Monday, August 25, 2008

Trade Regulation Tidbits

This posting was written by John W. Arden.

News, updates, and observations:

 While Senators Obama and McCain continue to square off on issues such as the Iraq War and the economy, they have engaged in precious little discussion about antitrust issues. Those neglected issues will be addressed at an antitrust debate between McCain and Obama supporters, scheduled for 12:15 p.m. Wednesday, September 24, at George Washington University Law School in Washington, D.C. Sponsored by the Antitrust and Consumer Law Section of the District of Columbia Bar, the program—“Antitrust Issues and the Presidential Campaign”—will feature William Kolasky discussing the views of Senator Obama and James Rill describing the positions of Senator McCain. Both Kolasky, senior partner at WilmerHale, and Rill, senior partner at Howrey LLP, have served in the Department of Justice Antitrust Division. Don Resnikoff, senior assistant attorney general with the District of Columbia, will serve as moderator. Further information about this event is available here on the website of the District of Columbia Bar.

 The American Antitrust Institute has endorsed efforts by consumer, public power, and commodity trade groups, among others, “to push through legislation to remove antitrust exemptions for U.S. railroads,” according to an August 20 announcement. Nearly 20 such organizations have announced their support of the proposed “Railroad Antitrust Enforcement Act,” which would eliminate “special antitrust exemptions that allow the nation’s freight railroads to avoid competition and therefore keep their rates artificially and unfairly high.” These “unjustifiably high rail rates” constitute a hidden tax on everyday items like food, electricity, paper, and manufactured goods, the groups maintained. “Imagine consolidations in the airline, telecom or pharmaceutical industries without the Department of Justice or the Federal Trade Commission ensuring consumers are protected through compliance with the nation’s antitrust laws. That’s exactly what happens in the railroad industry.” The proposed legislation is S. 722 and H.R. 1650. Further details on the AAI position appears here.

Is antitrust law becoming irrelevant to franchise lawyers? That is the question raised by noted franchise attorney Rupert M Barkoff in a recent “Franchising” column (New York Law Journal, July 28, 2008). Although knowledge of antitrust law was essential when Barkoff began practicing franchise law in the mid-1970s, things have changed. “As franchising became a more popular method of distributing goods and services, at the same time antitrust law moved heavily toward permitting franchisors more flexibility in structuring and administrating their franchise programs.” The antitrust view of vertical non-price restrictions changed dramatically in 1977, when Continental T.V., Inc. v. GTE Sylvania Inc. (433 U.S. 36, 1977-1 Trade Cases ¶61,488) made a franchisor’s customer and territorial restrictions subject to the rule of reason. Previously, those restrictions were considered per se illegal. Vertical price fixing by franchisors was historically considered per se illegal, until the Supreme Court eliminated the application of per se rule to maximum resale price fixing arrangements in 1997 (State Oil Co. v. Khan, 522 U.S. 3, 1997-2 Trade Cases ¶71,961, CCH Business Franchise Guide ¶11,274) and to minimum resale price fixing arrangements in 2007 (Leegin Creative Leather Products Inc. v. PSKS Inc., 2007-1 Trade Cases ¶75,753, CCH Business Franchise Guide ¶13,639). The Supreme Court held that, in some instances, maximum and even minimum price restrictions might enhance competition in the marketplace. The law of tying arrangements has also loosened its grip on franchisors since the early 1970s. In a series of decisions, courts have chiseled away at the per se treatment of tying arrangements, particularly in the franchise context. “This 30-year retrospective suggests that the antitrust laws cannot be ignored by the franchise legal community, but the in terrorem effect they once had on franchising has been mollified extensively,” Barkoff concluded. Full text of the article appears here.

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