Leegin Creative Leather Products, Inc. v. PSKS, Inc.

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Leegin Creative Leather Products, Inc. v. PSKS, Inc.
Seal of the United States Supreme Court.svg
Argued March 26, 2007
Decided June 28, 2007
Full case name Leegin Creative Leather Products, Inc. v. PSKS, Inc.
Citations 551 U.S. 877 (more)
127 S.Ct. 2705, 168 L.Ed.2d 623
Prior history Certiorari to the United States Court of Appeals for the Fifth Circuit
Holding
Dr. Miles is overruled and vertical price restraints are to be judged by the rule of reason.
Court membership
Case opinions
Majority Kennedy, joined by Roberts, Scalia, Thomas, Alito
Dissent Breyer, joined by Stevens, Souter, Ginsburg
Laws applied
Sherman Act

Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007), is a US antitrust case in which the United States Supreme Court reversed the 96-year-old doctrine that vertical price restraints were illegal per se under Section 1 of the Sherman Act, replacing the older doctrine with the rule of reason.

The decision overruled a long-standing precedent, Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911).

Facts[edit]

Leegin, a manufacturer of leather apparel, concluded that its interests would be best served by opting out of a price war "race to the bottom," focusing instead on quality and brand cachet. Accordingly, with specific exceptions, it decided to refuse sale to retailers if they intended to discount its products below their recommended retail price. Five years after this policy was introduced, Leegin discovered that Kay's Kloset was violating the policy by marking down the Leegin products by 20%. When Kay's refused to comply with Leegin's policy, Leegin cut them off. PSKS, the parent company of Kay's, sued charging that Leegin had violated antitrust laws when it entered into "agreements with retailers to charge only those prices fixed by Leegin." After the district court refused to hear testimony describing the procompetitive effects of Leegin's pricing policy, Leegin appealed seeking to have Dr. Miles overruled.

Judgment[edit]

Dr. Miles had become obsolete almost as soon as it was decided; the court started moving away from rigid per se rules in antitrust, both generally, see Standard Oil v. United States (decided only a month after Dr. Miles), and in the particular area of vertical restraints, see United States v. Colgate (1919). After a brief mid-century hiatus in which the court imposed a more social goals-oriented jurisprudence,[1] the court tacked back to an understanding of antitrust based on economics and allocative efficiency, primarily under the influence of Robert Bork's book The Antitrust Paradox. As this process rolled through cases like Continental v. GTE Sylvania (1977), State Oil Co. v. Khan (1997), and Verizon v. Trinko (2004), Dr. Miles became more and more anomalous.

In Leegin, the court resolved the tension by overruling Dr. Miles. Citing Bork, Ronald Coase, and others, the Court held that manufacturer-imposed minimum resale prices can lead retailers to compete efficiently for customer sales in ways other than cutting the retail price.

See also[edit]

References[edit]

  1. ^ United States v. Alcoa, for example, which inveighed that antitrust serve "the helplessness of individual before" "great aggregations of capital" by restricting industry to "small units"; see also United States v. Columbia Steel Co., 334 U.S. 495, 535-36 (1948) (Douglas, J., dissenting).

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