For decades, it has been a per se violation of U.S. antitrust law for manufacturers or distributors to specify retail selling prices. In the spirit of atomistic, unrestrained competition, retailers were free to set prices without undue interference from upstream channel participants. Attempts by manufacturers or other channel participants to restrict retail price setting initiatives were viewed by regulators as an unwarranted and illegal interference with the market mechanism. Restrictions on price setting initiatives would, it was argued, lessen competition and ultimately raise prices above competitive levels to the detriment of consumers. Recently, under the leadership of newly appointed Chief Justice Roberts, a more “business friendly” Supreme Court has reversed this policy; vertical price fixing is no longer a per se violation of U.S. antitrust law. By a five-to-four margin, the Court held in Leegin Creative Leather Products that manufacturers could, under certain circumstances, establish binding retail selling prices. Henceforth, retail price setting restrictions will be subject to a rule of reason evaluation whereby price restrictions will be assessed on a case-by-case basis. Proponents of the now-legal restrictions argue that this will ensure that merchandise sold through retail outlets will receive needed support, free riding will be reduced or eliminated, and new brand introduction will be facilitated. Critics argue that the Court's decision marks a return to the days of fair trading; marginal firms will be protected, so-called “inframarginal consumers” will be forced to pay for services they do not want or need, and prices for many branded products will rise, all to the detriment of consumer welfare.

The Supreme Court's Leegin decision overturned the longstanding rule of per se illegality for resale price maintenance and applied a rule of reason. One might think that the question whether a vertical “agreement” exists between a manufacturer and a dealer should not be affected by the mode of analysis to be applied after an agreement is found. First one asks whether an agreement exists, and determines whether the per se rule or rule of reason applies only after receiving an affirmative answer. Nevertheless, ever since Colgate the Supreme Court has generally taken a more restrictive approach on the agreement issue in resale price maintenance cases than in cases involving other vertical agreements. Unlike horizontal agreements among competitors, which are relatively uncommon, vertical agreements between actual or would-be suppliers and customers are everywhere, and include sales, licenses, franchises, employment agreements, and information arrangements. Their very ubiquity indicates that only a few will be of antitrust concern. Given the ubiquity of vertical agreements, we need to be clear on which ones should be of concern to antitrust law. Too many cases have asked whether an agreement is present without considering the nature of the agreement sought. Indeed, virtually every case alleging resale price maintenance or other vertical restraints involves firms who are the parties to some agreement. A curiosity of many dealer-complaint cases is their failure to identify the nature and content of the alleged complainer-manufacturer agreement. The apparent subject matter of the alleged agreement is not the plaintiff's destruction but the manufacturer's distribution policy and its implementation, the complainer's future behavior, or both. The tribunal must first define its concept of an agreement and then ask whether the defendant had a motive to enter into that agreement. If unilateral termination of a price cutter because of price cutting does not constitute an agreement, then no agreement exists unless there is a motive for and evidence of the manufacturer's agreement with some third party. In any event, the consequences of not finding an agreement are not quite the same when the underlying restraint is addressed under the rule of reason. Both unilateral and multilateral conduct that result in reduced output and higher prices are actionable, although unilateral conduct must meet the somewhat stricter structural standards of §2's monopolization or attempt offense.

This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work was reproduced from the original artifact, and remains as true to the original work as possible. Therefore, you will see the original copyright references, library stamps (as most of these works have been housed in our most important libraries around the world), and other notations in the work. This work is in the public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work.As a reproduction of a historical artifact, this work may contain missing or blurred pages, poor pictures, errant marks, etc. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.