Leegin Creative Leather Products, Inc. v. PSKS, Inc.
PSKS, a retail women's clothing store, sued Leegin, a manufacturer of women's accessories, claiming that Leegin engaged in "vertical" price fixing that is illegal under the Sherman Antitrust Act, 15 U.S.C. sec. 1. In 1997, Leegin instituted the “Brighton Retail Pricing and Promotion Policy,” which stated that Leegin would do business only with retailers who followed Leegin's suggested retail prices for its Brighton products. In 2002, after learning that PSKS had violated Leegin’s pricing policy by placing PSKS’ entire line of Brighton products on sale, Leegin suspended all shipments of Brighton products to PSKS. PSKS, which was invested heavily in the Brighton line, lost sales and profits.
A jury found that Leegin and its retailers agreed to fix the retail prices of Brighton products, which caused PSKS to suffer antitrust injury. The jury awarded damages of $1.2 million to PSKS, which the district court trebled pursuant to 15 U.S.C. sec. 15(a). On appeal, Leegin challenged whether the jury should have applied a "per se" rule of price fixing to its case, or the more lenient "rule of reason." Under Dr. Miles Medical Co. v. John D. Park & Sons Co., the Supreme Court held that vertical price fixing is automatically (per se) an antitrust violation. The Fifth Circuit Court of Appeals affirmed the verdict, finding no reason not to apply the "per se" rule to Leegin.
Question Presented:
This Court has held that antitrust "per se rules are appropriate only for conduct that . . . would always or almost always tend to restrict competition." Modern economic analysis establishes that vertical minimum retail price maintenance does not meet this condition because the practice often has substantial competition-enhancing effects.
The question presented is whether vertical minimum resale price maintenance agreements should be deemed per se illegal under Section 1 of the Sherman Act, or whether they should instead be evaluated under the rule of reason.
