Resale Price Maintenance in the Post-Leegin World: A Comparative Look at Recent Developments in the United States and European Union

Andrew Gavil, Jun 14, 2010

The conventional wisdom today holds that the federal law of vertical restraints in the United States has been “harmonized.” Thanks to the U.S. Supreme Court’s 2007 decision in Leegin, the nearly century-old per se rule that absolutely banned minimum resale price maintenance (“RPM”) has been abandoned. The more economically sound approach of the Court’s 1977 decision in Sylvania, which held that non-price intrabrand restraints should be judged under the “rule of reason,” has been extended to price restraints, which were largely indistinguishable in effect. As a consequence, vertical intrabrand price and non-restraints will be treated alike-both are presumptively unlikely to significantly harm competition. Suppliers may now freely choose from a full pallet of vertical restraints to accomplish their marketing goals, provided they do not unreasonably restrain trade in some very specific, narrowly defined ways.

The true picture is far less clear. Three years after Leegin, the state of RPM in the United States is surprisingly uncertain, and that uncertainty is a reminder of the complexity of the U.S. competition policy system. Many voices can now be heard in the post-Leegin debate-federal, state, public, and private-and at least three camps have formed. Whereas some would overrule Leegin and restore the per se rule of Dr. Miles, others would work within Leegin, accepting its invitation to develop a structured and tailored approach to applying the rule of reason to RPM. Still others would read Leegin for all it is worth and more, happily depositing concerns over RPM into the trash-bin of antitrust history.

This debate about RPM is not confined to the United States. The confluence of Leegin and the expiration of the E.U.’s decade-old Vertical Restraints Block Exemption Regulation have ignited a more global re-examination of the economic and legal standards for evaluating RPM. Although that re-examination has led to some visible movement by the European Commission in the direction of greater permissiveness, formally, European enforcement authorities remain far more sceptical of the supposed economic benefits of RPM than at least some of their U.S. counterparts. As a consequence, all of the views currently being advocated in the United States differ from that endorsed by the new Block Exemption in the E.U. Some would be more restrictive, whereas others would be more permissive. The middle ground that is most likely to emerge as the dominant view in the United States, however, suggests that at the end of this period of re-examination, the prevailing views in the United States and Europe will have become more closely aligned, although not fully converged. The differences will be reduced to the distance between cautious optimism and cautious pessimism. It is also likely that the positions will continue to converge over the next decade, but the direction of that convergence will depend upon what we learn about RPM-its uses and effects-in the intervening years.