Ways Around the Resale-Price Maintenance Limitations Under US Antitrust Law
As an antitrust attorney with an antitrust blog, my phone rings with a varied assortment of antitrust-related questions. One of the most common topics involvesresale-price maintenance. “Resale price maintenance” is also one of the most common search terms for this blog.
That is, people want to know when it is okay for suppliers or manufacturers to dictate or participate in price-setting by downstream retailers or distributors.
I think that resale-price maintenance creates so many inquiries for two reasons: First, it is something that a comparatively large number of companies need to consider, whether they are customers, suppliers, or retailers. Second, the law is confusing, muddled, and sometimes contradictory (especially between and among state and federal antitrust laws).
If you want background on resale-price maintenance, you can review my blog post on Leegin and federal antitrust law here, and you can read my post about resale-price maintenance under state antitrust laws here.
Here, we will discuss alternatives to resale-price maintenance agreements that may achieve similar objectives for manufacturers or suppliers.
The first and most common alternative utilizes what is called the Colgate doctrine.
The Colgate doctrine arises out of a 1919 Supreme Court decision that held that the Sherman Act does not prevent a manufacturer from announcing in advance the prices at which its goods may be resold and then refusing to deal with distributors and retailers that do not respect those prices.
Businesses—with the minor exception of the refusal-to-deal doctrine—have no general antitrust-law obligation to do business with any particular company and can thus unilaterally terminate distributors without antitrust consequences (in most instances; please consult an attorney).
Both federal and state antitrust law focuses on the agreement aspect of resale-price maintenance agreements. So if a company unilaterally announces minimum prices at which resellers must sell its products or face termination, the company is not, strictly speaking, entering an agreement.
The distributor that sells the suppliers products under those terms is not entering an agreement, it is merely complying with a unilateral policy set by the supplier.
As you might imagine, both suppliers and distributors have to be very careful or they can easily find themselves participating in a resale-price maintenance agreement, with potential antitrust liability. Antitrust-attorney guidance is a must here to make sure that a unilateral policy does not morph into an antitrust conspiracy under state or federal antitrust law.
Many companies, in fact, have—with antitrust guidance—adopted specific Colgate policies to permit them to set, unilaterally, resale prices while at the same time minimizing antitrust risk by avoiding a resale-price agreement. These are quite common throughout the economy.
The Colgate doctrine is the most common route around resale-price maintenance, but there are a couple others worth mentioning.
You can read the rest of this blog post at the link below.