State Regulation of Resale Price Maintenanceon the Internet: The Constitutional Problemswith the 2009 Amendment to theMaryland Antitrust Act

Table of ContentsI. Introduction 1112II. Background 1114A. Resale Price Maintenance Generally 11141. Resale Price Maintenance Defined 11142. The Incentive to Use Resale Price Maintenance 1115B. Resale Price Maintenance Under the Law 11161. The Per Se Rule Versus the Rule of Reason 11162. Resale Price Maintenance from Dr. Miles to Leegin 11183. The State Response to Leegin....... 1123III. Resale Price Maintenance Under the Rule of Reason 1124IV. Federal Preemption 1126V. The Commerce Clause 1133A. In Defense of the RPM Prohibition 11341. Impossibility of Compliance 11362. The Use of a Vertical Nonprice Restraint in Furtherance of a Price Restraint 11393. The Benefit to In-State Dealers 1140B. The Extraterritoriality Principle 11411. The Extraterritorial Reach 11422. The Intent of the Legislature 11453. Complying with Inconsistent Regulations 1145VI. Towards a Uniform Standard 1147VII. Conclusion.. 11491. IntroductionFor nearly a century, minimum resale price maintenance (RPM) was considered per se illegal1 under § 1 of the Sherman Act.2 Minimum RPM results from agreement between a manufacturer and a dealer to set a price below which the dealer cannot resell the manufacturer's product.3 In 2007, the United States Supreme Court, in Leegin Creative Leather Products, Inc. v. PSKS, Inc.,4 decided that the per se rule would no longer apply, and that RPM would be subject to the rule of reason.5 In contrast to the per se rule, the rule of reason requires the fact finder to weigh all aspects of the challenged practice to determine if it is an unreasonable restraint on competition.6 In response to Leegin, the General Assembly amended the Antitrust Act7 in 2009, hereinafter referred to as the Maryland RPM to prohibit per se the use of RPM.8 The RPM prohibition is the first and so far only state legislation expressly rejecting the application ofLeegin to state law.9Circumstances will likely arise where RPM would be found lawful in every state - except Maryland. Because virtually all courts consult federal antitrust precedent when interpreting state antitrust laws,10 courts will interpret state antitrust laws in accordance with Leegin and adopt the rule of reason as the standard applicable to RPM. Because the burden of proof under the rule of reason for antitrust plaintiff is very high, uses of RPM analyzed under the rule of reason post-Leegin will likely be upheld in all or almost all cases.11This Note demonstrates that although federal law does not preempt the RPM prohibition, the statute regulates commerce occurring wholly outside the state in violation of the dormant Commerce Clause. It begins by examining a hypothetical but nonetheless probable situation in which internet dealer located outside sells a product subject to manufacturer-imposed RPM to a consumer over the Internet. …