Resale Price Maintenance and Leegin: Opening Kay's Kloset Opened the Lid on Pandora's Box in Global Competition Law

I. INTRODUCTION II. RPM IN THE UNITED STATES FROM DR. MILES TO LEEGIN III. ECONOMICS WEIGHS IN IV. THE LANDSCAPE OF DIVERGENCE IN THE UNITED STATES A. State Level Divergence B. Federal Level Activity V. RPM IN THE EUROPEAN COMMUNITY VI. RPM IN NATIONAL JURISDICTIONS A. Mexico and Canada B. Australia C. United Kingdom D. France E. Spain F. Japan Go China VII. CONCLUSION VIII. AFTERWORD So, one conclusion in regard to globalization is that traditional U.S. view of antitrust, with all complexity of its historical development, is not necessarily exportable to rest of world; one must take account of political and social context of other countries' competition laws. (1) --Honorable Christopher Bellamy, Judge of Court of First Instance of European Communities More than any other single force, interaction of competition policy systems of EU and US deeply influences convergence process within all of multinational and regional networks.... What happens in EU and US does not stay there. (2) --William E. Kovacic, Chairman, Federal Commission I, for one, do not think that there is currently aNy 'right' way to resolve antitrust cases regardless whether they arise on this side or other side of Atlantic. As I have said on another occasion, it may be that it is best to let 'competition' between our 'differentiated products' play itself out. (3) --J. Thomas Rosch, Commissioner, Federal Commission I. INTRODUCTION In June 2007, U.S. Supreme Court turned almost 100 years of competition law on its head with its decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc. (4) In addition to its dismissal of near-century-old application of a per se rule to resale price maintenance (RPM), decision drove a deep wedge between manner in which vertical price fixing is treated in United States and under rest of world's competition law regimes. The divergence between postures of European Community and United States may be approached only by internal divergence between U.S. Supreme Court and federal enforcement officials (5) on one hand, and state attorneys general on other. The path through tangled branches of vertical price fixing thicket was a torturous one for so-called per se rule in antitrust analysis of vertical arrangements. It wended its way from birth of application of per se treatment of vertical price fixing in Dr. Miles Medical Co. v. Park & Sons Co. (6) involving patent medicines through antitrust exemptions for state Fair Trade laws provided by Miller-Tydings Act (7) and McGuire Acts and their eventual repeal. It continued on through condemnation of consignment in sale of motor fuel in Simpson v. Union Oil Co. (9) and finally of maximum resale price maintenance in Albrecht v. Herald (10) in 1968, which eventually led to 1997 decision in State Oil Co. v. Kahn, (11) in which Supreme Court removed per se label from maximum vertical price fixing, but stated that arrangements to fix minimum prices ... remain illegal per se. (12) Minimum resale price maintenance persisted as a per se antitrust offense in U.S. antitrust jurisprudence for a scant ten more years until Supreme Court concluded in 2007 in Leegin that the Court's more recent jurisprudence has rejected rationales on which Dr. Miles was based (13) and that the rule of reason, not a per se rule of unlawfulness ... [is] appropriate standard to judge vertical price restraints. (14) The Court noted some factors relevant to a rule of reason inquiry into situations involving vertical price restraint. These include pervasiveness of retail price restraint in an industry, source of restraint, and market dominance of manufacturer and/or retailer(s). …