On Monday, March 26th, the Supreme Court will hear the case Leegin Creative Leather Products, Inc. v. PSKS, Inc. You may already be familiar with Brighton Handbags, a division of Leegin. Their website claims that they are the only major accessories line that coordinates from, “head to toe.” PSKS is a
Price fixing is illegal, per se, as decided under the case Dr. Miles Medical in 1911; however, in US v. Colgate (1919) the court made a concession to manufacturers, stating, "[manufacturer] may announce in advance the circumstances under which he will refuse to sell." Therefore, hypothetically, if I am manufacturer interesting in fixing prices, it would be per se illegal (no evidence of reasonableness would be admitted to the court in determining guilt) for me to agree with my retailers as to the prices they would set for my product and the punishment they would incur for deviating. However, under the Colgate doctrine, it would be legal for me, the manufacturer, inform retailers that it was their responsibility to make an independent decision concerning the prices they set for my product, but that I would refuse to supply them with anymore should they not following the suggested retail price. The line is, therefore, a bit blurry. Should Leegin do anything to enforce their minimum suggested prices, they find themselves dangerously close to vertical price fixing. However, it is well within their legal right to refuse to deal with certain retailers under certain circumstance that they’ve stated in advance.
The Leegin case coming before the Supreme Court is an important one because Leegin is asking the Court to overrule Dr. Miles Medical and its per se rule on price-fixing in favor of a rule of reason. Should Dr. Miles be overruled, future price fixing cases coming before the court would now be able to argue that their price-fixing strategy had other, perhaps, pro-competitive effects. In this case, Leegin argues that, "This pricing policy allows Leegin and others to build a strong brand name. All retailers are selling the same product at the same price, [Leegin] competes by providing additional services that would help Leegin stand out from consumers," Leegin's counsel said. "It provides a consumer-additional choice." (1) Economically, this means that consumers are gaining something from the high-prices that may be lost if you were able to buy a Brighton Bag at Wal-Mart - a brand name, an assurance that you could not have found the bag at a lower price, and certain standard product services.
This case is an important one and will be watched by the world of antitrust very closely.
(1) http://docket.medill.northwestern.edu/archives/004185.php
Posted by Tiffany Luong and Vicky Ukritnukun
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