Maryland Amends Antitrust Law to Make Resale Price Maintenance Per Se Illegal

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

Legislation clarifying that resale price maintenance (RPM), also known as vertical price fixing, remains per se illegal in the State of Maryland was signed into law on April 14 by Governor Martin O’Malley. The measure—Laws of 2009, Chapters 43 and 44—will take effect on October 1, 2009.

Response to Leegin Decision

The amendment to the Maryland Antitrust Act signifies the first legislative action taken to reverse the U.S. Supreme Court's ruling, in Leegin Creative Leather Products, Inc, v. PSKS, Inc. (2007-1 Trade Cases ¶75,753), that RPM should be held to a rule of reason standard rather than declared per se illegal under federal antitrust law.

For Maryland and other states that are statutorily-required to interpret their own antitrust laws in accordance with the prevailing judicial interpretations of federal antitrust law, the High Court’s ruling effectively changed state law as well.

During a Maryland Senate Judiciary Committee hearing on February 25, American Antitrust Institute President Albert Foer argued that the decision to apply the per se rule rather than the rule of reason standard “generally determines who wins an RPM case, and indeed determines whether legitimate cases are even initiated."

Foer contended that use of the rule of reason standard for RPM increases retail prices, primarily victimizing two groups—average retailers and end-use consumers—while protecting profit margins of manufacturers and mass merchandisers. Since the Leegin ruling was delivered, he noted, the practice of setting minimum prices has become far more commonplace.

Federal Legislative Efforts

The Maryland law is not the only initiative being taken to address or even undo the Supreme Court decision. A proposal to restore the rule of per se illegality for vertical agreements to fix minimum prices has been introduced by Sen. Herb Kohl (D-Wis.) in each of the last two sessions of Congress. Hearings on the current “Discount Pricing Consumer Protection Act” (S. 148) will be held in May.

At a meeting of retailers, online merchants, consumer advocates, and antitrust experts in Washington, D.C. last December, representatives from the House Judiciary Committee stated their intention to hold hearings to address the RPM issue this spring.

In February, the FTC began a series of workshops to address the problems of RPM by exploring how to best distinguish between uses of RPM that benefit consumers and those that do not. The next two workshops will be held in Washington, D.C. on May 20 and 21. At these workshops, panels will focus on the history of the practice, empirical evidence on the effects of RPM, and how it should be analyzed under the antitrust laws. Further information regarding these workshops can be found here on the FTC website.

While no other state has considered legislation similar to Maryland’s, more than 30 states took the position that RPM should remain per se illegal, in briefs with the Supreme Court during its consideration of the Leegin case. It is expected that the legislative action by the State of Maryland will prompt at least a few other states to follow its lead.