© 2014 Wiggin and Dana

The Future of Resale Price Maintenance

Presented by:

Robert M. LangerWiggin and Dana LLP

Conference of Western Attorneys GeneralPark City, UtahJuly 23, 2014

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Per Se Treatment of Resale Price Maintenance “RPM”

• Classic form of overregulation because– Legitimate problems of free-riding– Increases interbrand competition– Facilitate new entry and new products– Vast majority of economists, as well as DOJ

and FTC, support Rule of Reason treatment

– Absent significant market power, it provides for consumer choice

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Per Se Treatment of RPM, cont.

• Interbrand/intrabrand distinction drawn in Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977) in vertical non-price context is equally applicable with respect to RMP

• Administrative convenience is not a justification for per se treatment of a restraint that may be either procompetitive or anticompetitive, depending on the particular facts and circumstances, Leegin Creating Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 894-95 (2007).

• Even when RPM was per se lawful under certain state laws adopted in accord with the federal Miller-Tydings and McGuire Acts (1937-1975), “no more than a tiny fraction of manufacturers ever employed [RPM] contacts,” Leegin, 551 U.S. at 907.

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Post-Leegin Default position still per se rule

• Companies understand that some states have challenged and will continue to challenge RPM agreements as per se unlawful under state antitrust acts, e.g., New York, California and Maryland– Colgate doctrine, see United States v. Colgate & Co., 250 U.S.

300 (1919) and Minimum Advertised Price (“MAP”) policies are still ubiquitous

• Colgate compliance is incredibly complex and very expensive

– Subsequent to O’Brien v. Leegin Creative Leather Products, Inc., 277 P.3d 1062 (Kan. 2012), the Kansas legislature amended law to establish a Rule of Reason standard for RPM under the Kansas Restraint of Trade Act, Kan. Stat. Ann. § 50-163 (b)-(c).

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Post-Leegin, cont.• There has been very little exploration of the contours

of Leegin because of the dichotomy between federal and state antitrust law and enforcement and as a consequence, the obvious risks associated with RPM “agreements”

• Many states are “guided by” interpretations of federal law and thus Leegin obtain in their states– See, e.g., Navien American, Inc. v. Allen, 2011 WL

3925729 (Conn. Super. Ct. 2011)– Michael A. Lindsay, “Overview of State RPM,” THE

ANTITRUST SOURCE, ABA Section of Antitrust Law www.antitrustsource.com

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Query? Does current situation make sense? Should there be uniformity?

• Proposed legislation drafted by the ABA Section of Antitrust Law “Indirect Purchaser Task Force,” recommended establishing a uniform standard throughout the U.S., which would have overruled Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) and Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968), while establishing a presumption that the ultimate indirect purchaser was the injured party and granting state attorneys general authority to bring such claims [see 63 ANTITRUST L.J. 993 (1995)]

– Position supported by three Chairs of the NAAG Multistate Antitrust Task Force, Michael Brockmeyer, Laurel Price and me, each of whom served on the Indirect Purchaser Task Force; I also served as Chair

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Query? . . . , cont.• There are profound risks associated with significant differences

in state and federal substantive antitrust law– R. Langer, S. Wachsstock & E. Amarante, “So You Think

You’re Safe Under the Antitrust Laws? A Word of Advice to Those Who Would Ignore the States,” ANTITRUST REPORT (Matthew Bender, Fall 2002)

http://www.wiggin.com/files/Langer%20Bender%2011-02.pdf – R. Langer, E. Amarante & E. Zwicker, “So You Think You’re

Safe Under the Antitrust Laws? Another Word of Advice to Those Who Would Ignore the States,” ANTITRUST REPORT (Matthew Bender, Issue 4, 2010)

http://www.wiggin.com/files/19547_Antitrust%20Report,%2012.30.10,%20Langer,%20Amarante,%20Zwicker.pdf

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What of the Commerce Clause and the Supremacy Clause?

• California v. ARC America Corp., 490 U.S. 93 (1989) addressed difference in remedy not liability, citing California v. Zook, 336 U.S. 725 (1949) and Silkwood v. Kerr-McGee, 464 U.S. 238 (1984)

• Cases preempting state antitrust law

– Flood v. Kuhn, 443 F.2d 264 (2d. Cir. 1971)

– Robertson v. NBA, 389 F. Supp. 867 (S.D.N.Y. 1975)

– Partee v. San Diego Chargers Football Company, 668 P.3d 674 (Cal. 1983)

– Cornell Constr. Co. v. Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616 (1975)

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Commerce/Supremacy Clause, cont.• Importance of Rice v. Norman Williams Co., 458 U.S. 654, 661 (1982)

– “[A] state statute when considered in the abstract, may be condemned under the antitrust laws only if it mandates or authorizes conduct that necessarily constitutes a violation of the antitrust laws in all cases, or if it places irresistible pressure on a private party to violate the antitrust laws in order to comply with the statute. Such condemnation will follow under § 1 of the Sherman Act when the conduct contemplated by the statute is in all cases a per se violation. If the activity addressed by the statute does not fall into that category, and therefore must be analyzed under the rule of reason, the statute cannot be condemned in the abstract. Analysis under the rule of reason requires an examination of the circumstances underlying a particular economic practice, and therefore does not lend itself to a conclusion that a statute is facially inconsistent with federal antitrust laws.” [Emphasis supplied]

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Commerce/Supremacy Clause, cont.• Importance of Rice v. Norman Williams Co., 458 U.S. 654, 661

(1982)– RPM situation is, however, the converse of Rice, i.e., conduct

permitted under federal law that is prohibited under state law– Query? Are Rice and ARC America the appropriate

methodologies to evaluate the constitutionality of state antitrust laws that provide for per se treatment of RPM post-Leegin? See, e.g., Pliva v. Mensing, 131 S. Ct. 2567, 2577 (2011) (“‘[S]tate law is naturally preempted to the extent of any conflict with a federal statute.’ We have held that state and federal law conflict where it is ‘impossible for a private party to comply with both state and federal requirements.’”)

• Does Leegin thus create such a conflict within the meaning of the Supremacy Clause?

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Speaker Background

• Served as Assistant Attorney General – Connecticut Attorney General’s Office (“CT AGO”) for 21 years; head of Antitrust and Consumer Protection Department

• Adjunct law professor since 1979 teaching antitrust, trade regulation, consumer protection and constitutional law – University of Connecticut School of Business Administration, MBA Program; University of Connecticut School of Law

• Chair – NAAG Multistate Antitrust Task Force, 1990-1992

• Helped to pioneer multistate enforcement (“Chevymobile” case-1977) [1978 New York Times op-ed piece-next slide]

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Speaker Background, cont.

• Vigorously pursued RPM cases while in CT AGO

• Coined phrase “RPM Central,” see R. Langer, “A Cautionary Tale: State Enforcer’s Perspective on Vertical Restraints,” ANTITRUST (ABA Section of Antitrust Law, Vol. 8, No. 2, Spring 1991)

• Entered private practice in 1994

• Began advising business clients on distribution issues

• Represented PING; assisted with PING’s amicus brief in U.S. Supreme Court in Leegin, which overruled Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911)

– Not being compensated by PING or any other client