly restricts the consumer-based monopoly capable of reducing prices by same mechanism as corporate monopoly). magoo] (describing ability of firm with large market share to manipulate price); cf. roger g. noll, "buyer" congress enacted the sherman antitrust act in 1890, and it remains the producers does not provide the same precursors as the use of similar restraints furthermore, applying the rule of reason these wealthy corporations were beginning to use their power, financial and the difficult task of determining on a case-by-case basis what conduct the act for much of the twentieth century, the court applied the per se rule to the standard oil company had grown so until 2007, each paper at or below a designated maximum retail price, or else face termination of its wholesale agreement consequently, producer-dealer relationship.19 restraints). in cont'l t.v., the court elected to assess vertical non-price restraints under the rule of reason in 2009] the rule of reason after leegin 929 the sherman act, the per se regime began in 1911 when the court applied the j.l. & econ. 363, 373-74 (1985) (describing power of retail cartel to compel resale price maintenance by theory requires use of the rule of reason to account for potential pro-competitive uses of vertical minimum price restraints in lieu of minimum resale price restraints because courts often overlook the improper implications of act); see also khan, 522 u.s. at 10 (stating not all price restraints judged according to rule of reason analysis). language of the act.40 17. infra part iii.a (discussing potential impact of leegin holding). maintenance). the dissenting justices note that the mere possibility of pro-competitive justifications for resale the per se rule to resale price maintenance schemes in dr. miles medical co. v. court's application of the rule of reason to resale price maintenance on the inc., 127 s. ct. 2705 (2007). the analysis described in dr. miles is really an antiquated form of the rule of price maintenance `always or almost always tend[s] to restrict competition and cont'l t.v., 433 u.s. at 54-57 (reviewing scholarly works describing economic effects of vertical price standard oil ultimately held that the sherman act proscribed horizontally minimum resale price maintenance is a type of vertical price restraint 32. see standard oil v. united states, 221 u.s. 1, 32-33 (1910) (describing characteristics of standard oil vertical minimum resale price maintenance schemes, such as those employed id. producers can merely employ a non-price restraint to obtain the same result as resale price maintenance. according to justice kennedy's majority opinion, "[w]e granted certiorari to determine whether vertical non-price restraints already assessed under the rule of reason may be used to determined minimum retail price maintenance schemes have similar economic impacts as horizontal schemes, in restraint of trade under the rule of reason, except for horizontal price fixing and trusts). regard to vertical price and non-price restraints. at 2715-16. but see brief in opposition at 20, leegin, 127 s. ct. 2705 (no. 06-480) [hereinafter brief in act, it recognized that some restraints are per se unlawful because of their resale price schemes designed with an improper purpose are more notable when 35. see supra text accompanying note 30 (quoting alleged conduct violating sherman act). 56. compare albrecht v. herald co., 390 u.s. 145, 152 (1968) (rejecting maximum price scheme under administrative system the effects of which depend upon the content of rules and precedents only as they are of the sherman act was to benefit producers or consumers. id. at 359. on one hand, the act serves to control signaled a dramatic shift in the court's ability to recognize and interpret (2007). 5. see khan, 522 u.s. at 10 (noting not all price restraints assessed according to rule of reason). dissenting). according to the dissent, the rule of reason is only as effective as the court's ability to properly sure to accompany judicial decision-making based on a purely economic recognize self-protection mechanisms amongst manufacturers and retailers that limit the use of such schemes to price restraints per se illegal under sherman act). 114. see supra note 73 and accompanying text (outlining potential pro-competitive uses of resale price 2. non-monopoly producers minimum price restraints employed by dealers are those designed to organize for example, courts deem horizontal price restraints--those occurring miles med. co. v. john d. park & sons co., 220 u.s. 373 (1911). dismantled this holding.14 not a per se violation of act); cont'l t.v., inc. v. gte sylvania, inc., 433 u.s. 36, 57-58 (1977) (holding non- per se illegal in recognition of their consistent anti-competitive purpose and goods contracts that restrict a vendee's ability to subsequently trade or bargain (e.g., a restraint on alienation) court's futile effort to apply complex economic principles in merger case). 38. see united states v. nat'l retail lumber dealers ass'n, 40 f. supp. 448, 455 (d. colo. 1941) economic considerations inherent to rule of reason analysis.84 103. see howard p. marvel & stephen mccafferty, the welfare effects of resale price maintenance, 28 application of the rule of reason. see cont'l t.v., 433 u.s. at 57-58. dissenting) (disagreeing with rule of reason as dominant antitrust standard). according to the dissent, courts see also state oil v. khan, 522 u.s. 3, 10 (1997) (recognizing act's prohibition against unreasonable gas station and convenience store owned by the defendant. id. pursuant to this agreement, the plaintiff previously, there are several potential uses for resale price maintenance by indicative of unlawful intent.22 customers. id. according to the policy, "in this age of mega stores . . . consumers are perplexed by promises according to the court, "resale price maintenance could assist the [manufacturer] cartel in identifying price- 54. 390 u.s. 145 (1968). the defendant, the herald co., published a daily newspaper in the st. louis non-price restraints 15. see leegin, 127 s. ct. at 2714-17 (noting pro- and anti-competitive effects of resale price minimum resale price maintenance agreements should continue to be treated as per se unlawful." see leegin, at best and does not embody the essential element of the rule of reason: an alan greenspan, antitrust, in capitalism: the unknown ideal (signet 1986) (arguing monopoly power prior antitrust jurisprudence, however, this note will also generally discuss potential effects of the minimum price scheme.103 circumstances, however, certain anti-trade and anti-competitive restraints northern pacific railway co. and white motor co., paved the way for a learned that kay's discounted many leegin-manufactured products below as described restraint does not exhibit large market share or the ability to manipulate price. on the other hand, in a variety of instances a may arise that do not fit the general determination; however, such cases are not sufficiently common or early interpretations of the act proscribed all transactions and contracts that profit margins, while limiting or even eliminating the non-price competition they face. id. in addition to enforcing sherman act violations.119 second significant rejection of the stare decisis doctrine in state oil v. kahn.64 power, and courts thus must look elsewhere to infer the reasonableness of their rule of reason analysis takes into account several factors including specific information about the relevant the rule of reason after leegin: reconsidering the use of 85. see the doctor is out, supra note 12, at 2-3 (describing potential impact on manufacturers); license 115. see brief for economists, supra note 19, at 3 (describing incentive for non-monopoly producers to encounter when applying the rule of reason to resale price maintenance u.s. at 20). these concerns are especially prevalent in statutory interpretation. id. (citing hohn v. united decision.107 58. 433 u.s. 36 (1977). the defendant, gte sylvania inc., manufactured and sold television sets through section i of sherman act), with kiefer-stewart co. v. joseph e. seagram & sons, inc., 340 u.s. 211, 213 restraints by manufacturers not formerly comprehended by the dr. miles court. id. at 2720-21. id. indicates and economic study suggests that minimum retail price restraints can manufacturer and distributor are analogous to horizontal price agreements because a large body of antitrust not the manufacturer, gain from higher retail prices. the manufacturer often loses; interbrand competition between market participants at the same level of production or distribution-- part iii also examines problems courts may of product quality and support of product which we believe is lacking in these large stores. consumers are similar treatment under the sherman act, this premise may easily be used to argue adherence to stare decisis. application of the rule of reason by recognizing the pro-competitive benefits of (1988)) (noting pro-competitive and anti-competitive justifications of vertical minimum resale price 8. leegin creative leather prods., inc. v. psks, inc., 127 s. ct. 2705, 2710 (2007) (holding vertical 84. see leegin, 127 s. ct. at 2729-30 (breyer, j., dissenting) (describing lack of consensus regarding although the court acknowledged the rule of decipher the pro-competitive effects. see id. (noting difficulty in identifying actual effects of price restraints). purpose). the court deemed many restraints per se unlawful early in the act's invalidation of vertical maximum price fixing," which signaled the court's between the business and its dealers both accurately reflect the reasonableness price maintenance schemes, particularly where the entity employing the schemes employed by entities with a large market share because of the the likelihood that vertical minimum price restraints might inundate (articulating petitioner's argument in favor of remand). according to leegin, the trial judge committed although rejected by the fifth circuit court additionally, beginning in 1911 with the supreme court's landmark in 1997, the defendant leegin creative court determined the rule of reason should apply because the defendant's non- u.s. at 30 (stating allegedly unlawful conduct occurred between 1870 and 1882). the government charged "perhaps erroneous judgment of a seller for the forces of the competitive market may severely intrude upon the effects.87 the likely result. id. at 2714-17 (discussing economic effect of minimum retail price maintenance schemes); maintenance schemes in leegin creative leather products, inc. v. psks, inc.10 lower federal courts already have guidance in determining what constitutes theoretically the leegin decision could have vast economic implications for illegal without elaborate inquiry as to the precise harm they have caused." see n. pac. ry. co. v. united nature, and effect'" to appropriately assess the reasonableness of a resale price restraint. id. (quoting state oil although (1997) (noting primary purpose of antitrust laws to protect and stimulate interbrand competition). the majority the sherman act is the most important and influential mainstay in antitrust despite these restraints, the application the court suddenly shifted to a rule of reason standard.45 6. see n. pac. ry. co., 356 u.s. at 5 (holding all horizontal price restraints per se illegal under sherman instances in which the benefits are likely to outweigh potential harms? my own answer is, not very easily." id. 2710. originally found exclusively on leather belts, the brighton brand name eventually expanded into a receiving similar treatment under the sherman act, maximum price schemes essentially mimic minimum price defendant's restraint was per se illegal under section i of the sherman act.49 this portion of the clayton act allows private parties to sue in federal district court for violations of the 116. see leegin, 127 s. ct. at 2712 (noting relevant factors defining rule of reason). the "history, nature 3. see texaco, inc. v. dagher, 547 u.s. 1, 5 (2006) (describing rule of reason as essential tool to assess premised the act on the theory that the unrestrained interaction of competitive the per se rule was warranted because the district court's original holding relied on their application of the per the 62. see cont'l t.v., inc. v. gte sylvania, inc., 433 u.s. 36, 50-52 (1977) (assessing application of per se schemes). rule of reason and advocates for courts to use important circumstantial evidence stringent rule of reason standard.74 the rule of reason standard might prove difficult in its application to retail price less than the defendant's retail price would reduce the plaintiff's price margin of 3.25 cents per gallon. violation of sherman act), vacated, 522 u.s. 3 (1997). according to the court, the restriction amounted to a profits. id. according to the court, "[t]he antitrust outcome does not turn merely on the presence of sound 2009] the rule of reason after leegin 933 although resale price maintenance does not necessarily exhibit manifestly anti- "once experience with a particular kind of restraint enables the court to predict with confidence that the rule of miles med. co. v. john d. park & sons co., 220 u.s. 373 (1911). main concern voiced by both the plaintiffs and the court was the general anti- 77. see leegin, 127 s. ct. at 2713-14 (reaffirming rule of reason as accepted standard to assess potential power and economic policy, 72 antitrust l.j. 589, 589 (2005) [hereinafter buyer power] (describing marketplace.25 in the manufacturing of exclusive pharmaceuticals. id. at 394. the defendant established minimum prices at accepted standard to determine sherman act violations). but see leegin, 127 s. ct. at 2726 (breyer, j., court cases extending application of rule of reason after 1968). psks, inc., and kay's 52. see id. at 375-77 (comparing schwinn non-price restraint to price restraints on alienation generally). 926 suffolk university law review [vol. xlii:919 the court concluded that where the distributor purchases goods from a manufacturer, and owns them outright, 106. see infra notes 107-08 (discussing increased awareness of antitrust laws by business leaders). determining intent absent excessive market share, however, may cutting manufacturers who benefit from the lower prices they offer." id. at 2716. while this first example as a preliminary matter, this note will describe the general policy concerns although the court previously departed from the per se rule in other cases, 112. see brief for economists, supra note 19, at 3-4 (noting price and non-price restraints "substantially resale price maintenance). higher prices can be accomplished directly by entities with large market share or as policy to enhance their brand name because discount prices offered at large corporate stores often confuse rather, the nature of the business employing the restraint and the relationship 113. see brief for economists, supra note 19, at 3-4 (indicating similar economic impact of vertical price ultimately, the appeals the proper standard for determining whether courts should analyze a particular restraint under the rule of defendant's price scheme in recognition of albrecht's faulty reasoning.66 of appeals, this argument served as the basis for review by the supreme court given price restraint.93 merging of law and economics, 74 harv. l. rev. 226, 238-47 (1960) [hereinafter section 7] (describing courts must use this information to infer the restraint's purpose and its intended light of their potentially pro-competitive effects. 433 u.s. at 54-58. court reasoned that "[t]here is insufficient economic justification for per se be an effective tool in many respects, it does not necessarily produce timely or consistent results in a legal 13. see leegin, 127 s. ct. at 2713 (describing court's reluctance to apply per se rule absent considerable when considering what conduct violates the act.39 33. see id. at 72-75 (holding standard oil trust violated sherman act by stifling competition); supra text noted that antitrust jurisprudence subsequent to the dr. miles decision has affirmatively established the many court concluded, "it cannot be stated with any degree of confidence that resale that the standard oil monopoly, although especially dominant and formidable for its time, benefited society and ability to manipulate price do not effectively indicate intent.118 part iii cautions decreased demand for their products. id. competitive restraints and to promote pro-competitive ones."1 contract or agreement with its dealers, restricted the resale of products to charge only those prices fixed by leegin." id. (internal quotations omitted). [t]he said individual defendants, in connection with the standard oil company . . . entered into non-existent pro-competitive effects.42 63. see cont'l t.v., 433 u.s. at 57-58 (abandoning the schwinn holding). resale price maintenance). decrease output.'"79 john d. park & sons co., 220 u.s. 373, 408 (1911) (holding minimum retail price scheme per se illegal), courts shall assess legality of vertical price restraints according to rule of reason), overruling dr. miles med. manufacturers of the same or a similar product. see id.; see also state oil co. v. khan, 522 u.s. 3, 14-15 court also moved toward extending the per se rule to vertical price restraints 2009] the rule of reason after leegin 935 note will focus exclusively on this business relationship. see id.; see also infra parts iii.b.1, iii.b.2 (assessing equipped to separate economic fact from fiction, but the nature of retail price any significant degree of accuracy what these implications will be.85 subscribers along the plaintiff's route that herald could deliver the paper directly at a lower cost. id. as a characterize the sherman act as prohibiting only unreasonable restraints on trade or commerce. id. at 406-07. or enhance a retailer-based cartel.102 although the court in proscribes.37 act.72 the antitrust laws because they have similar overall economic impact.113 reasoning, the court overruled the schwinn holding and refused to characterize to determine whether a given price restraint violates the act.3 vertical minimum price restraints may eliminate free-riding retailers who benefit from increased demand copperweld corp. v. independence tube corp., 467 u.s. 752, 768 (1984)) (noting importance of market share unwillingness to accept the economic assumptions underlying albrecht.67 undoubtedly set minimum price levels above competitive rates, which is a clear 2002, leegin discovered that kay's discounted all brighton brand-name products by 20 percent. id. despite 119. see supra part iii.b (discussing difficulty of applying rule of reason to resale price maintenance categorized this reliance as "extraneous to the question that controls here," particularly because the doctrine agreements.23 see bus. elecs. corp. v. sharp elecs. corp., 485 u.s. 717, 723 (1988) (quoting nw. wholesale stationers, inc. id. he believes, however, that the application of these criteria to a given resale price scheme is impracticable outweigh any pro-competitive consequences. id. thus, use of the rule reflects the general policy that cases standard to resale price maintenance schemes will certainly have lasting effects after the act's inception, for example, a district court interpreted producer may employ a vertical minimum price scheme without running afoul inc., 433 u.s. 36, 57-58 (1977) (holding non-price vertical restraints subject to rule of reason due to pro- restraint's legality under the act. id. at 59-60; see also fletcher, supra note 28, � 4982 (detailing vague leather products, inc., a national manufacturer of leather clothing and apparel, applied by judges and juries in courts and by lawyers . . . ." id. in other words, while economic analysis may resale price maintenance), with brief in opposition, supra note 79, at 15-20 (arguing resale price maintenance by the justification for applying the per se rule to vertical minimum resale price standard, however, does not govern all price restraints.5 purpose.95 most preeminent piece of american antitrust legislation today.24 reasonableness. see id.; see also supra text accompanying note 6 (describing proper standard to determine in limited manufacturer). compelled by the power of the retail cartel, the manufacturer will institute a resale price policy retailers and enable value-added services and promotional efforts. see leegin, 127 s. ct. at 2715. moreover, 117. see supra text accompanying note 105 (assessing pro-competitive and anti-competitive incentives for cont'l t.v., 433 u.s. at 50. in reference to the restraint at issue, the court in white motor noted, "we need to indication of improper intent easily recognized by courts.108 which all vendees and distributors (also known as dealers) were required to sell dr. miles's products. id. this instances where anti-competitive harms are more likely from instances where benefits are likely to be found." 96. see license to fix, supra note 12, at 114-15 (describing improper dealer actions after leegin). id. although the retail price agreement allowed for temporary discounts of leegin products below stipulated monopoly, a corporate enterprise designed to control and manipulate supply in competition and trade in the market and is thus per se illegal under section i of manufacturer might consider it has little choice but to accommodate the retailer's demands for vertical price provide courts with an incentive to examine their use more critically.100 subsequently sued leegin in federal district court alleging leegin's retail the united states supreme court has long distinguished between horizontal 59. see id. at 40. the defendant's proposed instruction would have had the jury find the restriction small clothing boutique that carried a variety of leegin-manufactured 98. see id. at 2719 (describing interbrand competition dynamic). according to the court, "the retailers, competitive effects of resale price maintenance). have avoided potential confusion by maintaining the status quo and applying a efficient production and lower prices than a regulated market can provide. id. greenspan argues, for example, co., 226 f. 62, 66 (w.d.n.y. 1915) (asserting "restraint of trade" not inherently synonymous with "restraint of 97 and accompanying text (predicting likely use of vertical minimum price restraints by producers and dealers). justifications of minimum retail price maintenance schemes from economic study in an attempt to determine competitive effects); dr. miles med. co. v. john d. park & sons co., 220 u.s. 373, 408 (1911) (holding (1951) (likening maximum price maintenance scheme to minimum price scheme), and dr. miles med. co. v. 938 suffolk university law review [vol. xlii:919 pac. ry. co. that "there are certain agreements or practices which because of their pernicious effect on forces yields the best allocation of economic resources, the lowest prices, and extend per se rule to non-price vertical restraint). the court demonstrated a clear affinity for the rule of reason own independent assessment of the economic impact of such restraints, the 47. see dr. miles med. co. v. john d. park & sons co., 220 u.s. 373, 408-09 (1911) (likening restraint at 2730. justice breyer also notes that scholars have developed certain criteria "that will help courts separate enactment of sherman act). see generally christopher grandy, original intent and the sherman antitrust act: the leegin majority held that minimum retail price agreements are not effect.6 diminish free riding). all retailers subject to producer-mandated prices are unable to discount so they must the defendant's retail price had to be rebated to state oil pursuant to their agreement. id. at 7-8. likewise, any apparently instituted this distribution policy to advance sales, improve distributor and dealer stability, and raise worthy of per se treatment because of their potentially pro-competitive accurately predict and theorize a given restraint's economic and competitive and non-price restraints). although the amici argue that the restraints are identical in effect and should receive use this assumption to infer the purpose of a given vertical price policy, which 46. see dr. miles, 220 u.s. at 408 (holding minimum retail price maintenance scheme per se illegal under the rule of reason over the course of decisions, they can establish the litigation 11. see infra note 16 and accompanying text (suggesting rule of reason provides a more exact assessment know more than we do about the actual impact of these arrangements on competition to decide whether they application of the rule of reason to vertical minimum price restraints employed 76. see leegin creative leather prods., inc. v. psks, inc., 549 u.s. 1092 (2006) (granting certiorari). judge relied exclusively on the per se rule for vertical restraints established in dr miles and elected to exclude united states v. arnold, schwinn & co., 388 u.s. 365, 377 (1967) (describing anti-trade effect of non-price 50. 388 u.s. 365 (1967). legislators suspected that dr. miles, which likened the defendant's price restriction to an unlawful restraint on alienation. compare are just as likely to be used because large-scale producers generally use price further confused by the ever popular sale, sale, sale, etc." id. leegin claimed it set price levels to allow accompanying note 29 (describing method used to artificially manipulate prices). standard for determining the proper application of the per se rule. id. at 49-50. the court determined in n. moreover, with above-average market share may use resale price maintenance to maintain or increase their market share, variety of women's fashion accessories, many of which kay's sold. id. brighton eventually became kay's 153. furthermore, maximum price fixing may limit distribution to large firms capable of withstanding lower by leegin creative products, inc., should continue to be treated as a per se manufacturers, producers, dealers, and retailers, it is difficult to predict with restricting bargaining in order to influence price adversely affects the time congress enacted the sherman act, the word "trust" was synonymous with monopolistic practices. id. according to psks, inc. and kay's, the stores placed brighton products on sale to compete with nearby light of the vague language employed in section i. perhaps not surprisingly, this theory, however, continues to garner significant pricing policy artificially fixed prices in violation of section i of the sherman of the sherman act.104 producers regardless of market share or the ability to control supply and according to lockerby, a request for minimum resale price maintenance by a dealer, in this case a franchisee, 90. see infra note 91 and accompanying text (noting inherent ambiguity of retail price maintenance b. implementation of the rule of reason: practical concerns schemes). result, over 300 of the plaintiff's 1,200 existing customers switched to herald's direct delivery. id. first, courts are inherently suspicious of price john d. park & sons co., 220 u.s. 373 (1911). according to the dissent, "[l]aw, unlike economics, is an greenspan suggests that, historically speaking, trusts are a necessary part of an open market leading to more competitive effects as the supreme court suggests are required for per se "the rule of reason is designed and used to eliminate anti-competitive 60. see gte sylvania, inc. v. cont'l t.v., inc., 537 f.2d 980, 988 (9th cir. 1976) (applying rule of retailers appropriate margins to support leegin's marketing strategy, while maintaining leegin's status as an lower federal courts against using purely economic analysis when applying the 69. the restraint at issue concerned the placement of various limitations on wholesale distributors of schwinn 89. see id. at 2714 (conceding potential dual effect of minimum resale price maintenance); see also id. at of the sherman act prohibited the maximum retail price maintenance scheme 109. see leegin, 127 s. ct. at 2712 (citing copperweld corp. v. independence tube corp., 467 u.s. 752, per se illegal under act). but see white motor co. v. united states, 372 u.s. 253, 263 (1963) (declining to congress courts will undoubtedly encounter these producer- (noting act not intended to prohibit all contracts or agreements in restraint of trade). with herald. id. after the plaintiff carrier raised the retail price above the stipulated maximum, herald notified demonstrates that the restraint in question will almost always adversely affect competition. id. that is, where the ninth circuit court of appeals economic notions and enhanced economic analysis. the united states reasonableness of price restraint). it is important to note that, despite the act's precise language, only that led congress to enact section i of the sherman act in order to later 924 suffolk university law review [vol. xlii:919 this holding presupposes that courts are capable of determining the part ii also addresses the main policy concerns that caused restraints.20 of economic impact). generally.47 maintain lower prices). not only must non-monopoly producers compete with dealers on the basis of price, but inhibits competition and trade). although today the term "antitrust law" is somewhat anachronistic, the term is appropriate to describe a law schemes.56 example, manufacturers must compete for the business of dealers and will only considerations inherent in the rule of reason will best avoid the many problems retailers. id.; see also richard posner, antitrust law: an economic perspective 172-73 (2d ed. 2001) usually retailer). as is most often the case, manufacturers employ vertical minimum price restraints to obtain 7. 220 u.s. 373 (1911), overruled by leegin creative leather prods., inc. v. psks, inc., 127 s. ct. 2705 97. see leegin, 127 s. ct. at 2718-19 (describing manufacturer's preference to institute policies in own & sons co., 220 u.s. 373 (1911). the majority essentially precludes the application of the per se rule by the supreme court, on the other hand, declined to apply per se treatment to the products. id. at 371. in particular, schwinn instructed wholesalers to sell schwinn products "only to in 1911, as a result of the supreme court's holding, the decision in dr. miles medical co. v. john d. park & sons co.7 park & sons co.46 and dealers may also use them to lock in higher profits for themselves. id. finally, a manufacturer or retailer an unlawful minimum price restraint; the leegin opinion outlined situations in the united states supreme court granted certiorari to determine whether minimum price schemes, like that employed by schwinn. id. at 152. according to the court, to substitute the 12. see the doctor is out, but is resale price maintenance in?, dechert on point (dechert llp, new legality of vertical price restraints assessed according to rule of reason), overruling dr. miles med. co. v. john majority, courts must consider "`specific information about the relevant business' and `the restraint's history, although task for lower federal courts. 18. infra parts ii, iii (recapping history of sherman act and supreme court's efforts to preserve act's ct. at 2714. furthermore, the leegin court rejected the notion that vertical price agreements between consistently act in their own best interests when instituting price policies.97