89–010 

Calendar No. 473 

111TH CONGRESS REPORT " ! SENATE 2d Session 111–227 

DISCOUNT PRICING CONSUMER PROTECTION ACT 

JULY 21, 2010.—Ordered to be printed 

Mr. LEAHY, from the Committee on the Judiciary, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany S. 148] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on the Judiciary, to which was referred the bill 

(S. 148), to restore the rule that agreements between manufacturers and retailers, distributors, or wholesalers to set the minimum 

price below which the manufacturer’s product or service cannot be 

sold violates the Sherman Act, having considered the same, reports 

favorably thereon, without amendment, and recommends that the 

bill do pass. 

CONTENTS 

Page 

I. Background and Purpose of the Discount Pricing Consumer Protection 

Act ............................................................................................................... 2 

II. History of the Bill and Committee Consideration ....................................... 6 

III. Section-by-Section Summary of the Bill ...................................................... 6 

IV. Congressional Budget Office Cost Estimate ................................................ 7 

V. Regulatory Impact Evaluation ...................................................................... 8 

VI. Conclusion ...................................................................................................... 8 

VII. Minority Views of Senators Sessions, Hatch, and Kyl ............................... 9 

VIII. Changes to Existing Law Made by the Bill, as Reported ........................... 16 


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1 551 U.S. 877 (2007). 

2Dr. Miles Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911). 3Leegin, 551 U.S. at 926 (Breyer, J., dissenting). 4 Joseph Pereira, State Law Targets ‘Minimum Pricing’, Wall St. J. at D1 (E. ed. April 28, 

2009). 5Leegin, 551 U.S. at 885 (quoting Continental T.V. Inc. v. GTE Sylvania Inc., 433 U.S. 36, 

49 (1977)). 6 Id. at 885 (quoting State Oil Co. v. Khan, 522 U.S. 3, 10 (1997)). 7 Id. at 885–86. 8 ABA Section of Antitrust Law, Antitrust Law Developments, at 55 (4th ed. 1997) (citing U.S. 

v. Arnold, Schwinn & Co., 388 U.S. 365, 374 n. 5 (1967)). 

I. BACKGROUND AND PURPOSE OF THE DISCOUNT PRICING

CONSUMER PROTECTION ACT

This legislation is intended to restore the automatic (‘‘per se’’) 

ban on manufacturer setting of minimum resale prices (a practice 

known as ‘‘minimum resale price maintenance’’). Minimum resale 

price maintenance results in higher prices to consumers. Until the 

recent Supreme Court decision in Leegin Creative Leather Products, 

Inc. v. PSKS, Inc.,1 these agreements had been per se illegal for 

nearly a full century under the antitrust laws. This legislation reinstates that per se ban. 

The antitrust laws forbade manufacturers from setting minimum 

resale prices.2 Three years ago, in its 5–4 decision in Leegin, the 

Supreme Court overturned this per se prohibition. Instead, the narrow majority in Leegin directed that minimum resale price maintenance be evaluated on a case-by-case basis under the ‘‘rule of reason’’ approach, pursuant to which the anticompetitive effects of the 

conduct are weighed against its likely pro-competitive benefits. 

The per se rule banning minimum resale price maintenance by 

manufacturers enabled retail discounting and permitted vigorous 

price competition to flourish. The dissenting opinion in Leegin predicted that, if only 10 percent of manufacturers imposed resale 

price maintenance policies under the new interpretation of the law, 

the average family of four’s retail bills would increase between 

$750 and $1000.3 Since the Leegin decision, it has been reported 

that over 5,000 manufacturers have implemented minimum price 

policies.4 These policies have appeared in various industries, including electronics, apparel, toys, home furnishings, and others. If 

minimum resale price maintenance continues to be permitted, 

prices for a myriad of consumer goods are likely to increase, consumer access to discounted products will decline, and retail competition will be inhibited. 

This legislation is necessary to prevent this consumer harm. Rule 

of reason analysis, adopted by the Leegin court, is insufficient to 

prevent anticompetitive minimum resale price maintenance agreements, given the practical difficulties that plaintiffs face in bringing a successful case. In antitrust cases, rule of reason requires 

‘‘the factfinder [to] weigh all the circumstances of a case in deciding 

whether a restrictive practice should be prohibited as imposing an 

unreasonable restraint on competition.’’ 5 ‘‘Appropriate factors to 

take into account ‘include specific information about the relevant 

business’ and ‘the restraint’s history, nature, and effect.’ ’’ 6 Whether the businesses involved have ‘‘market power’’ is a ‘‘further, significant consideration.’’ 7 Further, the ‘‘plaintiff bears the burden of 

proving that a restraint has a substantial anticompetitive effect.’’ 8

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9 Id. at 55. 10 Id. at 59 (citing Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768 (1984) 

(noting that the rule of reason is ‘‘an inquiry into market power and market structure designed 

to assess the combination’s actual effect’’)). 11See H. Hovenkamp, The Antitrust Enterprise 105 (2005) (litigating a rule of reason case is 

‘‘one of the most costly procedures in antitrust practice’’). See also, M.A. Carrier, The Rule of 

Reason: An Empirical Update for the 21st Century, 16 Geo. Mason L. Rev. 827, 830 (finding that 

out of 222 reported Federal antitrust cases decided under the rule of reason in the last decade, 

the plaintiff prevailed in only one). 12 As Justice Breyer pointed out in dissent in Leegin, requiring proof of ‘‘market power’’ ‘‘invites lengthy time-consuming argument among competing experts, as they seek to apply abstract, highly technical, criteria to ill-defined markets.’’ 551 U.S. at 917 (Breyer, J., dissenting). 13Marcy Syms, CEO of Syms discount clothing stores, stated in an answer to a written question from Senator Kohl as to whether she would be likely to bring a rule of reason case challenging minimum resale price maintenance, that ‘‘[i]t would be very unlikely for SYMS to bring 

an antitrust suit [under the rule of reason]. We would not have the resources, knowledge or 

a strong enough position in the market place to make such action prudent.’’ The Leegin Decision: 

The End of the Consumer Discounts or Good Antitrust Policy?: Hearing Before Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights of the Committee on the Judiciary, S. Hrg. 110–342 (2007) at 40 (August 24, 2007 letter to Sen. Herb Kohl from Marcy Syms). 

Likewise, Stacy Haigney, counsel to Burlington Coat Factory, testified that ‘‘the cost [of pursuing a rule of reason antitrust case] is more than likely to be well into the seven figures. Burlington Coat Factory cannot afford that kind of expenditure and disruption of its business in 

a litigation which . . . is far from certain to succeed. Thus, as a practical matter, the Leegin 

case deprives Burlington Coat Factory of any remedy should it become a victim of vertical price 

fixing.’’ The Discount Pricing Consumer Protection Act: Do We Need to Restore the Ban on 

Vertical Price Fixing?: Hearing Before the Subcommittee on Antitrust, Competition Policy and 

Consumer Rights of the Committee on the Judiciary, S. Hrg. 111–267 [hereinafter 2009 Antitrust 

Subcommittee Vertical Price Fixing Hearing] at 33. Haigney also described the considerable hurdles that a discount retailer would need to overcome to establish a rule of reason case challenging minimum resale price maintenance. According to Haigney, in light of the Supreme 

Court’s decision in Bell Atlantic Corp. v. Twombly, 55 U.S. 544 (2007), requiring an antitrust 

plaintiff to plead a ‘‘plausible’’ antitrust claim, ‘‘without any discovery, a plaintiff must undergo 

the effort and expense of putting together a complex economic analysis of the market, the history of the restraint, the relative market shares of the product and the parties, etc., simply to 

survive a motion to dismiss. Assuming that this hurdle can be surmounted, the plaintiff would 

then have to embark upon years of document-rich discovery and motion practice against a wellheeled adversary with numerous depositions, including of multiple experts on both sides.’’ Id. 

at 20 & 33. 

lish liability under the rule of reason,9 and the plaintiff must prove 

that ‘‘the restraint is likely to have a substantial, adverse effect on 

competition by engaging in an analysis of the [relevant] market to 

predict the restraint’s effect. . . .’’ 10

The likely antitrust plaintiffs in minimum resale price maintenance cases—small discount retailers and consumers likely will not 

have the economic resources to successfully bring these actions. 

Given the substantial legal burdens, requiring litigants to prove 

minimum resale price maintenance illegal under the rule of reason 

is both costly and time consuming.11 Testimony from economic experts regarding the market, the market power of the parties to the 

restraint, and the likely impact on competition is typically required 

in such a case; oftentimes involving highly complex economic modeling.12

Two prominent discount retailers that testified in hearings on 

this issue before the Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights (‘‘Antitrust Subcommittee’’) stated their companies did not believe the rule of reason standard would be effective in halting anticompetitive behavior, as they would be unlikely to bring a rule of reason case challenging minimum resale price maintenance.13

These concerns are supported by evidence that the current law 

is not deterring resale price maintenance agreements. While it has 

been less than three years since the Leegin decision, more than 

5,000 companies have reportedly implemented minimum pricing 


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14 Joseph Pereira, State Law Targets ‘Minimum Pricing’, Wall St. J. (E. ed.), April 28, 2009, 

at D1. 15 2009 Antitrust Subcommittee Vertical Price Fixing Hearing, supra at n.13, (Written Testimony of FTC Commissioner Pamela Jones Harbour [hereinafter Harbour Written Testimony]) 

at 119; Id. at 13 (Tod Cohen, eBay Vice President and Deputy General Counsel for Government 

Relations, testified that since the Leegin decision, one internet monitoring company, alone, has 

sent over 1.2 million ‘‘notice and takedown’’ requests to the eBay site); Joseph Pereira, Discounters, Monitors Face Battle On Minimum Pricing, Wall St. J. (E. ed.), Dec. 4, 2008, at A1. 16 Harbour Written Testimony, at 119–120. 17 Cecile Kohrs Lindell, Sony Upsets Holiday Shoppers, Antitrust Attorneys, The Deal, Nov. 24, 

2008, http://www.thedeal.com/dealscape/2008/11/sonylupsetslholidaylshoppersla.php 

(last visited Dec. 3, 2008). 18 Joseph Pereira, Why Some Toys Don’t Get Discounted—Manufacturers Set Price Minimums 

That Retailers Must Follow Or Risk Getting Cut Off; Shopping Around for ‘Rock Band 2’, Wall 

St. J. (E. ed.), Dec. 24, 2008, at D.1. 19 Joseph Pereira, Price Fixing Makes Comeback After Supreme Court Ruling, Wall St. J. (E. 

ed.), Aug. 18, 2008, at A.1. 20 50 Stat. 693. 21 66 Stat. 631. 

policies.14 A new industry referred to as ‘‘internet monitors’’ has 

emerged since the Leegin decision. As part of their efforts to enforce minimum resale pricing policies, manufacturers hire these 

companies to monitor retail prices on the Internet. After noticing 

low prices, the internet monitors report the low prices to manufacturers, who then demand the retailer raise their prices to the manufacturers’ minimums.15

In addition, at the Antitrust Subcommittee’s May 2009 hearing 

on S. 148, former FTC Commissioner Pamela Jones Harbour testified that since the Leegin decision ‘‘the number of companies using 

RPM has substantially increased,’’ ‘‘some discounters had been terminated by as many as a quarter of their suppliers,’’ and other discounters (including PSKS, Inc., the plaintiff in the Leegin case) 

have gone out of business, unable to get the courts to ‘‘even consider the merits of their claims under the rule of reason.’’ 16 This 

testimony is supported by reports received by Antitrust Subcommittee staff from Internet retailers that manufacturers are implementing policies forbidding Internet retailers from listing discounted prices on the Internet retailer’s web page for that product. 

Only after potential customers add the product to their Internet 

‘‘shopping cart’’ does that customer see the discounted price. Among 

other things, this prevents web applications that identify low prices 

on the Internet for consumers from finding the sale price for the 

product. This has the effect of stifling price competition on the 

Internet. 

There are many other examples of the implementation of minimum resale price maintenance since the announcement of the 

Leegin decision, including Sony’s decision to implement a program 

mandating minimum retail prices on certain high end electronics,17

efforts to forbid retailers from discounting toys during the 2008 holiday shopping season,18 and Avis’ Rent-A-Car policy forbidding its 

independently owned franchisees from renting cars below Avis’ 

minimum prices in Alaska.19

Past empirical studies further demonstrated the negative effect 

of minimum price agreements. In 1975 Congress repealed the 

Miller-Tydings Fair Trade Act 20 and the McGuire Act 21 which permitted individual States to enact ‘‘fair trade’’ laws authorizing minimum resale price maintenance agreements. At the time of the repeal, 36 States permitted minimum resale pricing. A study conducted by the Department of Justice found minimum resale price 

maintenance policies in the States that permitted this practice 


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22Leegin, 551 U.S. at 912 (opinion of Breyer, J., dissenting) (citing Hearings on H.R. 2384 before the Subcommittee on Monopolies and Commercial Law of the House Committee on the Judiciary, 94th Cong., 1st Sess., 122 (1975) (statement of Keith I. Clearwaters, Deputy Assistant 

Attorney General, Antitrust Division)). 23T. Overstreet, Bureau of Economics Staff Report to the FTC, Resale Price Maintenance: Empirical Theories and Empirical Evidence 160 (1983). 24Leegin, 551 U.S. at 889. 25 Id. at 911 (opinion of Breyer, J., dissenting) citing 8 P. Areeda and H. Hovenkamp ¶ 1632d, 

at 321–323 (2d ed. 2004). 26The majority opinion in Leegin noted that ‘‘[r]esale price maintenance may, for example, facilitate a manufacturer cartel.’’ Leegin, 551 U.S. at 892 (citing Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717, 725 (1988)). 27 Additionally, the per se rule of liability for minimum resale price maintenance has the 

strong advantage of being a bright line rule, eliminating all of the uncertainty associated with 

a lengthy and complicated litigation inherent in rule of reason antitrust cases. The per se rule 

enables businesses to more clearly understand what is permissible and what is not with respect 

to vertical price restraints; the rule of reason, by contrast, may lead to uncertainty as to what 

conduct is forbidden and what is allowed, and under what circumstances. 

raised prices by 19% to 27%.22 Additionally, in 1983, the Federal 

Trade Commission staff, after studying numerous pricing surveys, 

concluded that the surveys ‘‘indicate[d] that [resale price maintenance] in most cases increased the prices of products sold.’’ 23

The Supreme Court’s rationale for subjecting resale price agreements to a rule of reason analysis, rather than a per se ban, is to 

promote competition among manufacturers selling different brands 

of the same type of product.24 However, banning minimum resale 

price maintenance itself may actually enhance this ‘‘interbrand 

competition.’’ If a manufacturer of a product bans its retailers from 

selling its products at a discount, then competing manufacturers 

will not feel the competitive pressure to reduce the retail price of 

their competing products. Allowing resale price maintenance could 

actually make it easier for competing manufacturers to collude. As 

Justice Breyer explained in his dissenting opinion in Leegin: 

Resale price maintenance agreements can help to reinforce the competition-inhibiting behavior of firms in concentrated industries. In such industries firms may tacitly 

collude, i.e., observe each other’s pricing behavior, each understanding that price cutting by one firm is likely to trigger price competition by all. . . . [R]esale price maintenance agreements will tend to prevent price competition 

from ‘‘breaking out’’ and they will thereby tend to stabilize 

producer prices.25

Thus, allowing resale price maintenance makes it very easy for 

the formation of implicit agreements between competing manufacturers to keep prices artificially inflated.26 Such collusion is nearly 

impossible to prove and ultimately harms the consumer.27

A ban on minimum resale price maintenance is essential to 

maintaining vibrant competition among retailers. Indeed, the ban 

on minimum resale price maintenance greatly aided the rise of today’s low price, discount retailers—stores such as Target, Walmart, 

and Syms—as well as giant Internet discounters such as Amazon 

and eBay—which have been so successful in challenging incumbent 

retailers. All of these companies offer consumers a wide array of 

highly desired products at discount prices. Eliminating the ban on 

minimum resale price maintenance runs the substantial risk of 

blocking new discount retailers from getting a competitive foothold 

necessary for their survival. If new discount retailers are prevented 

from selling products at the behest of large, incumbent retailers because of the pressure these incumbents put on manufacturers to 


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28 Nothing in this legislation will alter the rule of U.S. v. Colgate & Co., 250 U.S. 300 (1919), 

that a manufacturer does not violate antitrust law by refusing to do business with distributors, 

including distributors that fail to adhere to a unilaterally announced pricing policy, nor is it the 

intent of this legislation to do so. Thus the opposition to the bill on the grounds that certain 

high end manufacturers will not be able to control where their products are sold, and that the 

reputation of these brands will suffer if their products are sold at a discount outlet, is not well 

founded. Under the Colgate doctrine, a manufacturer is always free to choose which retailers 

may or may not sell its products. Enactment of this bill will not force any manufacturer to have 

its product sold at any store it finds undesirable. 

forbid discounting, then an essential element of retail competition 

so beneficial to consumers may be imperiled. Enactment of S. 148 

will keep discount retail competition alive.28

II. HISTORY OF THE BILL AND COMMITTEE CONSIDERATION

The Discount Pricing Consumer Protection Act was first introduced in the 110th Congress by Senator Kohl on October 30, 2007 

(S. 2261). The bill had three cosponsors (Senators Biden, Clinton, 

and Whitehouse). It was referred to the Committee on the Judiciary. No further action was taken on S. 2261 in the 110th Congress. 

On January 6, 2009, Senator Kohl introduced the Discount Pricing Consumer Protection Act in the 111th Congress (S. 148). The 

bill has 10 cosponsors (Senators Durbin, Feinstein, Feingold, 

Franken, Kaufman, Klobuchar, Schumer, Specter, Whitehouse, and 

Wyden). It was referred to the Committee on the Judiciary. The 

Committee held a hearing titled ‘‘The Discount Pricing Consumer 

Protection Act: Do We Need to Restore the Ban on Vertical Price 

Fixing?’’ on May 19, 2009. Testimony was received from Pamela 

Jones Harbour, Commissioner, Federal Trade Commission; Tod 

Cohen, Vice President and Deputy General Counsel, eBay; Stacy 

Haigney, General Attorney, Burlington Coat Factory; and James 

Wilson, Partner, Vorys, Sater, Seymour & Pease, LLP. 

The Senate Judiciary Committee considered the legislation on 

March 18, 2010, and voted to report the Discount Pricing Consumer Protection Act, without amendment, favorably to the Senate 

by voice vote. 

III. SECTION-BY-SECTION SUMMARY OF THE BILL

Section 1. Short title 

This section provides that the legislation may be cited as the 

‘‘Discount Pricing Consumer Protection Act.’’ 

Section 2. Congressional findings and declarations of purposes 

This section contains congressional findings and declarations of 

purposes. 

Section 3. Prohibition on vertical price fixing 

Subsection (a) amends Section 1 of the Sherman Act by adding 

a provision stating that ‘‘[a]ny contract, combination, conspiracy or 

agreement setting a minimum price below which a product or service cannot be sold by a retailer, wholesaler or distributor violates 

this Act.’’ 

Subsection (b) provides that this Act shall take effect 90 days 

after the date of enactment. 


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IV. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

The Committee sets forth, with respect to the bill, S. 148, the following estimate and comparison prepared by the Director of the 

Congressional Budget Office under section 402 of the Congressional 

Budget Act of 1974: 

MARCH 25, 2010. 

Hon. PATRICK J. LEAHY, 

Chairman, Committee on the Judiciary, 

U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 148, the Discount Pricing 

Consumer Protection Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Mark Grabowicz. 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

S. 148—Discount Pricing Consumer Protection Act 

S. 148 would prohibit agreements between manufacturers and 

wholesalers, distributors, or retailers to set minimum prices for a 

product or service. The bill would negate the effects of a 2007 Supreme Court decision (Leegin Creative Leather Products, Inc. v. 

PSKS, Inc., 551 U.S. 877 (2007)) that permits minimum price 

agreements in certain cases. 

Based on information from the Department of Justice, CBO estimates that implementing the bill would have no significant effect 

on the department’s spending to handle cases involving minimum 

price agreements. 

Pay-as-you-go procedures would apply to the legislation because 

violators of the bill’s provisions could be subject to civil and criminal fines. Criminal fines are deposited as revenues in the Crime 

Victims Fund and later spent. However, CBO estimates that any 

additional revenues and direct spending would not be significant in 

each year. 

S. 148 contains no intergovernmental mandates as defined in the 

Unfunded Mandates Reform Act (UMRA) and would not affect the 

budgets of state, local, or tribal governments. 

Prohibiting agreements between manufacturers and wholesalers, 

distributors, or retailers to set minimum retail prices would impose 

a private-sector mandate as defined in UMRA. Any existing or future agreements that set such prices would be a violation of antitrust law. 

The cost of that mandate would be the forgone net income resulting from prohibiting such agreements; however, how such prohibitions would affect industry income is uncertain for several reasons. 

Although a large number of firms could be affected by the mandate, 

contracts involving pricing policies are confidential and can vary 

widely across markets. Further, the cost of the legislation would be 

mitigated to some extent because several states already prohibit 

such contracts and because firms could continue to use noncontractual policies that have the effect of setting minimum resale prices. 

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date would exceed the annual threshold established in UMRA for 

private-sector mandates ($141 million in 2010, adjusted annually 

for inflation). 

On March 5, 2010, CBO transmitted a cost estimate for H.R. 

3190, the Discount Pricing Consumer Protection Act of 2009, as ordered reported by the House Committee on the Judiciary on January 13, 2010. The two bills are similar, and the cost estimates are 

the same. 

The CBO staff contacts for this estimate are Mark Grabowicz (for 

federal costs) and Marin Randall (for the private-sector impact). 

The estimate was approved by Theresa Gullo, Deputy Assistant Director for Budget Analysis. 

V. REGULATORY IMPACT EVALUATION

In compliance with rule XXVI of the Standing Rules of the Senate, the Committee finds that no significant regulatory impact will 

result from the enactment of S. 148. 

VI. CONCLUSION

The Discount Pricing Consumer Protection Act, S. 148, will restore the antitrust rule that manufacturer setting of minimum resale prices is per se illegal under the Sherman Act. In so doing, it 

will overturn the Supreme Court’s 2007 Leegin decision. This legislation, by expressly banning minimum resale price maintenance in 

all circumstances, will eliminate the harm to competition created 

by the Leegin decision and substantially benefit consumers by enhancing their ability to obtain discount prices. 


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VII. MINORITY VIEWS

MINORITY VIEWS FROM SENATORS SESSIONS, HATCH, 

AND KYL 

We fully agree with the majority that the antitrust laws should 

protect consumers from anticompetitive behavior. But this bill exposes a disagreement over how the antitrust laws should be shaped 

and applied to serve that shared goal. For decades, the federal 

courts and antitrust scholars have understood that antitrust law 

should be grounded in sound economics so that the law prohibits 

conduct that is actually anticompetitive but does not deter conduct 

that is in fact procompetitive. That is the approach that we believe 

our laws should continue to follow. Unfortunately, this bill would 

amend the substantive language of Section 1 of the Sherman Act 

for the first time, without sound economic justification. 

In short, because economic scholarship shows that resale price 

maintenance agreements can benefit competition and consumers, 

the bill’s blanket ban of such agreements is misplaced. The Supreme Court’s holding in the Leegin case that these agreements 

should be judged based on a rule of reason test, which the bill 

would overturn, is sound legal and economic policy. We believe a 

wiser course at this time would be to follow this tradition of allowing court interpretation of the law to continue, fully recognizing 

that Congress may act in the future if court decisions prove unworkable or unwise. 

Background 

On the surface, the debate over this bill is about the proper way 

to police resale price maintenance agreements to protect competition and maximize consumer welfare. We agree with the majority 

that some resale price maintenance agreements can have anticompetitive consequences that outweigh any benefit to consumers. 

But the economic evidence accumulated over several decades 

strongly indicates that some resale price maintenance agreements 

benefit consumers and improve competition. We are concerned that 

a per se ban will block procompetitive behavior, harming competition in the marketplace and making consumers worse off. 

At a more fundamental level, we are concerned that this bill reveals a confusion over the proper aims and uses of antitrust law. 

The Sherman Act was drafted in broad terms and courts have applied it for over a century with an eye toward new developments 

in economic understanding so as to bar ‘‘unreasonable restraints of 

trade.’’ As the Supreme Court has repeatedly held in cases going 

back decades, ‘‘per se rules of illegality are appropriate only when 


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1See Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49–50 (1977). 2 551 U.S. 877 (2007). 

3 220 U.S. 373 (1911). 

4GTE Sylvania, 433 U.S. at 49–50. 5 Northwest Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co., 472 U.S. 284, 289 

(1985) (internal quotation marks omitted). 6Leegin, 551 U.S. at 886–87. 7 Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717, 723 (1988) 8GTE Sylvania, 433 U.S. at 58–59. 9Leegin, 551 U.S. at 886. 10State Oil Co. v. Khan, 522 U.S. 3, 10 (1997). 

they relate to conduct that is manifestly anticompetitive.’’ 1 This 

bill proposes to amend the Sherman Act by creating an absolute 

ban on retail price maintenance agreements, without regard for 

their real-world impact on competition or consumer welfare. As the 

conclusory and overtly political ‘‘findings’’ included in this bill 

show, the majority has chosen to ignore the great weight of economic scholarship, and would freeze in amber a legal rule that economic analysis shows is already obsolete. 

Per Se Antitrust Violations Should Be Reserved Only for Manifestly 

Anticompetitive Conduct 

This bill openly states that it is intended ‘‘to correct the Supreme 

Court’s mistaken interpretation of the Sherman Act’’ in Leegin Creative Leather Products, Inc. v. PSKS, Inc.2 This suggests a misunderstanding of both the Sherman Act and the Court’s Leegin decision. 

The Leegin Court held that vertical agreements between a manufacturer and a distributor to set a minimum resale price (‘‘resale 

price maintenance agreements’’) should be evaluated under ordinary ‘‘rule of reason’’ antitrust analysis. Prior to Leegin, resale 

price maintenance agreements had been treated as ‘‘per se’’ illegal 

under the Court’s 1911 decision in Dr. Miles Medical Co. v. John 

D. Park & Sons Co.3 The decision in Dr. Miles, however, was not 

based on economic analysis of the effects of vertical price agreements, and it has been roundly criticized in antitrust literature for 

decades. 

Under the Supreme Court’s precedents, ‘‘[p]er se rules of illegality are appropriate only when they relate to conduct that is 

manifestly anticompetitive,’’ 4 where the practice ‘‘lack[s] any redeeming virtue,’’ 5 and ‘‘only if courts can predict with confidence 

that [the practice] would be invalidated in all or almost all instances’’ under ordinary ‘‘rule of reason’’ antitrust analysis.6 Such 

per se rules have traditionally been confined to restraints ‘‘that 

would always or almost always tend to restrict competition and decrease output.’’ 7

Moreover, because a ‘‘departure from the rule-of-reason standard 

must be based upon demonstrable economic effect rather than . . . 

formalistic line drawing,’’ 8 the Supreme Court has held that per se 

rules are appropriate ‘‘only after courts have had considerable experience with the type of restraint at issue.’’ 9 And the Court has 

appropriately been ‘‘reluctan[t] to adopt per se rules with regard to 

restraints imposed in the context of business relationships where 

the economic impact of certain practices is not immediately obvious.’’ 10


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11 Howard P. Marvel, Resale Price Maintenance and the Rule of Reason, Antitrust Source, 

P.1 (June 2008) available at http://www.abanet.org/antitrust/at-source/08/06/Jun08- 

Marvel6=26f.pdf (‘‘Economists have posited an ever-widening set of conditions under which RPM 

can increase efficiency.’’). 12 3 Richard A. Posner, Antitrust Law 189 (2d ed. 2001). 13See, e.g., G. Franklin Mathewson & Ralph A. Winter, The Law and Economics of Resale 

Price Maintenance, 13 Rev. Indus. Org. 57, 67 (1998); Kenneth Kenneth G. Elzinga & David E. 

Mills, The Economics of Resale Price Maintenance, in 3 Issues in Competition Law and Policy 

1841 (ABA Section of Antitrust Law 2008), available at http://www.virginia.edu/economics/ 

Workshops/papers/mills/RPM%20ABA%20volume%202008.pdf; G. Franklin Mathewson & 

Ralph A. Winter, The Incentives for Resale Price Maintenance Under Imperfect Competition, 21 

Econ. Inquiry 337 (1983); Andrew N. Kleit, Efficiencies Without Economists: The Early Years of 

Resale Price Maintenance, 59 S. Econ. J. 597 (1993); Raymond Deneckere et al., Demand Uncertainty and Price Maintenance: Markdowns as Destructive Competition, 87 Am. Econ. Rev. 619 

(1997). 14Leegin, 551 U.S. at 889. 

In Leegin, the Court reviewed the considerable body of antitrust 

economics literature dealing with vertical price restraints and concluded that the per se rule of Dr. Miles was not supportable. The 

Court did not hold that all resale price maintenance agreements 

were legal. Rather, the Court found that the per se ban was unjustified, and that antitrust challenges to such arrangements 

should instead be evaluated under the ‘‘rule of reason’’ analysis 

that has long been the standard approach in enforcing the Sherman Act. 

While Congress is not strictly bound by the Supreme Court’s 

careful approach to identifying per se violations of the Sherman 

Act, the concerns highlighted by the Court apply equally to the 

Legislative Branch and counsel the Congress to proceed with caution. 

No such caution is evident in this bill, which proposes to ban all 

resale price maintenance agreements, regardless of their actual effects on competition and consumer welfare. The traditional ‘‘rule of 

reason’’ approach of the Sherman Act, which evaluates resale price 

maintenance agreements according to their actual economic effects, 

is the far wiser course. 

Modern Economics Shows That Some Resale Price Maintenance 

Agreements Benefit Consumers and Competition 

The economic and antitrust literature shows that procompetitive 

uses of resale price maintenance agreements are likely to be common.11 As antitrust scholar and federal court of appeals Judge 

Richard Posner noted in his influential treatise on antitrust law, 

the old judicially created per se rule against resale price maintenance was ‘‘a sad mistake. There is neither theoretical basis, nor 

empirical support, for thinking the practice generally anticompetitive.’’ 12 It would be no less of a mistake for Congress to repeat the 

Dr. Miles Court’s error by recreating a per se rule that is unsupported by the economic evidence. 

Professional economists appear to agree with near unanimity 

that resale price maintenance agreements can be procompetitive.13

As the majority opinion in the Leegin case noted, ‘‘economics literature is replete with procompetitive justifications for a manufacturer’s use of resale price maintenance.’’ 14 This point was made 

forcefully in an amicus brief signed by 23 economists in the Leegin 

case: 


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15 Brief of Amici Curiae Economists at 16, Leegin Creative Leather Products, Inc. v. PSKS, 

Inc., 551 U.S. 877 (2007) (No. 06–480) (internal citations omitted). 16 Herbert Hovenkamp, The Antitrust Enterprise: Principle and Execution 186, Harvard University Press, 2005. 17 8 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law 217 (2d ed. 2004). 18 Brief for Petitioner at 22–24, Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 

877 (2007) (No. 06–480); Brief of PING, Inc. as Amicus Curiae at 5–9, Leegin (No. 06–480). 

In the theoretical literature, it is essentially undisputed 

that minimum RPM [resale price maintenance] can have 

procompetitive effects and that under a variety of market 

conditions it is unlikely to have anticompetitive effects. 

The disagreement in the literature relates principally to 

the relative frequency with which procompetitive and anticompetitive effects are likely to ensue. The critical issue is 

the boundaries of that dispute. Some believe that minimum RPM is almost always benign and thus should basically be ignored by antitrust law except when it is part of 

a cartel case. Others believe that RPM has been demonstrated to be anticompetitive in some cases and thus 

merits serious antitrust consideration. The position absent 

from the literature is that minimum RPM is most often, 

much less almost invariably, anticompetitive. Thus, the economics literature provides no support for the application 

of a per se rule.15

Leading antitrust authorities agree with this economic analysis 

and had called for the reversal of the Dr. Miles rule for years prior 

to the Leegin case. Professor Herbert Hovenkamp wrote that the ‘‘Dr. Miles per se rule was unfortunate’’ and ‘‘the wrong rule, given 

that much RPM is competitively benign in the great majority of situations when it is not being used to facilitate collusion.’’ 16 In his 

treatise on antitrust law, co-written with the late Professor Phillip 

Areeda, Hovenkamp concluded that ‘‘[t]o the extent that Dr. Miles 

rests on the false categorical propositions that resale price maintenance never benefits manufacturers and always has the same effects as an illegal dealer cartel, its ruling is ripe for reexamination.’’ 17

The large body of empirical academic evidence arguing that minimum resale price agreements can be procompetitive is supported 

and brought to life by the convincing anecdotal evidence offered by 

the manufacturer parties and amici in the Leegin case to explain 

the procompetitive reasons their businesses chose to establish minimum resale prices.18

The majority seems to argue that the economic experts cited 

above are wrong, and that all resale price maintenance agreements 

should be banned. But the majority’s arguments are unconvincing. 

It is telling that the majority’s report cites no economic or empirical evidence showing that consumer welfare has been harmed in 

the aftermath of the Leegin decision. Instead, the majority cites to 

Justice Breyer’s prediction in his dissenting opinion that price increases would occur. This citation to an economic prediction from 

the dissenting opinion at the Supreme Court—not typically the 

branch to which one looks for economic policy expertise—is outweighed by the empirical economic evidence discussed above. 

Indeed, insufficient time has elapsed since the Leegin decision to 

draw meaningful conclusions about the decision’s economic conVerDate Mar 15 2010 22:17 Jul 22, 2010 Jkt 089010 PO 00000 Frm 00012 Fmt 6604 Sfmt 6602 E:\HR\OC\SR227.XXX SR227

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19 Hovenkamp, supra note 16 at 186. 20See, e.g., Antitrust Modernization Commission, Report and Recommendations 4 (2007). 21See Hon. Douglass H. Ginsburg, Gauer Distinguished Lecture in Law and Public Policy, AEI 

Legal Center for the Public Interest: Original Public Meaning of the Constitution: Out of Exile? 

(Sept. 23, 2008) (describing the pre-economic Supreme Court antitrust jurisprudence as an ‘‘ad 

hoc and incoherent’’ ‘‘assortment of vague and, ironically, anti-competitive social and political 

goals’’). 22 250 U.S. 300 (1919). 23GTE Sylvania, 433 U.S., at 57–59. 24Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752 (1984). 25 Business Electronics Corp., supra, 485 U.S. 717 (1988). 26State Oil Co. v. Khan, 522 U.S. 3 (1997). 

sequences. Before codifying a per se ban in the Sherman Act, Congress should wait until the economic evidence has had time to 

emerge. This is especially so because, before the Leegin decision, 

the per se ban of Dr. Miles ‘‘hindered the development of an economic understanding of the rationales and effects of RPM’’ because 

‘‘[t]he per se rule ma[de] proof of actual anticompetitive effects immaterial.’’ 19 At the very least, therefore, this bill is premature. 

Antitrust Law Should Be Based on Sound Economic Principles 

The past thirty years have led to broad consensus among scholars, practitioners, and judges that antitrust should be grounded in 

sound economics and that ‘‘antitrust protects competition, not competitors, and that it does so to ensure consumer welfare.’’ 20 In the 

absence of these basic, guiding principles, there would be a significant risk that antitrust rules—some of which can have a profound 

impact on the market—would turn instead on the personal biases 

or political beliefs of judges.21

This consensus that antitrust law is most appropriately based on 

sound economics has led the courts to grow increasingly reluctant 

to treat vertical restraints as per se antitrust violations. As the majority opinion in Leegin discusses, this trend began almost immediately after the Dr. Miles case was decided, starting with the 

Court’s decision in U.S. v. Colgate & Co.22 That decision undercut 

Dr. Miles by permitting a manufacturer to announce suggested resale prices and refuse to deal with distributors who do not follow 

them. 

Spurred by significant advancements and interest in the study of 

economics during the middle of the 20th Century, the Court began 

to rest antitrust law more firmly on economic principles. In 1977, 

the Court overturned the per se rule for vertical nonprice restraints 

(such as agreements on product placement) and adopted a rule of 

reason analysis.23 In 1984, the Court required plaintiffs alleging an 

illegal vertical price restraint to produce evidence showing that a 

manufacturer and its distributors were unlikely to have acted independently.24 And in 1988, the Court chipped away at Dr. Miles 

once again, holding that the per se rule did not apply to an agreement between a manufacturer and a distributor to terminate a contract if the distributor were to engage in price-cutting.25 Finally, 

and as recently as 1997, the Court overturned a nearly 30-year old 

precedent that had made vertical maximum price-fixing agreements per se illegal.26 The Court reached this conclusion, as the 

Leegin majority noted, after assessing ‘‘commentary and real experience.’’ 


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27See Abbott B. Lipsky, Jr., Private Damage Remedies: Treble Damages, Fee Shifting, and Prejudgment Interest, Testimony before the Antitrust Modernization Commission (2005), available 

at http://govinfo.library.unt.edu/amc/commissionlhearings/pdf/Lipsky.pdf (‘‘Applying a damage multiple and a fee-shifting provision to antitrust litigation has had the demonstrable effect 

of encouraging private supplementation of public enforcement, thereby enhancing whatever deterrent, compensatory and exemplary remedial effects the system would have otherwise produced, ceteris paribus.’’). 

The majority’s report does not deny that the Court has been 

steadily moving away from per se rules, including in the context of 

vertical restraints between a manufacturer and retailer. The Leegin 

decision was not an aberration. Nor was it ‘‘activist.’’ It was instead 

a faithful application of the scholarly view—recognized by the 

Court itself in a series of post-Dr. Miles cases—that most restraints 

cannot be deemed either anticompetitive or procompetitive without 

looking at specific facts and circumstances. 

The majority argues that the costs of bringing an antitrust suit 

under the rule of reason standard will deter plaintiffs from challenging even anticompetitive agreements. But the antitrust law has 

mechanisms to encourage plaintiffs to bring suit, such as treble 

damages and fee shifting,27 so that a fair hearing of arguments 

both for and against a resale price maintenance can occur. 

We agree with the majority that a resale price maintenance 

agreement used to facilitate horizontal collusion would be anticompetitive. In the majority’s example, of course, the primary antitrust violation is the horizontal collusion among manufacturers, not 

the vertical price maintenance arrangements that might facilitate 

enforcement of such horizontal collusion. Even so, a vertical price 

maintenance agreement used to facilitate horizontal collusion 

would fail under Leegin’s rule of reason test. 

The Majority’s Concerns Over Resale Price Maintenance Do Not 

Justify the Extraordinary Step of Amending the Sherman Act 

The Sherman Act has been a model of simplicity for over a century. Since its enactment in 1890, courts have been given the latitude to fine-tune their understanding of what is, and is not, an unreasonable restraint of trade based on experience and a continually 

developing understanding of economics. 

The bill would set the Sherman Act on a different course by, for 

the first time ever, designating a specific type of agreement as an 

unreasonable restraint of trade. Worse yet, it will freeze in place 

a view of resale price maintenance agreements that is, in most experts’ opinions, at least a half-century out of date—a view that mistakenly treats price as the only consideration for measuring consumer welfare and that ignores the well-documented free-riding 

problems that can drive competition out of the market, harming 

consumers in the long run. We readily acknowledge the importance 

of internet discounters to the growth of our economy and we recognize the valuable role that traditional discount retailers like Target, Walmart, Syms, or Kohl’s play in the marketplace. But economic scholarship makes clear that consumer welfare and economic 

output are maximized when consumers are able to choose from a 

range of products with varying levels of quality and service; such 

diversity in the market may be unsustainable if resale price maintenance is flatly banned. 


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28 United States v. Topco Associates, Inc., 405 U.S. 596, 610 (1972). 29 Indeed, this claim that the bill will preserve the Colgate rule, thus allowing what amounts 

to back-door resale price maintenance through ‘‘minimum advertized prices’’ and other such 

machinations, further suggests that this legislation has less to do with antitrust law than with 

political posturing. As Marvel notes in his article for the ABA Antitrust Section, ‘‘Terminating 

dealers who discount one’s products is not a less restrictive approach than encouraging them 

to continue to sell the products at the preferred price.’’ Marvel, Resale Price Maintenance and 

the Rule of Reason, Antitrust Source, June 2008, at p.6. Colgate allows manufacturers to maintain an exclusive brand image by refusing to deal with certain retailers, but such efforts at product differentiation are less directly beneficial to consumers than resale price maintenance arrangements that require retailers to provide a higher level of customer service in exchange for 

a guaranteed minimum retail price. 

We are also concerned that this legislation, by fundamentally 

changing the text of the law that the Supreme Court has called the 

‘‘the Magna Carta of free enterprise,’’ 28 may have unintended consequences in other applications of the Sherman Act. We do not 

know, for instance, whether or how this bill might be read to affect 

the numerous pre-Leegin decisions that chipped away at the holding in Dr. Miles. The majority report claims, for example, that this 

legislation will have no impact on ‘‘the rule of U.S. v. Colgate & 

Co., 250 U.S. 300 (1919), that a manufacturer does not violate antitrust law by refusing to do business with distributors, including 

distributors that fail to adhere to a unilaterally announced pricing 

policy.’’ But this assurance is not supported by the text of the legislation; a distributor who believes his contracts were terminated because of ‘‘excess’’ discounting would assuredly allege that he was 

the victim of a ‘‘conspiracy . . . setting a minimum price.’’ 29 And 

it is certainly conceivable that courts might interpret Congress’s actions in this area as exhibiting a generalized desire for the courts 

to move away from the historical use of the Sherman Act as a common law tool to promote competition. These issues, which are 

largely unaddressed by the majority’s report, highlight the need to 

exercise extreme caution before amending a statute that has been 

the cornerstone of antitrust jurisprudence for over a century. 

Conclusion 

This bill would outlaw all resale price maintenance, in contravention to the great weight of economic evidence, even in those 

situations where such activity is likely to be procompetitive. Like 

the Court, we believe that the ‘‘rule of reason’’ is the appropriate 

standard in such cases. 

We decline to join the majority’s effort, under the false guise of 

being faithful to precedent, to ignore the economic scholarship and 

judicial decisions to recreate by statute a judicial rule that has long 

been seen as a relic from a pre-economic, populist era in antitrust 

law. We therefore cannot support this legislation, and we hope that 

this bill does not signal a broader desire within the Congress to jettison the strides that have been made to ground antitrust law in 

sound economics. 

JEFF SESSIONS. 

ORRIN HATCH. 

JON KYL. 


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VIII. CHANGES TO EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with paragraph 12 of rule XXVI of the Standing 

Rules of the Senate, changes in existing law made by S. 148, as reported, are shown as follows (existing law proposed to be omitted 

is enclosed in black brackets, new matter is printed in italic, and 

existing law in which no change is proposed is shown in roman): 

UNITED STATES CODE 

TITLE 15—COMMERCE AND TRADE 

CHAPTER 1—Monopolies and Combinations in Restraint of 

Trade 

Subchapter I—Federal Trade Commission 

SHERMAN ACT (15 U.S.C. § 1) 

SEC. 1 (15 U.S.C. 1). TRUSTS, ETC., IN RESTRAINT OF TRADE ILLEGAL; 

PENALTY. 

Every contract, combination in the form of trust or otherwise, or 

conspiracy, in restraint of trade or commerce among the several 

States, or with foreign nations, is declared to be illegal. Any contract, combination, conspiracy or agreement setting a minimum 

price below which a product or service cannot be sold by a retailer, 

wholesaler, or distributor shall violate this Act. Every person who 

shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, 

$1,000,000, or by imprisonment not exceeding 10 years, or by both 

said punishments, in the discretion of the court. 

Æ 


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