Completion of the revolution in antitrust doctrine on restricted distribution: Leegin and its implications for EC competition law.(Symposium: A Continuing Symposium on Antitrust and the Roberts Court)

I. INTRODUCTION

The Supreme Court of the United States has, in a series of recent antitrust opinions, cut back and limited the types of antitrust claim that can successfully be brought before the U.S. courts and significantly raised the bar for antitrust plaintiffs. (1) For example, in F. Hoffmann-La Roche Ltd. v. Empagran S.A., (2) the Supreme Court reined in the circumstances in which foreign claimants are able to seek damages before the U.S. courts, in Verizon Communications Inc. v. Law Offices of Curtis V. Trinko LLP, (3) the Court, retreating from previous case law, adopted a "skeptical stance ... toward the benefits of judicial policing of refusals to deal" (4) and counselled generally against an undue expansion of section 2 of the Sherman Act liability, (5) in Illinois Tool Works Inc. v. Independent Ink, Inc., (6) the Court narrowed the scope of the per se rule against tying arrangements by abandoning the market power presumption in patent cases, in Bell Atlantic Corp. v. Twombly, (7) the Supreme Court stepped up the standard for pleading an antitrust complaint, obtaining discovery and surviving a motion to dismiss, and in Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., (8) the Supreme Court brought the law on the lawfulness of predatory bidding under section 2 into line with the case law on predatory pricing. On June 26, 2007, in the midst of a plethora of divergent views and opinions, the Supreme Court in Leegin Creative Leather Products Inc. v. PSKS, Inc. (9) overruled, five to four, the nearly century-old rule against minimum resale price maintenance (RPM), (10) holding that such arrangements should be analyzed under the rule of reason.

Not only does the judgment in Leegin take one further step in the shift away from the reliance on per se rules in antitrust cases, but it takes a final step in reversing the hostile treatment of vertical restraints on intrabrand competition. (11) In the middle of the 1970s many vertical intrabrand restraints such as minimum RPM, (12) maximum RPM (13) and customer and territorial restraints, (14) were illegal per se under section 1 of the Sherman Act. Sustained and widespread criticism of this position, challenge and an evolution in the objectives of antitrust law, however, led the Supreme Court to reconsider and disband these rules in subsequent years. In 1977, in its landmark opinion in Continental TV, Inc. v. GTE Sylvania, Inc., (15) the Supreme Court overruled the per se rule against nonprice intra-brand restraints (16) and instated the rule of reason as the prevailing and presumptive standard of antitrust analysis. Although this ruling left the per se rule against RPM in place, the Court began to whittle around its edges, paring it back to its minimum. In Monsanto Co. v. Spray-Rite Service Corp. (17) and Business Electronics Corp. v. Sharp Electronics Corp. (18) the Supreme Court raised the bar for those trying to prove the existence of a vertical price fixing agreement, and in State Oil v. Khan, (19) the Court overruled the per se rule against maximum RPM, commenting that its retention might actually harm both consumers and manufacturers. The opinion in Khan prompted Richard Posner to write:

 
   The revolution in antitrust doctrine on restricted distribution was 
   complete. Well, almost complete. The per se rule against resale 
   price maintenance remains. (20) 

The decision of the Roberts Court in Leegin Creative Leather Products Inc. v. PSKS, Inc., has now completed the revolution. In stark contrast to the position that existed in 1976, minimum RPM, maximum RPM and all nonprice intrabrand restraints are, in 2008, illegal only if proved to be in unreasonable restraint of trade under a rule of reason analysis.

In the EU, there has been a more gradual and less radical evolution in competition policy towards vertical agreements. Although the European Commission (the Commission) initially adopted a very interventionist policy and a formalistic approach to vertical agreements under Article 81 of the EC Treaty (EC), in 1999 it overhauled and modernized its interpretation and application of the rules in this sphere. The modernized regime is founded on:

(1) a block exemption on vertical restraints, Regulation 2790/1999 (the Verticals Regulation), (21) which exempts all vertical agreements that satisfy its criteria from Article 81(1)'s prohibition of restrictive agreements. Agreements complying with the terms of this Regulation are automatically valid and incapable of challenge (retrospectively at least) under Article 81; (22) and