Legal Update - Minimum Resale Price Agreements
Legislative Issue Update - June 2008
FTC Modifies Consent Decree To Allow Minimum Resale Price Agreements
In 2000, shoe manufacturer Nine West entered into a consent decree with the Federal Trade Commission which prohibited the company from entering into agreements with retailers to fix, control or maintain resale prices for its products.
In 2007, the U.S. Supreme Court ruled that it was no longer illegal per se under the federal antitrust laws for a manufacturer and its retailer-customer to agree on a minimum resale price to be charged. (Leegin Creative Products, Inc. v. PSKS, Inc.) The legality of these agreements will be determined on a case-by-case basis, using the rule of reason standard.
After Leegin, Nine West asked the FTC to modify the consent decree and delete the absolute prohibition against any agreements with retailers to fix, control or maintain resale prices for Nine West products. The FTC granted the request in part but did require Nine West to provide periodic reports on its use of any resale price agreements so the FTC can analyze the effect such agreements have on competition.
The FTC determined that Nine West’s use of minimum resale price agreements with retailers “is not likely to harm consumers.” Also significant to its decision was Nine West’s modest market share (about 15%), making it unlikely that prices could be raised beyond competitive levels. Finally, as commentators on the Leegin case have cautioned, any minimum resale price agreements employed by Nine West still face possible legal challenge under state antitrust laws.