On the last day of its term the Supreme Court reversed a ruling that had stood for 96 years and ruled instead that it was not automatically a violation for manufacturers and distributors to enforce minimum retail pricing on retailers. The case, Leegin vs. PSKS, was based on an appeal from Leegin Creative Leather Products of a $1.2 million judgment stemming from the company's decision to cut off
In deciding in favor of Leegin the Supreme Court overturned the flat ban on resale price agreements, based on the Sherman Antitrust Act, enunciated by the Court in 1911 in the case involving Dr. Miles Medical Company. In that 1911 case, the court decided that these vertical pricing agreements did not benefit the consumer and banned them outright. Now, in a 5-4 decision, the Court's new conservative majority has decided that in certain cases these pricing agreements may actually promote competition.
The decision does not mean that it is now acceptable for manufacturers to immediately implement programs that will turn their 'minimum suggested retail prices' into ironclad minimum retail prices, which, if not followed at the retail level, would result in the cut-off of supply or other punitive measures. What the Supreme Court decision means is that cases involving the imposition of vertical pricing by producers and distributors will now be considered on a 'case-by-case' basis in which courts will endeavor to determine the impact of such a pricing policy on competition. The only certain outcome of the precedent-shattering decision will be a slew of court cases as various groups of manufacturers attempt to establish their right to control retail prices.
The arguments cited by the Justices in the Leegin case do provide some potential insights in how the courts might decide similar cases in the future. Leegin's pricing policy was part of a marketing strategy for an upscale line of leather goods that were to be sold only in small boutiques that could provide copious amounts of customer service, so customer service can be considered an important factor. The court also cited 'product demonstrations' and the provision of specialized consumer services -- two elements that could certainly apply to hobby game stores that regularly provide demonstration of new games and hold organized play events, while losing sales on the very products that they are demonstrating and supporting to non-brick-and-mortar Internet discounters. Using this criteria the Leegin decision would appear to clear the way for game manufacturers to implement minimum retail prices, but the companies will have to be prepared to litigate to gain this right -- and under antitrust laws litigants face the possibility of triple penalties if they lose.
