In Leegin Creative Leather Prods. Inc. v. PSKS, Inc., 551 U.S. 877 (2007), the Court decided instead to apply the rule of reason to Leegin’s policy of setting the minimum price at which a dealer could resell its products. Since the Leegin decision, most of the cases relating to resale price maintenance have been brought under state antitrust statutes, which are modeled after the federal Sherman Antitrust Act.
Recently, the California Attorney General brought an action for violation of state antitrust and unfair competition laws against a cosmetics manufacturer in People v. Bioelements, Inc., No 10011659 (Cal. Sup. Ct. Jan. 11, 2011).
The manufacturer prohibited online retailers from discounting the prices at which they sold the manufacturer’s products. The case resulted in a consent judgment in which the manufacturer agreed to be enjoined from controlling internet prices.
Three days later, New York lost a similar case on a motion to dismiss. In People v. Tempur-Pedic Int’l, Inc., No. 400837/10 (N.Y. Sup. Ct. Jan. 14, 2011), the state’s Attorney General alleged that Tempur-Pedic violated state business laws by entering into agreements that fixed the prices resellers could charge for Tempur-Pedic products.
The New York court found that the state laws made such contracts unenforceable, but not unlawful.
The state’s claims against Tempur-Pedic could not stand because it had not entered into unlawful contracts, the court concluded.
The court found that Tempur-Pedic’s announced ‘policy’ of not doing business with retailers who substantially deviated from its suggested retail prices, unless the deviation was an isolated incident or related to a sale of discontinued merchandise, was a unilateral decision, and was not negotiable. The Court further noted that Tempur-Pedic’s policy also said that it neither solicited nor would it accept retailers’ agreement with the policy.
Carl E. Zwisler, IDI franchising Country Expert for U.S.A., Quentin Wittrock and Maisa Jean Frank, Gray Plant Mooty.
