Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2006)
- Docket
- 06-480
- Decided
- 2006-01-01
Summary
Question: Is it per se illegal under Section 1 of the Sherman Act for a manufacturer to set mandatory minimum prices for its products? Conclusion: No. The Court ruled 5-4 that " Dr. Miles should be overruled and that vertical price restraints are to be judged by the rule of reason." Justice Anthony Kennedy's majority opinion held that Dr. Miles had erred by treating vertical minimum price agreements between manufacturers and retailers as analogous to horizontal price-fixing agreements between sellers. The Court cited evidence from the economic literature that vertical minimum price agreements are rarely anticompetitive and can often function to increase interbrand competition. The Court acknowledged that in some cases vertical price minimums might facilitate manufacturer cartels, but it held that instances where the price agreements are abused for illegal anticompetitive purposes can be determined on a case-by-case basis under the rule of reason. The mere fact that vertical price minimums may lead to higher prices for goods cannot reflect negatively on its legality under the Sherman Act, because there are many legitimate business decisions that may ultimately result in higher prices. The majority also acknowledged that the principle of stare decisis would weigh against overruling the nearly 100-year-old precedent in Dr. Miles , but it held that the Sherman Act is to be treated as a "common-law statute," which must be allowed to evolve in the courts as economic knowledge and circumstances change. The dissenters, in an opinion authored by Justice Stephen Breyer, saw no change in circumstances that would justify overruling Dr. Miles , and they argued that the reliance of the business community on that decision supported adherence to stare decisis .