The NAM filed an amicus brief urging the Supreme Court to revisit whether resale price maintenance should always be considered a violation of the antitrust laws subject to treble damages, or whether there are sometimes legitimate business and procompetitive justifications that a court should take into account.
This case arose when a manufacturer of women's leather goods and accessories, selling through boutiques offering personal service and attention, suspended sales to a store that was not respecting its suggested retail price policy. The manufacturer, Leegin Leather, had announced that it would not deal with retailers that discounted its products, in order to promote sales through retailers that provided more service, and to foster an "everyday fair price" approach that prevents customers from feeling cheated if they see the merchandise on sale after they have already bought it.
The company's pricing policy was successful, but the trial court refused to allow the company to introduce evidence of the procompetive justifications for the policy, relying on the 1911 Supreme Court decision in the Dr. Miles case that resale price maintenance is per se illegal.
On 6/28/07, the Supreme Court ruled 5 to 4 to overturn Dr. Miles. It ruled that resale price maintenance can have procompetitive justifications, and that a per se rule against it is inappropriate. Although the plaintiff won a jury verdict of nearly $4 million, the manufacturer may now introduce evidence that its pricing policy has procompetitive justifications.
The NAM has participated in several Supreme Court cases in which we argued in favor of a rational approach in this area. Giving manufacturers the flexibility to establish the price at which their products may be sold can provide a variety of procompetitive benefits, and can help prevent discount dealers from "free riding" on the efforts of their competitors. Often products, such as complex electronic equipment, require retailers that are willing to invest in sales education and advertising.
Our brief in this case argued that the artificial rule in Dr. Miles has forced courts to distort ordinary principles of contract law, and to treat non-price restraints differently, even though they are as important to competition and can have a greater effect on prices than minimum resale prices.