Leegin Creative Leather Products, Inc. v. PSKS, Inc.
Citation: 551 U.S. 877 (Supreme Court, 2007)
Facts
Leegin Creative Leather Products manufactured leather goods and accessories sold under the “Brighton” brand. Leegin adopted a policy of refusing to sell to retailers who discounted its products below suggested retail prices. PSKS, a retail store that discounted Brighton products, sued after Leegin stopped supplying it, arguing that the vertical minimum resale price maintenance (RPM) agreement violated Sherman Act § 1 under the per se rule established in Dr. Miles Medical Co. v. John D. Park & Sons (1911).
Issue
Whether vertical minimum resale price maintenance agreements should continue to be treated as per se illegal under Sherman Act § 1, or whether they should be analyzed under the rule of reason.
Holding
The Supreme Court overruled Dr. Miles and held that vertical resale price maintenance agreements are subject to the rule of reason, not the per se rule.
Rule
Vertical minimum resale price maintenance is analyzed under the rule of reason. Courts must weigh the procompetitive effects (preventing free-riding, encouraging retailer services, facilitating entry) against anticompetitive effects (facilitating dealer or manufacturer cartels, reducing intrabrand competition) based on the specific facts of the case.
Significance
Leegin is one of the most significant antitrust decisions of the modern era because it overruled nearly a century of per se treatment for vertical RPM established in Dr. Miles. The decision reflects the Court’s broader embrace of economic analysis over categorical rules for vertical restraints, following Continental T.V. v. GTE Sylvania (1977). Leegin is a key case for understanding how the Court uses economic theory to reassign conduct between per se and rule of reason categories, and what counts as a procompetitive justification for resale price maintenance.