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Leegin Creative Leather Prods. v. PSKS, Inc.

Supreme Court of the United States

March 26, 2007, Argued ; June 28, 2007, Decided

No. 06-480

Opinion

 [*881]  [**2710]  Justice Kennedy delivered the opinion of the Court.

In Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 31 S. Ct. 376, 55 L. Ed. 502 (1911), the Court established the rule that it is per se illegal under § 1 of the Sherman Act, 15 U.S.C. § 1, for a manufacturer to agree with its distributor to set the minimum price the distributor can charge for the manufacturer's goods. The question presented by the instant case is  [*882]  whether the Court should overrule the per se rule and allow resale price maintenance agreements to be judged by the rule of reason, the usual standard applied to determine if there is a violation of § 1.  The Court has abandoned the rule of per se illegality for other vertical restraints [****10]  a manufacturer imposes on its distributors.  Respected economic analysts, furthermore, conclude that vertical price restraints can have procompetitive effects. We now hold that Dr. Miles should be overruled and that vertical price restraints are to be judged by the rule of reason.

Petitioner, Leegin Creative Leather Products, Inc. (Leegin), designs, manufactures, and distributes leather goods and accessories. In 1991, Leegin began to sell belts under the brand name "Brighton." The Brighton brand has now expanded into a variety of women's fashion accessories. It is sold across the United States in over 5,000 retail establishments, for the most part independent, small boutiques and specialty stores. Leegin's president, Jerry Kohl, also has an interest in about 70 stores that sell Brighton products. Leegin asserts that, at least for its products, small retailers treat customers better, [**2711]  provide customers more services, and make their shopping experience more satisfactory than do larger, often impersonal retailers. Kohl explained: "[W]e want the consumers to get a different experience than they get in Sam's Club or in Wal-Mart. And you can't get that kind of experience or support or [****11]  customer service from a store like Wal-Mart." 5 Record 127.

 [***632] Respondent, PSKS, Inc. (PSKS), operates Kay's Kloset, a women's apparel store in Lewisville, Texas. Kay's Kloset buys from about 75 different manufacturers and at one time sold the Brighton brand. It first started purchasing Brighton goods from Leegin in 1995. Once it began selling the brand, the store promoted Brighton. For example, it ran Brighton advertisements and had Brighton days in the store.  [*883]  Kay's Kloset became the destination retailer in the area to buy Brighton products. Brighton was the store's most important brand and once accounted for 40 to 50 percent of its profits.

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551 U.S. 877 *; 127 S. Ct. 2705 **; 168 L. Ed. 2d 623 ***; 2007 U.S. LEXIS 8668 ****; 75 U.S.L.W. 4643; 2007-1 Trade Cas. (CCH) P75,753; 35 A.L.R. Fed. 2d 631; 20 Fla. L. Weekly Fed. S 466

LEEGIN CREATIVE LEATHER PRODUCTS, INC., Petitioner v. PSKS, INC., dba KAY'S KLOSET . . . KAY'S SHOES

Subsequent History:  [****1] On remand at, Remanded by PSKS, Inc. v. Leegin Creative Leather Prods., 498 F.3d 486, 2007 U.S. App. LEXIS 20957 (5th Cir. Tex., Aug. 30, 2007)

Prior History: ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT.

PSKS, Inc. v. Leegin Creative Leather Prods., 171 Fed. Appx. 464, 2006 U.S. App. LEXIS 6879 (5th Cir. Tex., 2006)

Disposition: Reversed and remanded.

CORE TERMS

resale price, manufacturer, retailers, vertical, consumers, per se rule, antitrust, prices, rule of reason, dealers, overruling, producer, courts, anticompetitive, distributors, brand, effects, cases, anti trust law, procompetitive, products, benefits, riding, cartel, Sherman Act, common-law, horizontal, Amici, discount, repealed

Antitrust & Trade Law, Sherman Act, Scope, General Overview, Price Fixing & Restraints of Trade, Per Se Rule & Rule of Reason, Sherman Act, Cartels & Horizontal Restraints, Price Fixing, Vertical Restraints, Resale Price Maintenance, Governments, Courts, Judicial Precedent, Nonprice Restraints, Claims