A Resale Price Maintenance Agreement

During the Great Depression of the 1930s, many U.S. states began to pass fair trade laws that allowed the resale price to be maintained. These laws should protect independent retailers from competition from department stores. As these laws allowed for vertical price agreements, they directly conflicted with the Sherman Antitrust Act, and Congress resurrected a special exception with the Miller-Tydings Act of 1937. This particular exception was extended in 1952 by the McGuire Act (which rejected a 1951 Supreme Court decision that resulted in a narrower reading of the Miller-Tydings Act). On June 28, 2007, the Supreme Court struck down Dr. Miles, which was discussed above, on the grounds that vertical price restrictions such as advertised minimum prices are not illegal per se, but should instead be judged on the “rule of reason.” Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007).

This is a radical change in the way lawyers and law enforcement agencies deal with the legality of contract minimum prices, essentially restoring resale pricing in the United States in most (but not all) commercial situations. In today`s economy, manufacturers (and suppliers) often enter into resale price maintenance contracts with distributors and retailers. These are agreements that set the minimum price at which a reseller can sell the producer`s product. This is a vertical pricing. Manufacturers and distributors have long been told that resale price maintenance agreements or vertical price restrictions – agreements in which manufacturers and distributors set the minimum price a distributor can charge for the manufacturer`s product – are out of bounds. But this thinking and approach to trade relations in the supply channel must now change. In Leegin, the Supreme Court ultimately struck down Dr. Miles and ruled that resale price maintenance contracts were not inherently illegal. It applied the same reasoning that underpinned its decisions in Sylvania and others, finding that non-tariff vertical restrictions were subject to the rule. In last week`s ruling, the Supreme Court definitively rejected the ban on resale sales contracts. Although fair trade laws prevent known brands from being used as “decoys” to attract customers to other brands, encouraged by merchants, it is generally accepted that maintaining resale prices or “fair trade” is not a real solution to problems arising from unfair and deceptive trade disputes or sales practices. According to a press release issued on 18 September 2020 by the Danish Competition Authority (the Authority), the Danish design company GUBI A/S entered into a transaction with the AMF and fined DKK 6 million (about 800,000 euros) for the resale price (…) The initial move to maintain the resale price in the 1880s reflected the success of brand promotion and the resulting increased competition among retailers.

U.S. manufacturers have been given more specific authority than in other parts of the world; The so-called “non-signatory” clause of the National Fair Trade Act made contractual prices agreed between a manufacturer and a licensed distributor mandatory for all resellers. (See Fair Trade Act.) The maintenance of resale prices by producers was weakened when wholesale trade, coupled with the growth of strong trading organizations, created competing interests in retail.