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Kansas Supreme Court Beefs Up Antitrust Scrutiny Of Resale Price Maintenance

Posted  May 17, 2012

Resale price maintenance policies that pass muster under federal antitrust law may not survive state antitrust scrutiny in Kansas, according to that state’s highest court.

The Kansas Supreme Court has overturned a lower court’s decision granting defendant handbag and accessory maker Leegin Creative Leather Products, Inc. summary judgment in a state antitrust suit brought by a class of consumers challenging Leegin’s resale price maintenance pricing policy.

The plaintiffs in O’Brien v. Leegin Creative Leather Products Inc. allege that Leegin’s resale price maintenance pricing policy amounted to illegal price fixing and violated the Kansas Restraint of Trade Act (“KRTA”).

Leegin’s resale price maintenance practices fared better in a federal antitrust challenge to those practices in the U.S. Supreme Court decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2007).  In that case, the U.S. Supreme Court decided that – contrary to the longstanding per se ban on vertical resale price maintenance established in the early 1900s – resale price maintenance no longer constituted a per se Sherman Act violation and would instead need to be evaluated under the rule of reason.

According to the Kansas high court, however, the KRTA does not follow in lockstep with federal antitrust law.  While federal antitrust decisions may be persuasive authority, they are nonbinding on Kansas state courts.  The Kansas high court thus declined to apply federal law precedent relating to the requirement to show “antitrust injury” and the application of a rule of reason standard of review to vertical price maintenance claims.  The U.S. Supreme Court’s decision in Leegin did not preempt the state antitrust claim under the KRTA.

The Kansas legislature, however, has been quick to react.  State lawmakers have proposed a bill (House Bill No. 2797) to “correct” the court’s ruling and overturn it for any pending or future lawsuits.  The stated intention of the proposed bill is to “minimize conflicts between the Kansas restraint of trade act and section 1 of the Sherman Act … and reduce uncertainty as to the law applicable to commerce in Kansas.”

Tagged in: Antitrust Litigation, Price Fixing,