©2008 haynes and boone, llp national alcoholic beverage control association march 11, 2008 resale...
TRANSCRIPT
©2008 Haynes and Boone, LLP
National Alcoholic Beverage Control AssociationMarch 11, 2008
RESALE PRICE MAINTENANCEAFTER LEEGIN: AS CLEAR AS
MUD
Veronica KayneHaynes and Boone, LLPWashington, [email protected]
©2008 Haynes and Boone, LLP
Resale Price Maintenance Defined (1)
• Maximum RPM: a supplier sets the maximum price that resellers can charge their customers
• Minimum RPM: a supplier sets the minimum price that resellers can charge their customers
©2008 Haynes and Boone, LLP
Resale Price Maintenance Defined (2)
• Supplier: manufacturer, wholesaler, franchisor, intellectual property licensor.
• Reseller: wholesaler, franchisee, retailer, manufacturer of item made under an IP license
• “Supplier” and “Reseller” are in a vertical relationship in the supply chain
©2008 Haynes and Boone, LLP
Resale Price Maintenance: What It Is, and What It Isn’t (3)
• What It Is: the price to be charged by one buyer to another further down the supply chain: Manufacturer tells wholesaler what to charge retailer; franchisor tells franchisee what to tell consumer
• What It Isn’t: post-and-hold; below-cost prohibition; predatory pricing prohibition.
©2008 Haynes and Boone, LLP
The World Before Leegin
• 1911: Dr. Miles decision – resale price maintenance agreements are per se illegal.
• 1997: State Oil v. Kahn decision: maximum resale price maintenance agreements should be judged under the rule of reason
©2008 Haynes and Boone, LLP
How Leegin Changes The Law
• All forms of resale price maintenance, maximum and minimum, should be judged under the rule of reason.
©2008 Haynes and Boone, LLP
Why Change the Law?
• Rule of reason is the “norm”; per se treatment the exception.
• Dr. Miles was based on “formalistic line-drawing,” not economic inquiry.
• Modern economics offers many procompetitive justifications for RPM.
• There is no basis for blanket condemnation of potentially procompetitive practice.
©2008 Haynes and Boone, LLP
Other Legal Regimes Affect RPM
• State regulation – “franchise” or “open” or “control” state
• State antitrust law• Other state laws• Potential federal legislation
©2008 Haynes and Boone, LLP
What Would a Rule of Reason Analysis Look Like?
• In general:– product market definition– geographic market definition– anticompetitive effects not offset by
procompetitive benefits
©2008 Haynes and Boone, LLP
Anticompetitive Effects
• Higher prices and reduced output• Anticompetitive effects more likely
if:– defendant supplier has market power– retailers pushed for RPM – many suppliers have adopted RPM
©2008 Haynes and Boone, LLP
Procompetitive Benefits
• Decreased quality-adjusted price and increased output
• Procompetitive benefits could be the result of many activities, such as– increased point-of-sale service– increased advertising– improved shopping experience – store
amenities and location
©2008 Haynes and Boone, LLP
Adopting an RPM Policy
• What is the procompetitive objective?• Is the policy narrowly designed to achieve
the goal?• What do existing company documents say?• Does the supplier/retailer have market
power?• Do competitors have RPM policies?• Should the effect of the policy be examined
periodically?
©2008 Haynes and Boone, LLP
Leegin Provides Comfort on Other Practices
• Colgate-style unilateral price policies are still lawful; if a Colgate policy were found to have crossed the line into agreement, it would be judged under the rule of reason.
• Leegin reinforces that advertising restrictions are subject to the rule of reason.
©2008 Haynes and Boone, LLP
Conclusion
• Rule of reason treatment creates opportunity and uncertainty.
• Before opting for RPM policy, consider whether options will serve the purpose and whether other legal regimes affect the decision.
©2008 Haynes and Boone, LLP
www.haynesboone.com