State AGs Continue To Prosecute Resale Price Maintenance After Leegin
By Jason Hicks
On March 27, 2008, the U.S. District Court for the Southern District of New York entered a Consent Decree in a case brought by the Attorneys General of New York, Illinois and Michigan against Herman Miller, a seller of high-end office chairs. The Complaint alleged that Herman Miller's suggested retail price policy ("SRP policy") was unlawful price fixing under state and federal antitrust laws. The policy forbade retailers from advertising Herman Miller's furniture below the suggested retail price or lose access to Herman Miller furniture for one year.
(The suggested retail price for Herman Miller's popular Aeron chair (which I used to have in my old office!) is over $900 -- although I have heard that you can purchase an Aeron chair for significantly less ).
In the Consent Decree, Herman Miller agreed to pay $750,000 and agreed not to enter into any agreement with any dealer to fix the resale price at which Herman Miller's chairs are advertised. Herman Miller also agreed not to terminate, suspend or fail to fill orders of any dealer in order to coerce the dealer to adhere to Herman Miller's suggested retail price. The Consent Order, however, provided that: "Herman Miller retains the unilateral right to terminate, suspend, or fail to fill orders of any dealer or reduce the supply of or discriminate in delivery, credit, or other terms provided to any Dealer for lawful business reasons..." This last provision allows Herman Miller to keep its Colgate policy. A Herman Miller representative stated: "It remains our contention that the law says we can have a minimum advertised pricing policy and that we can enforce that unilaterally."
The New York Attorneys General office began investigating Herman Miller in 2003, at which time minimum resale price maintenance was per se illegal under both federal and state antitrust laws. The Complaint and Consent Decree, however, were filed in March 2008. In the interim, the Supreme Court ruled that minimum vertical price fixing was not per se illegal under the Sherman Act. Therefore, at least for purposes of federal antitrust laws, the conduct that the state Attorneys General were challenging was not per se illegal and instead was to be judged under the rule of reason. It is unclear, however, how such conduct will be analyzed under state law. State courts may disagree with Leegin and hold that minimum vertical price fixing is still per se illegal under state antitrust laws. The Herman Miller Consent Decree demonstrates that, at the very least, state Attorneys General are still concerned about and willing to prosecute minimum retail price policies.
Neither the Complaint nor the Consent Decree addressed whether the challenged conduct was to be analyzed under the per se rule or the rule of reason. It is noteworthy that the Complaint did not allege that Herman Miller possessed a large share of the market or otherwise had market power -- nor did it analyze whether the SRP policy promoted competition against other brands of office chairs even if it reduced intrabrand price competition for Herman Miller's chair. The absence of such allegations suggests that the state Attorneys General may consider minimum vertical price fixing to be per se illegal, despite Leegin.
One explanation for this Consent Decree is that the state Attorneys General had already been investigating Herman Miller before the Supreme Court's decision in Leegin, and did not want to give up their investigation without something to show for it. Still the lesson to be learned from this case is that companies (even companies with small market share) need to be careful when dealing with any minimum retail price policy.
To learn more about Leegin, see this PowerPoint Presentation.
(The suggested retail price for Herman Miller's popular Aeron chair (which I used to have in my old office!) is over $900 -- although I have heard that you can purchase an Aeron chair for significantly less ).
In the Consent Decree, Herman Miller agreed to pay $750,000 and agreed not to enter into any agreement with any dealer to fix the resale price at which Herman Miller's chairs are advertised. Herman Miller also agreed not to terminate, suspend or fail to fill orders of any dealer in order to coerce the dealer to adhere to Herman Miller's suggested retail price. The Consent Order, however, provided that: "Herman Miller retains the unilateral right to terminate, suspend, or fail to fill orders of any dealer or reduce the supply of or discriminate in delivery, credit, or other terms provided to any Dealer for lawful business reasons..." This last provision allows Herman Miller to keep its Colgate policy. A Herman Miller representative stated: "It remains our contention that the law says we can have a minimum advertised pricing policy and that we can enforce that unilaterally."
The New York Attorneys General office began investigating Herman Miller in 2003, at which time minimum resale price maintenance was per se illegal under both federal and state antitrust laws. The Complaint and Consent Decree, however, were filed in March 2008. In the interim, the Supreme Court ruled that minimum vertical price fixing was not per se illegal under the Sherman Act. Therefore, at least for purposes of federal antitrust laws, the conduct that the state Attorneys General were challenging was not per se illegal and instead was to be judged under the rule of reason. It is unclear, however, how such conduct will be analyzed under state law. State courts may disagree with Leegin and hold that minimum vertical price fixing is still per se illegal under state antitrust laws. The Herman Miller Consent Decree demonstrates that, at the very least, state Attorneys General are still concerned about and willing to prosecute minimum retail price policies.
Neither the Complaint nor the Consent Decree addressed whether the challenged conduct was to be analyzed under the per se rule or the rule of reason. It is noteworthy that the Complaint did not allege that Herman Miller possessed a large share of the market or otherwise had market power -- nor did it analyze whether the SRP policy promoted competition against other brands of office chairs even if it reduced intrabrand price competition for Herman Miller's chair. The absence of such allegations suggests that the state Attorneys General may consider minimum vertical price fixing to be per se illegal, despite Leegin.
One explanation for this Consent Decree is that the state Attorneys General had already been investigating Herman Miller before the Supreme Court's decision in Leegin, and did not want to give up their investigation without something to show for it. Still the lesson to be learned from this case is that companies (even companies with small market share) need to be careful when dealing with any minimum retail price policy.
To learn more about Leegin, see this PowerPoint Presentation.
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