Life After Dr. Miles

Cite this Article
Thomas A. Lambert, Life After Dr. Miles, Truth on the Market (August 18, 2008),

An article in today’s WSJ, Price-Fixing Makes Comeback After Supreme Court Ruling, reports that minimum resale price maintenance (i.e., the setting of minimum retail prices by product manufacturers) is increasing in light of last summer’s Leegin decision. That’s great news for me, because I’ve spent most of the summer cranking out an article on how exactly such price-fixing should be evaulated now that the Dr. Miles rule of per se legality is dead.

While there is an abundance of academic writing on the economic question of whether and under what conditions RPM may be anticompetitive, very little has been written on the legal question of exactly how courts should evaluate instances of RPM to determine their legality. My article aims to fill in that gap.

The article proceeds in three parts. Part I summarizes the economic literature on RPM, setting forth the anticompetitive risks the practice may pose, the procompetitive benefits it may provide, and the economic conditions that would support the various effects. Part II then summarizes and critiques six legal approaches to RPM that may conceivably govern in a post-Leegin world. The six approaches that have been proposed are: (1) an unstructured rule of reason (i.e., an approach based on Justice Brandeis’s famous “all things considered” version of the rule of reason); (2) a rule of per se legality (suggested by Judge Posner); (3) the approach proposed by a group of states attorneys general (it would require a procompetitive justification for RPM if the practice resulted in a price increase); (4) the approach set forth by the FTC in the Nine West matter (it would require a procompetitive justification if certain “Leegin factors” were present); (5) the approach proposed by economists William Comanor and F.M. Scherer (it would condemn dealer-initiated RPM and would subject all other RPM to a quantitative foreclosure test); and (6) the approach set forth in the Areeda/Hovenkamp treatise (it would allow a challenger to set forth a prima facie case on the basis of certain structural criteria and would then provide for an affirmative defense that the practice is procompetitive). Finding all of these approaches deficient, I set forth, in Part III of my article, an alternative approach. I’ll provide more detail on my approach in a subsequent post.

I wonder if I’ve left out any proposed rules of reason. Has anyone seen another proposal for how RPM should be evaluated post-Leegin? If so, I’d love to know!