Monday, November 07, 2011

Senate Bill Restoring Per Se Rule for Resale Price Maintenance Passes Judiciary Committee

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The Senate Judiciary Committee has approved legislation that would restore the rule of per se illegality for minimum resale price maintenance (RPM). The committee ordered reported the proposed “Discount Pricing Consumer Protection Act” (S. 75) without amendment on November 3.

The measure would reinstate a rule that was overturned by a five-to-four decision of the U.S. Supreme Court in Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2007-1 Trade Cases ¶75,753).

Under Leegin, RPM agreements are judged under the rule of reason, which requires a fact finder to consider all of the circumstances to distinguish “between restraints with anticompetitive effect that are harmful to the consumer and restraints stimulating competition that are in the consumer's best interest.”

The Leegin decision overturned a nearly 100-year-old precedent, Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373, which made it per se illegal under Sec. 1 of the Sherman Act for a manufacturer and its distributor to agree on the minimum price the distributor can charge for the manufacturer's goods.

The bill was introduced by Senator Herb Kohl (D-WI), chairman of the Senate Antitrust, Competition Policy and Consumer Rights panel, in January. It is co-sponsored by Senators Dianne Feinstein (D-CA), Charles Schumer (D-NY), Richard Durbin (D-IL), Sheldon Whitehouse (D-RI), Amy Klobuchar (D-MN), Al Franken (D-MN), Ron Wyden (D-OR), and Richard Blumenthal (D-CT).

It is identical to legislation introduced in the last two Congresses. In the 111th Congress, the measure was approved by the Senate Judiciary Committee.

The proposal would amend Sec. 1 of the Sherman Act by adding after the first sentence the following:
“Any contract, combination, conspiracy or agreement setting a minimum price below which a product or service cannot be sold by a retailer, wholesaler, or distributor shall violate this Act.”
The provision would take effect 90 days after the date of enactment.

“Allowing manufacturers to set minimum retail prices threatens the very existence of discounting and discount stores, and causes higher prices for consumers,” Senator Kohl said in a November 3 statement, announcing the committee’s action. “This legislation will ensure that stores can sell products at a discounted rate, helping consumers to save more of their hard earned money.”

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