1 (Slip Opini o n) OCTOBER T ERM , 20 06 Sy llabu s
N O TE : Wh er e it i s feas ibl e , a s yllab u s (h ead n ot e) wil lbe rel e as ed , as is bein g d o n e incon n ecti onwithth is cas e , a tth e ti meth e op in i o n is is s u ed

. Th e s yll abu s con s titu tes n o p a rt of th e op in i o nof th eC o u r t bu t h a s be en pre p are dbyt h e Re po rte ro f De ci sio n s fo r t h e co nveni e nce of t h e reade r
. Se e United Statesv. Detro it Timbe r& Lumb er Co., 200U. S

. 3 21, 337

. 

## SUPREME CO URT O FTHE UNI TED STATES

Sy llabu s LEE G IN C REATI VE LEAT HE R PRODU C T S , INC. v
. PSKS, INC. , DBA KAY’S KL OS ET . . . KAY’S SH OE S

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
No. 06–4 80. Ar g u ed M a r c h26, 200 7—D e c i ded Ju n e28, 2007 Given it s policy of refus i ngt o s e ll t oreta ilers t h a t discountit s goods

belowsu g g e sted pr ic es, petition er(Leegi n) stopped sel l i n gto r e spon den t ’s (PSK S) stor e. PSK S f iled su i t , a llegi n g , inter alia, th atLeegin
v i olated th e a n titr u s t l a w s byen ter i n ginto v e r t ic al agr e emen ts w i t h it s ret a ilers to s e tminimum res a le pric es
. The Dis t rictCourtex cluded expertt e s t imony ab o utLeegin’s p r icing policy’sprocompeti

tive effects on the gro und that Dr. Mile s Medi cal Co. v. J o hnD. Park & SonsCo. , 2 20 U. S. 373, makes it per se illegal und er §1 of the Sh er manAc t fora man u f ac tu r e ran d its distr ibu torto agr e e onth e minimum price t h e dist ribut o r ca n cha r g e for t h e ma nufa c t urer ’ s g oods. At tr ial, PSK S al l e g e d th at Leegi nan d its r e tailer s h a d agr eed to fixpr ic es, bu t Leeginar g u ed th at its pr ic in gpolic yw a s law

ful under §1

. The j ury fo un d for PS KS

. On a ppea l , t h e Fift h Circuit declined to ap ply the rule of reason to Le egin’s vertical price-fixing agreements and affirmed, finding that Dr. Miles ’ p er ser u le render ed ir r e lev a n tan y pr oc ompetitiv eju st ificat ions for Leegin’s p o licy. Held:Dr. Mile sis overrule da n d vert ical price res t raint s a r e t o be

ju dg ed byth e r u l e of r e ason
. Pp. 5–28.

(a) Th e ac c e pt ed stan dar df o rtestin gw h e th era pr ac tice r e str a in s trade in violation of §1 is the rule of reason, which requi r es the factfinder t oweigh “ a l l of t h e c i rcums t a nces , ” Continental T. V., In c. v. GTE SylvaniaInc. , 433 U. S. 36, 4 9 , in c l u d in g“spec i ficin for mation
ab o utt h e releva ntb u s i nes s ” a n d “t h e res t ra int ’ s his t ory, na t ure, a n d effect,” State Oil Co. v. Khan, 522 U. S. 3, 10. Th e r u l e distin g u ish e s betw eenr e str a in ts w i than tic o mpeti t iv e effec tth at ar e h a r m fu l to the consumer and those with proc ompetitive effect that are in the
cons umer’s b e s tint e res t

. However , w h e n ares t ra intis deemed2 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Sy llabu s

“ unla w ful per se, ” ibid., th e n e ed to stu d yanin div i du al r e str a in t’s reasonableness in light of r e al m a rket forces is el imina t ed, Busines s Electro nics Co rp. v. Sh arp Elect ronic sCor p
. , 485 U. S. 7 17, 72 3. Re

sor tto per se r u les is confined t ores t ra int s “t h a twould alwa ys or a l

mos talwa ys tend t ores t rictcompet it ion and decrea s e o u t p ut .” Ibid. Thus , a pe r se rule is a ppro p ria t eonly a f t e r co urt s haveha d cons id

erable experience with the ty pe of r e str a i n t at issu e, see Broadcas t Musi c, I nc. v. Columb ia Broadcasti n g Sy st em, Inc

. , 441 U. S. 1, 9, an d only if t h ey c a n predictwit hconfiden ce th a tt h e res t raintwould b e invalidated in all or almos ta ll ins t a nces under t h e r u le of rea s on, s e e Arizonav. Ma ricopa County Medi cal Soc. , 457 U. S. 3 32, 34 4. Pp. 5 – 7. (b ) Beca us e t h e rea s ons upon which Dr. Milesrelied do not just ify a per serule , it is neces s a r y to exa m ine, in t h e firs t ins tance, t h e eco nomic effects of vertical agre ements to fix minimum resale prices and to deter m in e w h e th erth e per se rule is nonet h eles s a ppropria t e
. Wer eth is Cou r tc o n s ider in g th e issu e as a nor igin al matter , th e ru le of r e ason , n o t a per se rule o f unla w fulnes s , would b et h e a ppropriate stan dar dto ju dg e v e r t ic al pr ic e r e str a in ts. Pp. 7–19. (1) Economics literature is repl ete with pr ocompetitive justifica

t i ons for a manufa c t ure r’s u s e of res a le price ma int e nance, a n d t h e few recents t udies on t h e s u bj ectals oc a s t doub ton t h e conclus ion th at th e pr ac tic emeets th e c r i ter i a fora per s e rule. The justifica

t i ons for vert ica lprice res t ra int s a r e s i mila r t o t h os e for ot her vert i

ca l res t ra ints

. Minimum res a le price ma int e na nce ca n s t imula t e in

t e rb ra nd compet it ion a m on g ma nufa c t u r e rs s e lling differentb r a n ds of th e same ty pe of pr oduc t byr e du c i ngin tr abr an d c o mpetition among retaile rs selling the same bran d. This is import ant because t h e a n t i t rus t la ws ’ “ p rima ry purpos e .
. . is t oprot ect int e rb ra nd competition,” Khan , su pra , a t15

. A s i ngle ma nufa c t urer’s us e of ver

tical price rest raints tends t oelim in ate in tr abr an d pr ic e c o mpetition ; t h is in t urn encou r a g es ret a ilers t oinvestin s e rvices or promot iona l efforts that aid the manufacturer’s po sitio nas against rival manufac

t urers
. Res a le price ma int e na nce ma y a l so give co ns umers more op t i ons t ochoos e a m ong low-pr ice, low-s e rvi c e b r a n ds ; high -price, highservice brands; and brands f a lling in betw een. Absent vertical price
res t ra int s , reta il s e rvices t h a tenha nce int e rb ra nd compet it ion might b eunderprovi d ed b e ca us e dis c ount in g ret a ilers ca nfree ride on re

t a ilers who furnis hs e rvicesa n d t h en ca pt ure s o me of t h e dema nd t h os e s e rvices genera t e
. Ret a i l price maint e na nce ca n a l s o increa s e interbrand competit ion by facilit a t ing m a rket entry for new firms
an d br an ds a n d byen c o u r agin gr e tailerserv ic es th atw o u l d n o t be pr ov ided ev en absen t fr ee r i din g
. Pp. 9–12. (2 ) S e t t i ng minimum res a le prices ma y a l s ohave a n t i co mpet itive3 Cite as: 55 1 U

. S. ____ (2007) Sy llabu s effects; and unlawful price fixing, desi gne dsolely to obtain monopoly pr ofits, is anev erpr esen t tempt ation

. Resa le pr ic e main ten a n c e ma y, for exa m ple, fa cilit ate a ma nufa c t urer ca rt el orb eus ed t oor ga nize ret a il ca rt els

. Itca n a l s ob eab u s e d b yapowerf ul ma nufa c t urer or ret a iler. Thus , t h e pot e nt ia l a n ticompet itive cons eq uences of vert ica lpriceres t ra int s mus tnotb eignored orund eres t i mat e d. Pp. 12–1 4. (3 ) Not w it hs tanding t h e ris k s of unla w fu l conduct , itc a nnotb e s t at ed wit hany degree of confidence t h a treta il price ma int e na nce
“ a l wa ys or a l mos ta l wa ys tend[s ] t ores t rictcompet it ion a n d dec r ea s e output,” Busines s Electro ni cs, sup ra, at 723. Ver t ic a l r e tail-pr ic e agreements have either procompeti tive or anticompetitive effects, de

pending on t h e circums t a n c e s in which t h ey we re for m ed; a n d t h e limite dempiri cal evidence availab l e does not suggest eff icient uses of the agreements are infreque ntor hypot h etica l

. A per serule should notb eadopt e d for a d minis t ra t ive conveni e nce a l one. S uch r u les ca n be c o u n t er pr odu c t iv e, in cr easin gth e an ti tr u s t sy ste m ’s total c o s tby prohib it ing procompet i t ive conductt h e a n t i t rus tla w s should enco ur ag e. An d a per se r u l e c a nnot be ju s t ified byth e possibil i tyof h i gh er prices ab s ent afurt her s h ow ing of a n t i compet it ive conduct

. The a n t i

tr u s t law s pr i m ar ilyar e desig n ed to pr otec t in terb r a n dc o mpetition from whichlower prices ca n la t e r res u lt

. Res p ondent ’s a r gument overlooks t h a t , in genera l, t h e int e res t s of ma nufa c t urers a n d con

su mer s ar e al ig n e d w i thr e spec t to r e ta il erpr ofit mar gin s. Resal e price ma int e na nce ha s economic da nger s
. If t h e rule of rea s on were to apply , c o u r ts w o u l d h av eto be di lig en t inelimin at in gth eiran ti

competitive u s es from the market. Fa ctors releva ntto t h e inq u iry
a r e t h e numb e r of ma nufa c t urers us ing t h e pra c t i ce, t h e res t ra int ’ s s o urce, a n d a ma nufa c t urer’ s ma rketpower. T h e r u le of rea s on is de

sig n ed an d u s ed to asc e r t a i nw h e th ertr an sac t ion s ar e an tic o mpeti

tiv eorpr oc ompetit iv e
. Th is st an dard principle appl ies to vertical price res t ra int s
. As court s ga in experien ce wit ht h es e res t ra int s b y applying the rule of reason over the course of decisions, they can es

tablish the litigation structure to en sure the rule operates to elimi

n ate an tic o mp etitiv e r e str a i n ts fr om th e mar k et an d to pr ov ide mor e g u idan c eto busin e sse s. Pp. 14– 19.

(c) Stare dec is is does notcompel cont inued a dherence t ot h e per se rule he re. Beca us e t h e S h erma n Actis t r ea t e d a s a common-la w sta t ute, it s pr ohibition on “ r estraint [s] of trade” evolves to meet the dynamics of present econom ic condit ions. The rule ofreason’s caseby -c ase adju di c ationimplem en ts th is c o mmon - lawappr oac h

. Her e , r e spec ted ec onomic s au th or it ies su g g e st th at th e per serule is inap

pr opr i ate. An d bothth e D e par t men tof Ju stic e an d th e Feder al Trade Commi ssion recommend replacing the pe r se rule wit ht h e r u le4 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Sy llabu s of reason. I naddition, this Courthas “overruled [its] precedents when s u b s eq uentca s e s hav eunder mined t h eir doct rina l underpin

nings

. ” Dick e rsonv. Unit ed States , 530 U. S. 428, 44 3. It is n o t su r pr isin gth at th e Cou r t h a s dist an c e d itsel f fr omD r
. Miles’ r ation ales, for t h e ca s ew a s decided not long a f t e r t h e S h erma n Act wa s ena c t e d,
w h e nth e Cour t h a d little e x per i en c e w i than titr u s t an aly s is. O n l y eigh t y e ar s after Dr . Mile s , t h e Courtrein ed in t h e de cis i on, holding t h a ta ma nufact urer ca n s u g g es tres a le prices a n d refus et odeal with dis t rib u t o rs who do notfollow t h em, United States v. Co lgate & Co., 250 U. S. 30 0, 30 7–3 08; an d mor er e c e n t lyth e Cou r th a s temper ed, limit ed, or ov erruled on ce s t rictvert ica lres t ra intprohib itions , s e e, e.g
. , GTE Sylvania , sup ra, a t57 –59. Th e Dr. Mile srule is a l s oincon

sistent with a principled f r amewor k, fo r it make s little economic
s e ns e when a n a l yzed wit hthe Court ’s ot her vert ica lres t ra intca s e s
. Deciding that procompetitiv eeffects of re sale price maintenance are insufficient to overrule Dr. Mileswould c a ll int oq u es tion ca s e s s uch
as Colgate an d GTE Sylvania

. Res p ondent ’s a r gument s for rea ffirm

ing Dr . Mile s basedon staredeci sisdo notreq u ire adifferentres u lt

. Pp. 19–2 8. 171 Fed. Appx . 464, r e v e r s ed an d r e man d ed.

K ENNEDY , J., delivered the opinion of the Court, in which R OBERTS , C. J., and S CALIA , T HOMAS , and ALITO , JJ., joined. B RE YER , J., filed a dis s e nt ing opinion, inwhic hS TEVENS , S OUTER , and G IN SB U R G , JJ., join ed._________________

_________________ 1 Cite as: 55 1 U

. S. ____ (2007) Opinion of t h eCourt

NOTICE: This op i n ion is subjec t to f o rmal revi si on bef o r e publicat ion in the p r eli m in ary p rin t of th e U n it edS t at es R e p o rts

. R e ad ers ar e r e qu es ted to n o tif yth e R e p o rt e rof D e c i s i on s , Su p r em e C o u rt of th e U n ited St at es , Wa s h

ington, D. C. 2054 3, of any typ o gra p hical or other f o rmal err o rs , in or der th atc o rr ect i on sm a y b e mad eb e f o r e th ep r e lim in aryp rin t go es t o p r es s
. 

## SUPREME CO URT O FTHE UNI TED STATES

No. 06–4 80
LEE G IN C REATI VE LEAT HE R PRODU C T S , INC., PETITION ER v. PSKS, INC., DBA KAY’S KLOSET . . . KAY’S SHOES
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEAL S FOR THE FIFTH CIRCUIT [Ju n e28, 2007 ] J USTICE K E NNEDY delivered the opinion of the Court. In Dr. Mile s Medical Co. v. John D. Park & Sons Co. , 220 U. S. 3 73 (1911), the Court es tablished the rule that i t 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 t h e distributor canch arge for th e manufacturer’s goods. The question presented by the instant case is whether the Court should overrule the per serule and allow resa l e price mai n tenance agreements to be judged b ythe rule of reason, the usual standard applied to determine if there i s a violatio n of §1. The Court has abandoned the rule of per s e illegality for o t her vertical restraints a manufacturer impo ses on its distributors. Respected economic analysts, furthermore, conclude that vertical pri c e restraint s can have procompetitive effects. We now hold that Dr. Milesshould be overruled and that vertical p r ice restraint s are to be judgedbythe rule o f
reason. I Petitioner, Leegin Creative L e ather Products, Inc.2 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Opinion of t h eCourt (Leegin), designs, manufactures, and distri butes leather goods and accessories. In 1991, Leegin began to sell b e lts under the brand nam e “Brigh ton.” The Bri ghton bran d has now ex panded into a variety of women’s fa shion acces

sories. It i s sold across the United States in over 5,000 retail establishments, for the most partindependent, small bouti ques and specialty sto r es. Leegin’s president, Jerry Kohl, also has an interest in about 70 stores that sell Brighton products. Leegin assert s that, a t least for its products, s m all retailers treat c u stomers better, provi d e customers more services, and make their shopping experi

ence more satisfactory than do l a rger, ofte n impersonal retailers. Kohl explained: “[W]e want the c o nsumers to get a different experience than th ey get in Sam’s Club or in Wal-Mart

. And you can’t get th at kind of experience or support or customer service fr om a store lik e Wal-Mart.” 5 Record 127. Respondent, PSKS, Inc. (PSKS), operates Kay’ s Kloset, a women’s apparel store in Lewis ville, Texas. Ka y’s Kloset buys from about 75 different manufacturers and at on e time sold the Brighton brand. Itfirst started purchasing Brighton go ods from Leegin in 1995. Once it began sellin g the brand, the store promoted Brighton. For example, it ran Brighton advertisements an d had Brighton days in the store. Kay’s Kloset became th e destination retailer in the area to buy Brighton products. Brigh t on was the store’s most important brand and once accounted for 40 to 50 percent of its profits. In 1997, Leegin instituted the “Brighton Reta il Pricing and Promotion Pol i cy.” 4 id., at 93 9. Foll owing the policy, Leegin refused to sell to retailers that discounted Brigh t on goods belo w suggested prices. The policy contained an exception for products not se lling well that th e retailer di d not plan on reordering. In th e letter to retailers establish

ing the poli cy, Leegin stated:3 Cite as: 55 1 U

. S. ____ (2007) Opinion of t h eCourt “In this age of mega stores lik e Macy’ s , Bloomingdales, May Co. and others, consumers are perplexed by promises of product qua lity andsupport of product which we believe is l a cking in these large stores. Consumers are further confused by the ever popular sale, sale, sale, etc. “We, at Leegin, choose to breakaway from the pack by selling [ a t] specialty stor es; s p ecialty stores that can offer the customer great quality merchandise, su

perb service, and sup p ort the Brighton pro d uct 365 days a year on a consist e nt basis. “We realize that half the equationis Leeginproduc

ing great Brighton pro d uct and th e other half is you , our retailer, creating gr eat looking stores selling our products in a quality manner.” Ibid. Leegin adopted the p o licy to giv e its retailers sufficient margins to provide c u stomers the service central to its distribution strategy. It also expressed concern that dis

counting harmed Brigh t on’s brand image and reputation. A year after institutin g the pricing policy Leegin intro

duced a marketing st rategy known as the “Heart Sto r e Program.” See id., at 962–972. It offered re tailers incen

tives to bec o me Heart Stores , and , in exchan ge, retailers pledged, among other things, to sell at Leegin’ s suggested prices. Kay’ s Kloset became a Heart Store soonafter Leegin created the program. After a Leegin employe e visited the store andfound it unattrac t iv e, the part ies appear to have agree dthat Ka y’s Kloset would not be a Heart Store beyond 199 8. Desp ite l o sing this s t atus, Kay’s Kloset continued to increase its Brighton sales. In December 2002, Leegin di scovered Kay’s Kloset had been marking down B r ighton’s e n tire line by 20 percen t

. Kay’ s Kloset contended it placed Brighton pro d ucts on sal e to compete with nearb yretailers who also w e re underc ut

ting Leegin’ s suggeste dprices. Leegin, nonetheless, r e -4 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Opinion of t h eCourt quested that Ka y’s Kloset ceas e discounting. Its request refused, Leegin stopped selling to the store. The l o ss of the Brighto nbrand had a considerable negative impact on the store’s revenue from sales. PSKS sued Leegin in the United States District Court for the Eastern District of Texas. It alleged, among other claims, that Leegin h a d violated the antitrust laws b y “enter[ing] into agreements wi thretailers to charge only those prices fixed by Leegin.” Id., at 1 236. Leegin planned to introduce expert testimony describing th e procompetit i ve effects of its pricing policy. The Distric t Court ex cluded the tes t imony, relying on the pe r se rule establishedby Dr. Mil e s
. AttrialPS KS arg u ed that th e Heart Stor e program, among other things, demonstrated Leegin and its retailer s had agreed to fix prices. Leegi n responded that it ha d established a unilateral pricin g policy lawful under §1, which a pplies only to concerted action. See United S t a t esv. Colga t e & Co. , 250 U. S. 300, 307 (1919). The jury agreed wi th PSKS an d awa r ded it $1.2 milli on. Pursuant to 15 U. S. C. §15(a), the District Court trebl ed the damages and reimbursed PSK S for its attorney’s fees and costs. It entered judgm e nt against Leegin in the amount of $3,975,00 0.80. The Court of Appeals fo r the Fifth Circuit affirmed. 171 Fed. Appx. 464 (2006) (per cur i am)

. On appeal Leegin did not dispute that it ha d entere d into vertical price-fixing agreements with its retailers. Rather, it contended that the rule of reason sh ould have applied to those agree

ments. The Court of Appeal s rejected this argument. Id. , at 466–467. It was correct to explain that it remained bound by Dr. Mil e s “[b]ecause [the Supreme] Court has consistently applied the per s e rul e to [vertic a l minimum price-fixing] agreements.” 171 Fed

. Appx., at 466. On thi s premise the Court of Appeals held that the D i strict Cour t did not abuse its discretion inexcluding the testimony of Leegin’ s economic expert, for the per serule rendered5 Cite as: 55 1 U

. S. ____ (2007) Opinion of t h eCourt irrelevant any proco m petitive justifications for Leegi n ’s pricing policy. Id., a t 467. We granted certiorari to de

termine whether verti cal minimum resale price mainte

nance agre ements should continue to be treated as pe r se unlawful. 549 U. S. ___ (2006). II Section 1 of the Sherm an Act p r ohibits “[e]very contra ct , combination in the for mof trust or otherwise, or conspir

acy, in restraint of trade orcommerce among the several States.” Ch. 647, 26Stat. 209, as amended, 1 5 U. S. C. §1. While §1 could be int e rpreted to proscribe all contract s, see, e.g., Board of Trad e of Chicagov. UnitedStates , 246 U. S. 231, 2 38 (1918), the Court h a s never “taken a literal approach to [its] language,” Texa co Inc. v. Dagh er , 5 47 U. S. 1, 5 (2006). Rather, the Cou rt has repeated time a n d again that §1 “outla w[s] only unreasonab l e restraints.” Sta t e Oil Co
. v. Khan , 522 U. S. 3, 10 (1997). The rule of reason is the accepted standard for testing whether a practice res trains trad ein violation of §1. S ee Texaco, su pra, at 5. “Under this rule, the factfinder weighs all of the circumstances of a case in deciding whether arestrictive practice s h ould be prohibited as imposing an unreasonable res traint on competition.” Continen talT. V., Inc. v. GTE Sylvania Inc. , 433 U. S. 36, 49 (1977). Appropriate factors to take into account include “specific information about th e relevant business” and “th e restraint’s history, nature, and effect.” Khan , supra, at10. Whether the business e s involved have mark e tpower is a further, significant consideration. See, e.g., Coppe rw el d Corp. v. Independen c e Tub eCo rp. , 467 U. S. 752, 76 8 (1984) (equating the rule of reason with “an inquiry into market power and m a rket s truc t ure design ed to assess [a restraint’s] actual effect”); see also Illinois Tool Works Inc.
v. Independ ent Ink, Inc. , 547 U. S. 28, 45–46 ( 2006). In it s design and function the rule distinguishes between re

-6 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Opinion of t h eCourt straints with anticompetitive effect that are harmful to the consumer and restraints stimulating competition that are in the consumer’s best interest. The rule of reason does not governall restraints. Som e types “a re deemed unlawful per se .” Khan , supra, at 1 0

. The per s e rule, treating categori es of restraints as neces

sarily illegal, eliminates the need to study the reasonable

ness of an individual restraint in light of the real market forces at w o rk, Busin e ss El ectroni cs Corp. v. Sharp Elec

t ronic s Corp. , 485 U. S. 717, 723 (1988); an d, it must be ack n owledged, the per serule can give clear guidance for certain con d uct. Restraints thatare per seunlawful in

clude horizontal agreements among competitors to fix prices, see Texaco , sup ra, at 5, orto divide mark ets, see Palmerv. BR G of G a ., I n c. , 498 U. S. 46, 49–5 0 (1990) (per curiam)

. Resort to pe r se rules is confined to restraints, like those mentioned, “that would always or almost al ways tend to restrict co mpetition and decrease output.” Busine ss El ec tro n ics , sup ra, at 723 (internal quotation marks omitted). To justify a per seprohibition a restraint must have “manifestly anticompetitive” effects, GTE Sylv ania , supr a, at 50, and “lack .

. . any redeeming virtu e ,” North w es t Wholesal eSta t ioners, Inc. v. P a cific S t a t ionery & Pr inti ng Co. , 472 U. S. 284, 28 9 (1985) (internal quotation marks omitted). As a consequence, the per se rule is appropriate only after court s have had considerable experience withth e type of res traint atissue, see Broadcas t M u sic, Inc. v. Columbia Broadcas ting System, Inc. , 441 U. S. 1, 9(1979), and only if courts can predict wit hconfidence that it would be invalidated in all or almost all i n stances under the rule of reason, s ee Arizonav. Maricop aCounty Medical So c. , 457 U. S. 332, 344 (19 82). It should come a s no surprise, then, that “we have expressed reluctance to adopt per s e rules with regard to r e strain ts imposed in the contextof7 Cite as: 55 1 U

. S. ____ (2007) Opinion of t h eCourt business r e lationship s where the econom ic impact of certain pra ctices is not immediately obvious.” Khan , supra, at 1 0 (internal quotation marks omitted); see also White Motor Co. v. U n it e dSt a t e s , 372 U. S. 253, 263 (1963) (refusing to adopt a per se rule for a vertical nonprice restraint because of the uncertainty concern i ng whether this type of restraint s a tisfied the demanding standa r d s necessary to apply a per se rule). And, as we have stated, a “departu re from the rule-of-reason standard must be based upon demonstrable economi ceffect rather than . . . upon formalistic line dr awing.” GT E Sylvania , supra, at 58–59. III The Court has interpreted Dr. Miles Medic a l Co. v. John D. P a rk & Sons Co. , 2 20 U. S. 373 (1911), as establishin g a per se rule against a vertical agre ement between a manu

facturer an d its distributor to set minimum resale prices. See, e.g., Monsanto Co. v. Sp ra y-Rite Se rv ice Cor p
. , 4 6 5 U. S. 752, 761 (1984). In Dr. Mile sthe plaintiff, a manu

facturer of medicines, sold its products only t o distributor s who agreedto resell them at set prices. The Court found the manufacturer’s con trol of resa le prices to be unlawful. It relied on the common-law rule that “a general restraint upon aliena tion is ordinarily invalid.” 220 U. S., at 404– 405. The C o urt then explained that the agreements woul d advantage the distributors, not the manufacturer, an d were analogous to a c o mbinationamong competing dis

tributors, w h ich the law treated a s void. Id., at 407–408. The reasoning of the C o urt’s more recent juri sprudenc e has rejecte d the ra tionales on which Dr. Mi les was bas ed. By relying on the common-law rule against r e straints on alienation, id., at 404– 405, the Court justified its decision based on “f ormalistic” legal doctrine rather than “demon

strable economic effect,” GTE Sylvania , sup ra, at 58–5 9. The Court in Dr. Mil e srelied on a treatise published in8 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Opinion of t h eCourt 1628, but f a iled to di s c uss in det a il the bu si ness reas ons that would motivate amanufacturer situated in 1911 t o make use of vertical p r ice restraints. Yet t h e Sherman Act ’ s use of “restraint of trade” “invokes the common law itself, .

. . not merely the static content that the common law had assigned to the term in 1890.” Busine ss Ele c tron

ics , supra, at 732. The general restraint on alienation, especially i nthe age when then-Justice Hughes used the term, tende dto evo k e policy conc erns extran eous to the question that controls here. Usually associated with lan d , not chattels, the rule arose fr om restrictions removing rea l property from the stream of commerce for generations. The Court should be cautious about putting dispositive weight on doctrines from antiquitybut of slight relevance. We reaffir mthat “the state of the common la w 400 or even 100 years a g o is irrel e vant to the i s sue bef o re us: the eff e ct of the antitrust laws upon vertical distributional re

straints in the American economytoday.” GT E Sylvania , 433 U. S., at 53, n. 21 (internal quotation marks omitted). Dr. Mil e s , furthermor e , treated vertical agr eements a manufacturer makes with its distributors as analogous to a horizontal combinati o n amon g competing distributors. See 220 U. S., at 407–408. In la ter cases, however, the Court reject ed the approach of reliance on rules governing horizontal restraints when defining rules applicable to vertical ones. See, e.g., Busine ss E lectronics , supra, at 73 4 (disclaimin gthe “notion of equivalence between the scope of horizontal per s eillegality and that of vertical per s e illegality”); Maricopa Co unty , supra, at 348, n

. 18 (noting that “horizontal restraints are generally less defensib le than vertical restraints”). Our recent cases formulate antitrust p r inciples in accordanc e with the appreciated differences in econom i ceffe ct between vertical and hori

zontal agreements, dif f erences the Dr. MilesCourt failed to consider. The reason s upon which Dr. Milesrelied do not justify a9 Cite as: 55 1 U

. S. ____ (2007) Opinion of t h eCourt
per s e rule. As a consequence, it i s necessary to examine, in the firs t instance, the economic effects of verti ca l agreements to fixminimum resale prices, a n d to dete r mine whether the per s e rule is nonetheles s appropriate. See Business Electronics , 485 U. S., at 726. A Though each side of th e debate ca n find sour ces to sup

port its position, it suffices to say here th at economic s literature is replete withprocom petitive justifications for a manufacturer’s use of resale price maintenance. See, e.g., Brief for Economists as Amici Curi ae16 (“In the theoreti

cal literature, it is ess e ntia lly un disputed that minimu m [resale price maintenance] can ha ve procompetitive effects and that under a variety of market co nditions itis unlikely to have anticompetitive effects”); Brie f for United States as Amicus Curiae9 (“[T]here is a widespread con

sensus that permitting a manuf acturer to control the price at which its goods aresold may promote interbrand co m p e t i t i on andc o nsumerw e lfar e in a v a r i et y of w a y s ” ) ; ABA Section of Antitrust L a w, Antitru st Law and Economics of Product Di stribution 76 (2006) (“[T]he bulk of the eco

nomic liter ature on [resale price maintenan ce] suggests that [it] is more likely to be used to enhance efficiency than for anticompetitive purpos es”); see also H. Hovenk

amp, The AntitrustE n terprise: Principle a n d E x ecuti o n 184–191 (2 005) (herei nafter Hovenkamp); R. Bork, The Antitrust Paradox 2 88–291 (1978) (herein a fter Bork). Even those more skeptical of resale price maintenance ack n owledge it can have procompetitive effects. See, e.g
. , Brief for William S. Comanor et al. as Amici Curia e3 (“[G]iven [ t he] diversity of e ffects [of resale price mainte

nance], one could reas onably take the position that a ru le of reasonrather thana per se a pproach is warran t ed”) ; F.M. Scher e r & D. Ros s , Industrial Market S t ructure and Economic Performance 558 (3ded. 1990) (hereinaft e r10 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Opinion of t h eCourt Scherer & Ross) (“The overall ba lance between ben e fit s and costs [of resale price maintena nce] is probably close”). The few r e cent studies documenting the competitive effects of resale price maintenance also cast doubt on th e conclusion that the practice meets the criteria for a per s e rule. See T. Ove r stre et, Resale Price Maintenance: Eco

nomic Theories and Empirical Evidence 170 (1983) (here

inafter Ove r street) (noting that“[ e]fficient uses of [resale price maintenance] are evidently not unusual or rare”); see also Ippolit o, Resale Price Main tenance: Empirical Evi

dence From Litigation, 34 J. Law & Econ. 263, 292–2 93 (1991) (hereinafter Ippolito). The justifications for vertical price restraints are similar to those for other verti cal restrain ts. See GTE Sylvania , 433 U. S., at 54–57. Minimum r e sale price maintenance can stimulate interbrand co mpetition—the competition among manufacturers selling different brands of the same type of pro d uct—b yre ducing intr abrand com p etition—the competition among retailers s e llin g the same brand. See id., at 51–52. The promotion of i n terbrand competition is important because “the primary purpose of the antitrust laws is to protect [thi s type of] competition.” Khan , 522 U. S., at 15. A single manufacturer’s use of vertical pri c e restraints t e nds to eliminate intrabrand pric e competition; this in turn encourages retailers to invest in tangible or intangible services or promotional efforts that aid th e manufacturer’s position as again s t rival ma nufacturers

. Resale price maintena nce also ha s the potential to give
consumers more options so that they can choose among low-price, low-service brands; high-price, high-servi ce brands; and brands tha tfall in bet w een. Absent vert ical price r e straints, t h e retail services tha t enhance interbrand co mpetition might be u n derprovide d. This is because discounting retailers can free ride on retailers who furnish services and then cap t ure some of the increased demand those services generate. GT E Syl

-11 Cite as: 55 1 U

. S. ____ (2007) Opinion of t h eCourt vania , sup r a, at 55. Consumers might learn, for example, about the benefits of a manufa cturer’s product from a retailer that invests in fine showrooms, offers produc t demonstrations, or hires and trains knowledgeable em

ployees. R. Posner, An titrust Law 172–173 (2d ed. 2001) (hereinafter Posner). Or cons umers might decide to b u y the product because they see it in a retail establishmen t that has areputation for selling high-quality m e rchandise. Marvel & McCafferty, Resale Price Maintenance and Quality Ce rtification, 15 Rand J

. Econ. 346, 347–349 (1984) (hereinafter Marvel & McCafferty). If the con

sumer can then buy t h e product from a reta iler that dis

counts beca use it has not spent capital provi d ing services or developi ng a quality reputa tio n , the high-service re

tailer will lose sa les t o the discounter, forcing it to cu t back its se rvices to a level lowerthan consumers would otherwise prefer. Minimum resale price maintenance alleviates the problem because it prevents the discounter from undercutting the service provider. With price compe

tition decreased, the manufac turer’s reta ilers compete among themselves ove rservices. Resale price mainten ance, in a ddition, can increase interbrand competition by facilitating market entry fo r new firms and brands

. “[N]ew m anufacturers and manu

facturers e n tering new mar k ets can use the restrictions in order to induce competent andaggressive retailers to make the kind of investment of capital and labor that is often required in the distribution of products unknown to the consumer.” GTE S y lvania , su pra, at 55; see Marvel & McCafferty 349 (notin g that reliance on a retailer’s repu

tation “will decline as the manufacturer’s brand becomes better known, so that [resale price mainten ance] may be particularlyimportantas a com p etitive device for ne w entrants”). New produ cts andnew brands are essentialto a dynamic economy, a n d if markets can be penetrated by using resal e price mai n tenance there is aprocompetitive12 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Opinion of t h eCourt effect. Resale price maintena nce can als o increase i n terbrand competition by encour aging retai l er services thatwoul d not be provided even absent free riding. It may be difficult and inefficient for a m anufacturer to make a n d enforce a contract wi th a retailer specif ying the different services the retailer must perform. Offering the retailer a guaran

teed margin and threatening termination if it does not live up to expectations may be th e m o st efficientway to ex

pand the manufacturer’s market share by inducing the retailer’s performance and allowi ng it to u s e its own initia

tive and experience inproviding valuable services. See Mathewson & Winter, The Law and Economics of Resale Price Maintenance, 13 Rev. Indus. Org. 57, 7 4–75 (1998) (hereinafter Mathewson & Winter); Klein & Murphy, Vertical Restraints as Con tract Enforcement Mechanisms, 31 J. Law & Econ. 265, 295 (198 8); see a l so Deneckere, Marvel, & Peck, Dem and Uncertainty, Inventories, an d Resale Price Maintenance, 111 Q. J. Econ. 88 5, 911 (199 6) (noting that resale price maintena nce may be beneficial t o motivate retailers to stock ade quate inventories of a manufacturer’s goods i nthe face of uncertain consumer demand). B While vertical agreements setting minimum resale prices can have procompetitive justifications, they may have anticompetitive effects in other cases; and unlawful price fixing, designed s o lely toobt a in monopoly profits, is an ever present temptation. Resale price maintenance may, for example, facil i tate a manufacturer cartel. See Busine ss El ectronics , 4 85 U. S., at 725. An unlawful carte l will seek to discover if some manu facturers are undercut

ting the ca rtel’s fixed prices. Resale price maintenance could assistthe cartel in identifying price-cu tting manu

facturers w h o benefit from the lower prices they offer.13 Cite as: 55 1 U

. S. ____ (2007) Opinion of t h eCourt Resale price maintenance, furthermore, could discourage a manufacturer from cutting price s to retailers with th e concomitant benefit of cheaper prices to consumers. See ibid.; see al so Posner 1 72; Overstreet 19–23. Vertical pri c e restraints also “might be used to organize cartels at t h e retailer level.” Business El ec tronics , supra, at 725–726. A group of retailers might collude to fix prices to consumers and thencompel a manufacturer to aid th e unlawful arrangement with resale price maintenance. In that instance the ma nufacturer does not establish th e practice to stimulate servicesor to promote i t s brand but to give inef ficient retailers hi gher profits. Re tailers with better dist ribution sy stems and lower cos tstru cture s would be prevented fr om chargin glower pri c es by the agreement. See Posner 172; Overstreet 13–19. Historica l examples s u ggest this possibi lit y is a legitimate concern. See, e.g., Marvel & McCafferty, The Welf are Effects of Resale Price Maintena nce, 28 J. Law & Eco n . 363, 373 (1985) (hereinafter Marvel) (providing an example of the power of th e National Association of Retail Drug gists t o compel manufacturers to use res a le price maintenance); Hovenkam p 186 (suggesting tha tthe retaildruggists in Dr. Mil e s formed a cartel and used manufacturers to enforce it). A horizontal cartel among competing manufacturers o r competing retailers that decreases outputor reduces competition in order to increase price is, and ought to be, per se unla w ful. See Texaco , 547 U. S., at 5; GTE Sylva

nia , 433 U. S., at 58, n. 28. To the extent a vertica l agreement setting minimum resale prices is entered upon to facilitate either type of cartel, it, too, would need to be held unlawful under the rule of reason. This type of agreement may also be usefu l evidence for a plainti ff attempting to prove the existence of a horizontal cartel. Resale price maintenance, furthe r more, canbe abused by a powerful manufa cturer or retailer. A dominant re

-14 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Opinion of t h eCourt tailer, for example, might request resale price mainte

nance to forestall innov a tion in dis tribution that decreases costs. A manufacturer might consider it has little choice but to accommodate the reta iler’s demands for vertic a l price restraints if the manufacturer believ e s it needs
access to the retailer’s distribution networ k

. S e e Overstreet 31; 8 P. Areeda & H. Hovenkam p, Antitrus t Law 47 (2d ed. 2004) (hereinafter Areeda & Hovenkam p); cf. Toys “R” Us, Inc. v. FTC, 221 F. 3d 928, 93 7–938 (CA7 2000). A manufacturer with ma rket power, by compari

son, might use resale price maintenance to give retailers an incentive not to sell the products of smaller rivals or new entra nts. See, e.g., Marvel 366–368. As should be evident, the poten t ial anticompetitive consequences of vertical price restraints must not be ignored or underestimated. C Notwithsta n ding the risks of unla w ful conduct, it cannot be stated with any degree of confidence that resale price maintenance “always o ralmost always tend[s] to restrict competition and decrease output.” Busines sElectronics , supra, at 72 3 (internal quotation marks omitted). Vertical agreements establishin gminimum resale prices can have either procompetitive or antic ompetitive effect s, depending upon the circumstance s in which they are formed. And although the empiricalevidence on the topic is limited, i t does not s u ggest efficient uses of the agreements a r e infrequent or hypothetical. See Overstreet 170; see al so id., at 80 (noting tha tfor the majority of enforcement actions brought by the Federal Trade Commission be

tween 1965 and 1982, “the use of [resale price mainte

nance] was not likely motivated by collusive dealers who had successfully coerced their suppliers”); Ippolito 292 (reaching a similar conclusion). As the rule would pro

scribe a si gnificant amount of procompetit ive conduct,15 Cite as: 55 1 U

. S. ____ (2007) Opinion of t h eCourt these agreements appear ill suited for pe r secondemn a tion. Respondent contends, nonetheles s , that vertical price restraints should be per se unla w ful because of the admin

istrative co nvenience of per se rules. See, e.g., GT E Sylva

nia , supra, at 50, n. 16 (noting “ per s e rules tend to provide guidance to the busin ess communi ty and to minimize th e burdens onlitigants a n d the judicial system”). That ar

gument suggests pe r se illegality is the rule rather tha n the exception. This misinterprets our antitrust law. Per
se rules m a y decreas e administrative costs , but that is only part of the equation. Those rules can be counterpro

ductive. T h ey can inc r ease the total cost of the antitru st system by prohibiting procompet i tive condu ct the an ti

trust laws should enc o urage. See Easterbrook , Vertical Arran g ements and the Rule of Reason, 53 Antitrust L. J. 135, 158 (1 984) (herei nafter Easterbrook). They also may increase li tigation costs by pro m oting frivolous suits against legi timate pra ctices. The Court h a s thus ex

plained that administrative “adva n tages are not sufficient in themselves to justifythe creatio n of pe r se rules,” GT E Sylvania , 4 33 U. S., at 50, n. 16, and has relegated their use to restraints that are “manifestly anticompetitive,” id., at 49–50. Were the Court now to conclude that vertica l price restra ints should be per se illegal based on adminis

trative cost s, we would under mine, if not overrule, the traditional “demandi n g standa r ds” for ad opting per s e rules. Id. , at 50. Any possible reduction in ad ministrative costs cannot alone justi f y the Dr. Milesrule. Respondent also argues the per se rule is ju stified be

cause a vertical price restraint ca n lead to higher prices for the ma nufacturer’s goods. See also Overstreet 1 6 0 (noting that “price su rveys indic a te that [r esale price maintenance] in most cases increased the prices of prod

ucts sold”). Respondent is mistaken in relying on pricin g effects absent a further show ing of anticompetitive con

-16 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Opinion of t h eCourt duct. Cf. id ., at 106 (explaining that price surveys “do no t necessarily tell us anyth ing conclusive about the welfare effects of [resale price maintenance] because the results are generally consistent with bo th procom petitive and anticompetitive theories”). For, as has been indicated already, the antitrust laws are designed primarily to protect inte rbrand com p etition, from which lower prices can later result. See Khan , 522 U. S., at 15. The Court, moreover, has evaluated other v e rtical restraints und er the rule of reason eve nthough prices can be increasedin the course of promotin g procompetitive effects. See, e.g., Busine ss El ectronics , 4 85 U. S., a t728. An d resale price maintenance may red u ce prices if manufacturers have resorted to costlier alternatives of controlling resale prices that are not pe r seunl awful. See infra , at 22 –25; see als o Marvel 371. Respondent’ s argument, furthermore, overlook s that, in general, the interests of manufactu rers and co nsumers are aligned wit hrespect to retaile r pr ofit margins. The differ

ence between the price a manufacturer charges retailers and the p r ice retailers char ge con s umers represents par t of the man u facturer ’ s cost of distr ibution, which, like an y other cost, the manufacturer us ua lly desires to minimize. See GTE S y lvania , 433 U. S., at 56, n. 24; s ee als o id., at 56 (“Economists .

. . h ave argued that manufacturers ha ve an economi cinterest in maintaining as much intrabran d competition as is consi s tent with the efficient distribution of their products”). A manufactu rer has no incentive to overcompensate retailers with unj u stified margins. The retailers, not the manufacturer, gain from higher reta il prices. The manufactu rer often loses; interbrand competi

tion reduces its compet itiveness an d mark et share because consumers will “substitute a diffe rent brand of the same product. ” Id

. , at 52, n. 19; see Business Electronics , s u pra, at 725. As a general matter, the r efore, a single manufac

turer will desire to setminimum resale prices only if the17 Cite as: 55 1 U

. S. ____ (2007) Opinion of t h eCourt “increase in demand resulting from enhanced service . . . will more than offset a negative impact on demand of a higher retail price.” Mathewson & Winter 67. The implications of res p ondent’s position are far reach

ing. Many decisions a manufacturer makes and carries out throughconcerted action c an lead to higher prices. A manufacturer might, for example, contract with different suppliers to obtain better input s that imp r ove produ c t quality. Or it might hire an advertising agency to promote
awareness of its good s. Yet n oonewould thinkthese actions violate the Sherman Act because they lead to higher prices. The antitrust laws do not require manufac

turers to p r oduce gen e ric goods that consu m ers do n o t know about or want. The manufacturer stri ves to improve its product quality or to pr omote its bran d because it believes thi s conduct will lead to increased demand de

spite highe rprices. The same can hold true for resa le price maintenance. Resale price maintena nce, it is true, does have economic dangers. I f the rule of reas on were to apply to vertical price restra ints, courts would have to be dilig ent in elimi

nating their anticompetitive uses fr om the mark et. This is a realistic objective, and certainfa ctors are relevant to the inquiry. For example, the number of manufacturers th at make use of the practi ce in a given industry can provide important instruction. When onl ya few manufacturers lacking ma rket poweradopt the prac tice, t h ere is little likelihoodi tis facilita t ing a man u facturer cartel, for a cartel then can be undercut byrival manufacturers. See Overst reet 22; Bork 2 94. Li kew i se, a retailer cartel i s unlikely wh en only a si ngle manufacturer in acompetitive market uses resale pri c e maintenance. Interbrand compe

tition would divert co nsumers to lower pric ed substitutes and elimina t e any gain s to retailers from their price-fixing agreement over a singl e brand. See Posner 17 2; Bork 292. Resale price maintenance should be subject to more care

-18 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Opinion of t h eCourt ful scrutiny, by contra st, if many competing manufactur

ers adopt the practice. Cf. Scherer & Ross 558 (noting that “except when [resale price maintenance] spreads to cover the bulk of an industry ’s output, deprivi n g consum
ers of a meaningful choice between high-service and lowprice outle t s, most [resal e price maintena nce arrange
ments] are probably i nnocuous”); Easterbrook 162 (su g
gesting tha t“every on e of the potentially-anticompetitive outcomes of vertical a rrangement s depends on the uni

formity of t h e practice” )

. The source of the rest raint may also be an important consideration. If there is evidence retailers were the impetus for a ver t ical price restra int, there i s a greater likelihoodthat the res traint facilitates a retailer cartel or supports a dominant, inefficientretailer. See Brief f o r William S. Comanor et al. as Amici Curi a e7–8. If, by contrast, a manufacturer adopted the policy i n dependent of retailer pressure, the restra in t is l e ss lik ely to prom ote anticompetitive conduct. Cf. Posner 177 (“It makes all the difference whether minimum retail prices are imposed by the manufacturer in order to evoke point-of-s ale services or by the dealers in or der to obtain monopoly profits”). A manufacturer also has an incentive to prote s t inefficien t retailer-induced price restraints because they can harm its competitive position. As a final matter, that a dominant manufacturer o r retailer can abuse resa le price ma intenance f o r anticom

petitive purposes may not be aseri ous concer n unless the relevant entity has market powe r. If a retailer lacks market po wer, manufacturers likely can selltheir goods through rival retailers. See also Busine ssEle c tronic s , supra, at 7 27, n. 2 (noting “[ r]etail marketpower is ra re , because of the usual presence of interbrand competition and other dealers”). And if a ma nufacturer lacks market power, ther e is less likelihood it can use th e practice t o k eep competitors away fr om distribution outlet s.19 Cite as: 55 1 U

. S. ____ (2007) Opinion of t h eCourt The rule of reason is designed and used to eliminate anticompetitive transactions from th e market. This stan

dard p r inciple applies to vertical price restra ints. A par t y alleging injury f r om averticala greement setting mini

mum resale prices will have, as a general matter, the informationand resources available to show the existence of the agre ement and its scope of operation. As courts gain experience considering th e effects of these restraints by applying the rule of reason overthe course of decisions , they canestablish the litigation structu re t o ensure the rule operates to el imin ate ant icompetitive restraints fro m the marketand to provide more guidance to businesses. Courts can, for example, deviserules over time for offering proof, or ev en presum ptions where justified, to mak e th e rule of reason a fair and efficient way to proh ibit anticom

petitive restraints and to pr omote procompetitive ones. For all of the foregoing reas ons, we think th at were the Court considering the issue as an original matter, the rul e of reason, not a per se rule of unlawfulness, would be the appropriate standard t o judge vert ical price restraints. IV We do not write on a clean slate, for the dec i sion in Dr. Milesis al most a century old. So there is an argument for its retention on the basis of star e decisi s alone. Even if Dr. Milesestablished an erroneous rule, “[s]taredecisis re flects a policy judgme nt that in most matters it is mor e important that the applicable rule of law be settled tha n that it be settled right

. ” Khan , 522 U. S., at 20 (internal quotation marks omitted). And concerns about maintai n ing settled law are strong wh en the questi o n is one of statutoryinterpretatio n
. See, e. g., Hohnv. Uni t e dS t at es , 524 U. S. 236, 251 (1998). Star e deci si s is not as significant in this case, however, because theissuebefo re us is the scope of th e Sherman Act. Khan , supra, at 2 0 (“[T]he ge neral presumption that20 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Opinion of t h eCourt legislative changes should be lef tto Con gress has les s force with r e spect to th e Sherman Act”). F r om the begin

ning the Co urt has trea t ed the Sherman Ac t a s a commonlaw statute. See Nat i onal Soc. of Professional Engineersv. United S t a t es , 435 U. S. 679, 688 (1978); see also North

wes t Airl in es, Inc. v. T ranspor t W o rkers , 451 U. S. 77, 98 , n. 42 (1981 ) (“In antitrust, the fed e ral courts

. . . act mor e as common-law courts than in other areas governed b y federal statute”). Just as the common law adapts to mod

ern understanding and greater experience, sotoo does the Sherman Act’s prohibit ion on “rest raint[s] of trade” evolve to meet thedynamics of present ec onomic con d itions. Th e case-by-cas e adjudicat i on contemplated by the rule of reason has implemented this common-law approach. See NationalSo c. of Prof essionalEn ginee rs , supra, at68 8

. Likewise, t h e boundaries of the doctrine of per s eillegali ty should not be immovable. For “[i]t would m a ke no sens e to create out of the single term ‘restrain t of trade’ a chronologically schizoid statute, i nwhich a ‘rule of reason’ evolves with new circu mstance and new wisdom, but a li ne of per seillegality remains forever fixed where it was.” Busine ss El ectronics , 4 85 U. S., at 732. A Star e deci si s , we conclude, does not compel our contin

ued adherence to the per se rul e against vertical pric e restraints. As discuss e d ear lier, respected a u thorities in the econom ics literature suggest the per se rule is ina p propriate, and there is now widespread agr eement that resale price maintenance can have procompeti tive effects. See, e.g., Brief for Economists as Amici Curi ae1 6

. I ti s also s i gnifi c ant that b o th the Department of Justice and the Federal Trade Commission—the antitrust enforce

ment agencies with the ability to assess the long-term impacts of resale price maintenance—have recommended that this C o urt replac e the per se rule with t h e traditional21 Cite as: 55 1 U

. S. ____ (2007) Opinion of t h eCourt rule of rea s on. Se e Brief for United States as Amicu s Curiae6. In the antitrust context the fact that a decision has been “called into serious question” justifies our re

evaluation of it. Khan , supra, at 2 1

. Other considerations reinforce the conclusion that Dr

. Milesshould be overtu rned. Of m o st relevance, “we ha v e overruled our precede n ts when subsequentcases have undermined their doctrinal underpinnings.” Dicke rsonv. United Sta t es , 530 U. S. 428, 443 (2000). The Court’s treatment of vertical restrain ts has progressed away fro m Dr. Miles ’ strict app r oach. We have distanced ourselves from the op inion’ s rati onales. Se e supra, at 7–8; see als o Khan , supra, at 21 (overruling acase when“the views underlying [it had been] erode dby this Court’ s prece dent”); Rod r iguezde Quijasv. Shears on/Americ a n Ex

pres s, Inc. , 490 U. S. 4 77, 480–481 (1989) (same). This is unsurprising, for the c a se was de cided not lo ng afteren actment of the Sherman Act w h en the Court had little experience with antitrust analys is. Only eight years after Dr. Miles , moreover, the Court reined inthe decision by holding that a manufacture r can announ ce suggested resale prices and refuse to deal with distributors who do not follow them. Colgate , 250 U. S., at 307–308. In more recent cases th e Court, following a co mmon-law approach, has continued to temper, limit, or overrule once strict prohibitions on vertical restraints. In 1977, the Court over turned the per serul e for vertical nonprice restraints, adopting th e rule of reason in its stead. GT E Sylvania , 4 33 U. S., at 57–59 (overruling U n it e dSt at e sv. Arnold, Schwinn & Co. , 388 U. S. 3 65 (1967)); see al so 433 U. S., at 58 , n. 29 (noti n g “that th e advantages of vertical restrictions should notbe limited to the categories of new entrants an d failing firms”). While the Court in a footnote in GTE S y lvaniasuggested th at differences between vertical p r ice and non p rice re stra ints could s u pport differ

ent legal treatment, see 433 U. S., at 51, n. 18, the centra l22 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Opinion of t h eCourt part of the opinion relied on authorities and arguments that find u n equal treatment “diffi cult to justify,” id., at 69–70 (Whi te, J., concurring in judgment). Continuing in this direction, in two cases in the 1980’s the Court defined legal rule s to limit the reach of Dr. Mile s and to accommodate the doctrin e s enunciated in GT E Sylvania and Colgate

. See Business El ectronics , supra, at 726–728; Monsanto , 46 5 U. S., a t 763–764. In Monsanto , the Court required that antitrus t plaintiffs alleging a §1 price-fixingconspiracymust present evidence tending to exclude the possibility a manufacturer and its distributors acted in a nindependent manner. Id., at 764. Unlike Justice Brennan’s concurrence, which rejected arguments that D r . Mi les should be overruled, see 465 U. S., at 76 9, the Court “ d ecline[d] to reach the question” whether verti

cal agreements fixing resale prices always should be unlawful because neither party s u ggested otherwise, id., at 761–762, n. 7. In BusinessEle c tronic sthe Court fur

ther narro wed the scope of Dr. M iles

. It held that the per se rule applied only to s p ecific agreements ove rprice levels and not to an agreement between a manufacturer and a distributor to terminate a price-cutting distributor. 48 5 U. S., at 72 6–727, 735– 736. Most recently, in 1997, after examining the issue of vertical maximum price-fixing agreements in light of commentary and real experience, the Courtoverruled a 29-year-old precedent treating tho s e agreeme n ts as per s e illegal. Khan , 522 U. S., at 2 2 (overruling Albrech tv. Her a ld Co. , 390 U. S. 145 (1968))

. It h e ld i n stead tha t they shoul dbe evalu a ted under the traditional rule of
reason. 52 2 U. S., at 22. Our continued limiting of the reach of the decision in Dr. Mil e sa n d our rece nt treatmen t of other vertical restraints justify the conclusion that Dr. Milesshould not be retained. The Dr. Mil e srule is also inconsist e nt with a principled framework , for it makes little eco n omic sens e when ana

-23 Cite as: 55 1 U

. S. ____ (2007) Opinion of t h eCourt lyzed with our other c a ses on vertical restra ints. If we were to de cide the pr ocompeti tive effects of resale pric e maintenance were insu fficient to overrule Dr. Miles , then cases such as Colgate and GTE Sylvaniathemselves would be called into question. These later dec i sions, while they may result in les s in trabrand competition, can be justified because they permit man u facturers t o secure the procompetitive benefit s asso ciated with ve rtical price restraints through other meth ods

. Theoth e r methods, however, co uld be less effici ent for a parti cular manufac

turer to establish and sustain. The end result hinders competition and consumer welfare because manufacturers are forced to engage in seco nd-best alternatives and be

cause consumers are required to shoulder the increased expense of th e inferior practices. The manufacturer has a number of legitimate options to achieve benefits similar to th ose p r ovided by vertical price restraints. A manufacturer canexercise its Colgateri gh t to refuse to deal with retaile rs that do not follow its sug

gested price s
. See 250 U. S., at 307. The economic effects of unilateral and conce rted p r ice s e tting are i ngeneral t h e same. See, e.g., Monsanto , 465 U. S., at 762–764. T h e problem for the manufacturer is that a ju ry might con

clude its un ilateral policy was really a vertical agreement, subjecting it to treble damages and potential criminal liability. Ibid.; Busin ess El ec tron ics , sup ra, at 728

. E v e n with the s t ringent sta n dards in Monsanto and Busin e ss Electronics , this danger can lead, and has led, rational manufacturers to ta ke wasteful m e asures. See, e.g., Bri e f for PING, I n c., as Amicus Curiae 9–18. A m anufacturer might refus e to discuss its pricin g policy with its distribu

tors except through counsel k n owledgeable of the subtle intricacies of the law. Or it mightterminate longstanding distributors for minor violations without seeking an ex

planation. See ibid

. The incre ased costs these burden

some meas ures generate flow to consumers i nthe form of24 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Opinion of t h eCourt higher price s
. Furthermore, dependin g on the type of product it se lls, a manufacturer might be able to achieve the procompetitive benefits of resale price maintenance by integrating down

stream and selling its products directly to co nsumers. Dr

. Milestilts the relative costs of vertical integration and vertical agr eement by making the former more attrac t iv e based on th e per ser u le, not on real market conditions. See Business Elec tron ics , supra, at 725; s ee general l y Coase, The Nature of the Firm, 4 Economica, New Series 386 (1937). This distortion might lead to inefficient inte

gration tha twould not otherwise take place, so that con

sumers mu st again suffer the consequences of the subop

timal distribution strategy. And integra t ion, unlike vertical pri c e restraint s , eliminates all intrabrand compe

tition. See, e.g., GTE S y lvania , 433 U. S., at 5 7 , n. 26. There is yetanother consideration. A manufa cturer ca n impose territorial restrictions on distributor s and allo w only one distributor to sell its goods in a given region. Our cases have recognized, and the ec onomics literature con

firms, that these vertic a l nonp rice restraints h ave impacts similar to t h ose of vertical price restraints; both reduc e intrabrand competition and can stimulate retailer ser

vices. See, e.g., Busine ss Elec troni c s , supra, a t728; Mon

santo , supra, at 762–763; see also Brief for Economists a s Amici Cu ri ae17–18. Cf. Schere r & Ross 56 0 (noting th at vertical nonprice restra ints “c an engender inefficiencies at least as serious as those imposedupon the consumer by resale price maintenance”); Steiner, How Ma nufacturers Deal with t h e Price-C u tting Reta iler: When Are Vertica l Restraints Efficient?, 65 Antitru st L. J. 407, 446–447 (1997) (indicating that “antitrust law shoul drecognize that the consumer interest is often better served by [resale price maintenance]—contrary to its per se illegality and the rule-of-reason status of ve rtical nonprice restraints”). The same legal standard ( p er se u n lawfulness ) applies to25 Cite as: 55 1 U

. S. ____ (2007) Opinion of t h eCourt horizontal market division and horizontal price fixin g because both have similar economic effect. There is lik e wise little economic justification for the curr ent differen

tial treatm e nt of vert ical price and nonpric e restraints. Furthermor e , vertical nonprice re straints ma y p r ove less efficient for inducing desire d services, and they reduce intrabrand competition more than vertical pri c e restraints by eliminat ing both price and service competition. See Brief for Economists as Amici Curi ae17–18. In sum, it is a flawed antitrust d o ctrine that serves the interests of lawyers—by creatin glegal distinctions that operate as traps for th e unwary— more than the interests of consumers—by re quiring manufacturers to choose second-best options to achieve sou n d business objectives. B Respondent’s arguments for reaffirming Dr. M ileson the basis of stare deci sisdo not require a different result. Respondent looks to congressio nalaction concerning verti

cal price restraints. In 1937, Congress passed the Mill erTydings Fai rTrade Act, 50 Stat. 693, which made vertical price restraints legal if authorized by a fair trade l a w enacted by a State. Fifteen years later, Congress ex

panded the exemption to permit vertical price-settin g agreements between a manufactu rer and a distributor to be enforced against other distri b u tors not i nvolved in the agreement. McGuire Act, 66 Sta t

. 632. In 19 75, however, Congress repealed bothActs. Consumer Goods Pricing Act, 89 Sta t . 801. That the Dr . Mile srule ap plied to verti

cal price restraints in 1975, ac cording to responden t , shows Congress ratified the rule. This is not so. The text of the Consumer Goods Pricing Act did not codify the rule of perse illegality for vertica l price restr a ints. It rescinde d statutory provisions that made them per selegal. Congress once again placed these restraints within the ambit of §1 of the Sherman Act

.26 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Opinion of t h eCourt And, as ha s been discussed, Congress intended §1 to give courts the ability “to develop go verning prin ciples of la w” in the common-law tradition. Texas Industries, Inc. v. Radcliff M a terials, Inc. , 451 U. S. 630, 64 3 (1981); see Busine ss E lectronics , 485 U. S., at 731 (“The changing content of t h e term ‘res traint of tra de’ was well recognized at the tim e the Sher man Actw a s enacted” ). Congress could have set the Dr. Miles rule in stone, but it chose a more flexibl e option. We respect its decision by analyzin g vertical pric e restraints, like a ll restraints, in conformance with t r aditi o nal §1 principles, including the p r inciple that our antitrust doctrines “evolv [e] with new circumstanc es and new wisdom.” Business El ectro nics, supra, at 732; s ee also Easterbrook 139. The rule of reason, furthermo re, is not inconsistent with the Consumer Goods Pricing Act. Unlik e the earlier con

gressional exemption, it does not treat verti cal price re straints as per se legal. In this re spect, the justifications for the prio r exemption are illumi nating. Its goal “was to allow the States to p r otect small retail establishment s that Congress thought might otherwise be driven from the mark etplace by large-volume discounters.” Californ ia Retail Liqu or Deal ers Assn. v. Midcal Aluminum, Inc. , 445 U. S. 97, 10 2 (1980). The state fair tra de laws also appea r to have been justified on similar grounds. See Areeda & Hovenkam p 298. The rationales for these pr ovisions ar e foreign to the Sherman Act. Div o rced from competition and consumer welfare, they we re designed to save ineffi

cient small retailers from their in ability to compete. The purpose of the antitru st laws, b y contrast, is “the p r otec

tion of competi t ion , not compe t i t ors .” Atla ntic Richfi eld Co. v. USAPetroleum Co. , 495 U. S. 328, 33 8 (1990) (in

ternal quotation marks omitted). To the ext e nt Congress repealed the exemptio n for so me vertical pri c e restraints to end its prior prac ti ce of encouraging anti c ompetitive conduct, the rule of rea s on promotes the sameobjective.27 Cite as: 55 1 U

. S. ____ (2007) Opinion of t h eCourt Respondent also reli es on severalcongressional appro

priations i nthe mid- 1980’s in which Congress did no t permit the Departme n t of Justice or the Federal Trade Commission to use f unds to advocate over turning Dr

. Miles

. See, e.g., 97 Sta t . 1071. We need not pause long in addressing this argum e nt. The conditions on funding a r e no longer i nplace, see, e.g., Brief for Unit ed States as Amicus Cu riae21, an d they were ambiguou s at best. As much as they might show congressional approval for Dr. Miles , the ymight de monstrate a different proposition: that Congress could n o t pass legi slation codi fying the rule and reached a short-term compro mise instead. Reliance interests do not require us to reaffirm Dr. Miles

. To be sure, rel i ance ona j u dicial opin ion is a sig

nificant reason to adh e re to it, Pa y n ev. Te nnesse e , 5 01 U. S. 808, 8 28 (1991), especially “in cases involving prop

erty andc o ntract righ ts,” Khan , 522 U. S., at 20. The reliance int e rests here, however, like the reliance interests in Khan , cannot justify an inefficient rule, especially because the narrownes s of the rul e has allowed manufac

turers to set minimum resale prices in other ways. An d while the Dr. Mil e s rule is longstanding, resale price maintenance was legal under fair trade laws in a majority of States for a large pa rt of the past century u p until 1975. It is also of note that during this time “when the legal environment in the [United States] was most favorable for [resale price maintena nce], no more than a ti ny fraction of manufacturers ever e m ployed [resale price maintenance] contracts. ” Overs treet6; see also id., at 169 (noting th at “no more than one percent of ma nufacturers , accountin g for no more than ten pe rcent of con s umer goods purchases, ever employed [resale price maintenance] in any single year in the [United States]”); Sch e rer & Ross 549 (noti n g that “[t]he fraction of U.S. retail sales covered by [resale price maintenance] in its heyday has been variously esti

mated at fr om 4 to 10 percent”). To the extent consumer s28 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. Opinion of t h eCourt demand cheap goods, judging v e rtical pric e restraints under the rule of reason will not prevent the market from providing them. Cf. Easterbrook 152–153 (noting th at “S.S. Kr esg e (the old K-Mart) flourished during the days of manufacturers’ greates tfreedom” because “discount stores offer a combination of price and service tha tmany cus tomers value” and th at “[n]othi ng in restr i cted dealin g threatens the ability of consumers to find low prices”); Scherer & Ross 557 (noting that “for the most part, th e effects of t h e [Consumer Goods Pricing Act ] were imp e r ceptible because the forces of c o mpetitionhad alrea d y repealed the [previous antitrust e x emption] in their ow n quiet way”). For these reasons the Court’s decision in Dr. Mil e s Medical Co

. v. John D. Park & Sons Co. , 2 20 U. S. 373 (1911), is n o w overruled. Vertical price restraints are to be judged according to the rule of reason. V Noting tha tLeegin’s president has an ownership inter

est in retail stores that sell Brighton, respondent claims Leegin participated in an unlawful horizontalcartel with competing r e tailers. Respondent did not make this allega

tion in the lower courts , and we do not consider it here. The judgment of the Court of Appeals is reversed, and the case is remanded for proceedings consistent with this opinion. It is so orde red._________________

_________________ 1 Cite as: 55 1 U

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B REYER , J., dissenting 

## SUPREME CO URT O FTHE UNI TED STATES

No. 06–4 80
LEE G IN C REATI VE LEAT HE R PRODU C T S , INC., PETITION ER v. PSKS, INC., DBA KAY’S KLOSET . . . KAY’S SHOES
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEAL S FOR THE FIFTH CIRCUIT [Ju n e28, 2007 ] J USTICE B RE YE R , wi th whom J UST I CE S T EVE N S , J U S TI CE S OUTER , an d J USTIC E G INSBURGjoin, dissent ing. In Dr. Mile s Medical Co. v. John D. Park & Sons Co. , 220 U. S. 3 73, 394, 408–409 (1911), this Court held th at an agreement between a manuf acturer of proprietary medicines and its dealers to fixthe mini mum price at which its medicines c o uld be sol dwas “invalid . . . und er the [Sherm an Act, 15 U. S. C. §1]. ” This Cou rt has consis

tently read Dr. Mil e sas establi s hing a bright-line rule that agree m ents fixing minimum resale prices are per se illegal. See, e.g. , United Statesv. Tren to n Po tte rie sCo
. , 273 U. S. 3 92, 399–401 (1927); NY N

E

X C o rp
. v. Dis c on, Inc. , 525 U. S. 128, 13 3 (1998). That pe r serule is one upon which the legal profession, b u siness, an d the public have relied for close to a centur y. Today the Court holds that cour ts must dete rmine the lawfulness of minimum resale price maintenance by applyi ng, not a bright-line per se rule, but a circumstance-specific “rule of reason.” Ante , at 28. And in doing so it overturns Dr. Mile s
. The Court justifies its departu re from ordinary consid

erations of sta re d ecisi s bypointing to aset of argumen t s well knownin the antitrust literature for close to half a century. See ante , at 10–12. Congress has repeatedly2 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. B REYER , J., dissenting found in these arguments insufficient gro unds for over

turning the per se rule. See, e.g. , Hearings on H. R. 10527 et al. before the Subco m mittee onCommerce and Finance of the Hou s e Committee on Interstate and F o reign Com

merce, 85thCong., 2d Sess., 74–76, 89, 99, 1 01–102, 192– 195, 261–2 62 (1958). And, in my view, they do not war

rant the C o urt’s nowoverturning so well-established a legal precedent. I The Sherman Act seek s to mainta in a mark etplace free of anticompetitive prac tices, in particular tho s e enforced by agreement among private firms. The law assumes that such a marketplace, free of private restrictions, will tend to bring about the low e r prices, better produ cts, and more efficient production processes that consumers typicall y desire. In determining the lawfulness of particular prac

tices, court s often apply a “rule of reason.” They examine both a practice’s likely antic omp e titive effects and its beneficial b u siness jus t ifications. See, e.g. , National Co l

legia t e A t hl eticAssn. v. Board of R e gent s of Univ. of Okla. , 468 U. S. 8 5 , 109–110, and n. 39 (1984); National Soc. of Profess ional Engin eers v. UnitedStates , 43 5 U. S. 679, 688–691 (1978); Board of Trade of Chicagov. United Sta t es , 246 U. S. 231, 238 (1918). Nonetheles s, someti mes the lik ely anticompetitive consequenc es of a particular practice are so serious and the potential justifications s o few(or, e.g. , so difficult to prove) thatcourts have departed from a pure “rule of reason” approach. Andsometi mes this Court has imposed a rule of pe r se unlawfulness—a rule that instructs courts to find the practice un lawful all (or nearly all) the time. See, e.g. , NYN E

X

, supra , at 1 33; Arizonav. Mari copa County Medical Soc. , 457 U. S. 3 32, 343–344, and n. 16 (1982); Continental T. V., Inc. v. GTE Sylva n ia Inc. , 433 U. S. 36, 5 0 , n. 16 (19 77); UnitedStatesv. Topco As so ci

-3 Cite as: 55 1 U

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B REYER , J., dissenting ates, Inc. , 4 05 U. S. 59 6, 609–611 (1972); U n it e dSt at e sv. Socony-Vacuum Oil Co. , 310 U. S. 150, 21 3–214 (1940) (citing and quoting Tre n to n Po tte ri es , sup ra , a t397–398). The case before us as ks which kind of approach th e courts should follow where minimum resale price maint e nance is atissue. Sh ould they a pply a per se rule (or a variation) that would make minimum resale price mainte

nance always (or almo st alwa ys) unlawful? Should they apply a “r ule of reason”? Were the Court writingon a blank slate, I would f i n dthese questions diffic u lt. But, of course, the Court is not wri ting ona blank slate, and that fact mak e s a considerable legal dif f erence. To best explain why the question would be di fficult were we decidingit afresh, I briefly summarize several classical arguments for and aga i nst the use of a per s erule. The arguments focus on three sets of considerations, those involving: (1) potentialantic ompetitive effects, (2) poten

tial benefits, and (3) a d ministration. The difficulty arise s out of the fact that t h e different sets of c o nsiderations point in different directions. See, e.g. , 8 P. Areeda, Anti

trust La w ¶¶1628–1633, pp. 330–392 (1st ed. 1989) (here

inafter Are e da); 8 P. Areeda & H. Hovenkamp, Antitrust Law ¶¶162 8–1633, pp. 288–339 (2d ed. 2004 ) (hereinafter Areeda & Hovenk amp); Easterbrook , Vertical Arrange

ments and the Rule of Reason, 53 Antitrust L. J. 135, 146– 152 (1984) (hereinafter Easterbroo k); Pitofs ky, In Defense of Discounters: The No-Frills Case for a Per SeRu le Against Ve rtical Price Fixing, 71 Geo. L. J. 1487 (1983) (hereinafter Pitofsky); Schere r, The Economics of Vertical Restraints, 52 Antitrus tL. J. 687, 706–707 (1983) (herei n after Scher e r); Posner, The NextStep in the Antitru st Treatment of Restricte d Distributi o n: Per Se Legality, 4 8 U. Chi. L. Rev. 6, 22– 26 (1981); Brief for William S. Co

manor and Frederic M. Scherer as Amici Curi ae7–10. On the one hand, agreements setting minimum resale prices may have seriou s anticompetitive consequences. In4 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. B REYER , J., dissenting
resp ec t to dealers:Resale price maintenance agreements , rather like horizontal price agre ements, can diminishor eliminate price competition among dealers of a single brand or (if practiced generally by manufactu rers) among multibrand dealers. In doing so, they can prevent dealers from offering customers the lower prices th at many cu s tomers prefer; they can prevent de alers from responding to changes in demand, say falling demand, by cutting prices ; they canencourage dea l ers to substitute servi c e, for p r ice, competition, thereby threatening wastefully to attract to o many resources into th at portion o f the indust ry; they can inhibit expansion by more efficient dealers whose lower prices migh t otherwise attrac tmor e customers, stifling the developmen t of new, m o re effi cient modes of retailing; and so forth. See, e.g. , 8 Areeda & Hovenkam p ¶1632c, a t 319–321; Steiner, The Evolution and Applications ofDualStage Thin king, 49 The Antitrust Bulletin 877, 899–9 00 (2004); Comanor, Vertical Price-Fixing, Vertical Market Restrictions, and the New Antitrust Policy, 98 Harv
. L. Rev. 983, 990–1000 (1985). In re s pe ct to produc ers:Resale pri c e maintenance agree

ments can help to r e inforce the competition-inhibitin g behavior of firms in concentrate d industries. In such industries firms may tacitly collude, i.e. , observe ea ch other’s pric ing behavior, each u n derstanding tha tp r ic e cutting by o n e firm is likely to trig g er price competition by all. See 8 Areeda & Hovenkam p ¶1632d, at 321–323; P. Areeda & L. Kaplow, Antitrust Analysis ¶¶231–233, pp. 276–283 (4th ed. 1988) (hereina fter Areeda& Kaplow). Cf. United Sta t esv. Containe r Cor p . of America , 393 U. S. 333 (1969); Areeda & Kaplow ¶¶247–253, at 327–348. Where that is so, resale price ma intenance can make it easier for each produc er to identify (by observing retail mark ets) when a comp etitor has begun to cut prices. And a producer who cuts wholesal e pri c es withoutlowering the minimum resale price will stand to gain little, if anything,5 Cite as: 55 1 U

. S. ____ (2007)

B REYER , J., dissenting in increased profits, because the dealer will be unable to stimulate i n creased consumer demand by passing alon g the producer’ s price cut to consumers. Ineither cas e , resale price maintenance agreem ents will tend to preven t price competition from “breaki n g out”; and they will thereby tend to stabili ze producer prices. See Pitofsk y 1490–1491. Cf., e.g. , Co ntainer Corp. , supra , at 336–337. Those who express concern about the potential anticom

petitive effects find e m piri cal support in th e behavior of prices before, and then after, Con gress in 1975 repealed the Mill er-Tydings Fa ir Trade Act, 50 Stat. 693, and th e McGuire Act, 66 Stat. 631. Those Acts had pe rmitted (bu t not required) individu al States to enact “fairtrade” law s authorizing minimum resale price maintenance. At th e time of repeal minimum resale price maintenance wa s lawful in 3 6States; it was unlawful in 14 States. See Hearings o nS. 408 be fore the Su bcommittee on Antitru st and Monopoly of the Senate Committee on the Judiciary, 94th Cong., 1st Sess., 173 (1975) (hereinafter Hearings on S. 408) (sta tement of Thomas E. Kauper, Assistant Attor

ney Genera l, Antitrust Division). Comparing prices in th e former Sta t es with pri c es in the latter States, the Depar t

ment of Justice argue dthat mini mum resale price main

tenance had raised pri c es by 19% to 27%. See Hearings on H. R. 2384 before the Subcommittee on Monopolies an d Commercial Law of the House Co mmittee onthe Judici

ary, 94thCong., 1st Sess., 122 (1975) (hereinafter Hea r ings on H. R. 2384) (s tatement of Keith I. C l earwaters, Deputy Assistant Attor n ey General, Antitrust Division). After repeal, minimum resale pric e maintenance agree

ments were unlawful p er s e in every State. The Federal Trade Com m ission (F TC) staff, after studying numerou s price surve y s, wrote t hat collectively the surveys “indi

cate[d] tha t[resale price maintenance] in most cases increased the prices of products sold with [resale price maintenance].” Burea uof Economics Staff Report to the6 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. B REYER , J., dissenting FTC, T. Overstreet, Re sale Price Maintenance: Economic Theories and Empiri cal Evidence, 160 (1983) (hereinafter Overstreet). Mosteco n omists to day agree that, in the words of a prominent antitrust treatise, “resale price maintenance tends to produce higher consumer prices than would otherwise be the case.” 8 Areeda & Hovenk

amp ¶1604b, at 40 (fin d ing “[t]he evidence . . . persuasiv e on this poin t”). See als o Brief for William S. Comanor and Frederic M

. Scherer as Amici Curiae4 (“It is uniform ly acknowledged that [re s ale price maintenance] and other vertical rest raints lead to higher consumer pric es”). On the oth e r hand, th ose favoring resale price mainte

nance have long argu ed thatre sale price maintenance agreements can provi d e important consumer benefits

. The majority lists two: First, such agreements can facili

tate new e n try. Ante , at 11–12. For exam ple, a newly entering producer wishing to buil da product name migh t be able to c o nvince dea l ers to help it do so—if , but only if , the producer can assure those dea l ers that they will later recoup their investment. Without resale price mainte

nance, late-entering dealers might take adva ntage of th e earlier investment and, through price competition, drive prices down to the point where the early de alers cannot recover wh at they spent. By assuring the initial dealer s that such later price competition will not occur, resale price maintenance can encourage them to c a rry the new product, thereby helpi n g the new producer succeed. See 8 Areeda & Hovenkam p ¶¶1617a, 1631b, at 193–196, 308. The result might be increased competition at the produce r level, i.e. , greater in ter -brand co mpetition, that brings with it net consumer benefits. Second, wi thout resale price ma intenance a produce r might find its efforts to sell a product undermi ned by wha t resale price mainten ance advo c a tes call “free riding.” Ante , at 10 –11. Suppo se a producer concludes that it ca n succeed onl yif dealers provide certain services, say, prod

-7 Cite as: 55 1 U

. S. ____ (2007)

B REYER , J., dissenting uct demonstrations, high quality shops, advertising that creates a certain product image, and so forth. Without resale price maintenance, some dealers might take a “fre e ride” on th e investment thatoth e rs make i nproviding those servi c es. Such a dealer w o uld save money by not paying for those services and co uld consequently cut its own price and increase its own sales. Under these circum

stances, dealers might prove un willing to i nvest in th e provision o f necessary services. See, e.g. , 8 Areeda & Hovenkam p ¶¶1611–1613, 1631c, at 126–165, 309–313; R. Posner, Antitrust La w 172–173 (2d ed. 2001); R. Bork, The Antitrust Paradox 2 90–291 (1978) (herein a fter Bork); Easterbrook 146–149. Moreover, where a producer and not a group of dealers seeks a res a le price maintenance agreement, there is a special reason to believe some such benefits exist. That i s because, other things being equal, producers should wa nt to encourage price com p etition am ong their dealers. By doing so th ey will often increase profits by selling more of their produ ct. See Sylvania , 433 U. S., at 56 , n. 24; Bor k 290. And that is so, even if the p r oducer possesses suffi

cient marke tpower to earn a super

- normal profit. That is to say, other things being equal, the producer will benefi t by cha r gin ghis dealers a competitive (or e v en a high erthan-competitive) wholesale pr ice while encou r aging price competition among them. Hence, if the pro d ucer is the moving force, the prod ucer must have some special reas on for wanting resale pric e maintena nce; and inthe absenc e of, say, concentrated producer markets (where that special reason might consist of a desire to stabilize wholesal e prices), tha tspecial re ason may well reflect the specia l circumstan c es just des cribed: newentry, “fre e riding,” o r variations on those the m es. The upshot is, as many economists suggest, sometimes resale price maintenance can pro v e harmful; sometimes i t can bring benefits. See, e.g. , Brief for Economists as Ami c i8 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. B REYER , J., dissenting Curiae16; 8 Areeda & Hovenkam p ¶¶1631–1632, at 306– 328; Pitofsky 1495; Sch e rer 706–707. But before conclud

ing that courts should consequentl yapply a rule of reas on, I would ask such que stions as, how often are harms or benefits likely to occu r? Ho w ea sy is it to separate th e beneficial s h eep from the antitrust goats? Economic discussion, such as the studies the Court relies upon, can he l p p r ovide answers to these questions, and in doing so, economics can, a n d should, inform anti

trust law. But antitrust law cannot, and should not, precisely replicate economis ts’ (sometimes conflicting) views. That is becau s e law, unl ik e econom ics, is ana d

ministrativ e system the effects of which depend upon the content of rules and precedents only as they are applied by judges and juries in courts and by lawyers a dvising their clients. An d that fact means that courts will often brin g their own administrative judgment to bear, sometimes applying ru les of per seunlawfulness to business practices even when those pra ctices some times produce benefit s
. See, e.g. , F.M. Scher e r & D. R o ss, Indust rial Market Stru cture and Econo m ic Performance 335–339 (3d ed. 1990) (hereinafter Sch e rer & Ros s ) (describing some cir

cumstances under which price-fixing agreements could b e more benef i cial than “unfettered competition,” but also noting potential costs of moving from a per se ban to a rul e of reasonab leness as ses s ment of su ch agreements). I have alr e ady described studies and ana lyses that suggest (th o ugh they cannot prov e) that resale price main

tenance can cause h a rms with some regularity—an d certainly w h en dealers are the dr iving force. But what about benef i ts? How often, for ex ample, willthe ben e fits to which th e Court points occur inpractice? I can find no economic co nsensus on this point. There is a consensus in the literature that “f r ee riding” takes place

. But “f ree riding” ofte n takes place in the economy without any legal effort to stop it. Many visito rs to California take free rid e s9 Cite as: 55 1 U

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B REYER , J., dissenting on the Pacific Coast Highway. We allbenefi t freely from ideas, such as that of creating the first supermarket

. Dealers often take a “free ride” on investments that others have made in bui ldin g a product’s name an d reputation. The question is how often the “free riding” problem is serious en ough significantly to deter dealer investment. To be more specific, one can easily im a g i n ea dealer who refuses to provide important pre s ale services, say a de

tailed explanation of h o w a produ ct works (or who fails to provide a proper atmosphere in which to s e ll expensiv e perfume or alligator billfolds ), l e st customers use that “free” service (or enjoy the psychological b e nefit arisi n g when a high -priced retailer stocks a particular brand of billfold or h andbag) an d then buy from another dealer at a lower price. Sometimes this musthappen in reality. But does it happen often? We do, after all, live in an economy where firms, despite Dr. Mil e s ’ per se rule, still sell com

plex technical equipment (as wel las expens ive perfume and alligator billfolds) t o consumer s. All this is to sayth at the ulti mate question is not whether, b u t how mu ch, “free ri ding” of th is sort takes place. And, after reading the briefs, I must answer tha t question with an unce rtain “sometimes.” See, e.g. , Brie f for William S. Comanor and Frede r ic M. Sche rer as Amici Curiae6–7 (noting “skepticism in the economic literature about how often [free riding] actu ally occurs” ) ; Scherer & Ross 551–555 (explaining the “se v ere limitations” of the free-rider justification for resal e price maintenance); Pitofsky, Why Dr. Mile sWas Right, 8 Regulation, No. 1, pp. 27, 29–30 (Jan./Feb. 1984) (si m ilar analysis). How easilycan courts identify in stances in which the benefits are likely to outweigh po tential harms? My own answer is, not very ea sily

. For one thing, it is oftendiffi

cult to ide n tify who—producer or dealer—is the moving force behin dany given resale price maintenance agree

ment. Suppose, for example, s e veral large multibrand10 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. B REYER , J., dissenting retailers all sell resale-pri ce-maintained products. Sup

pose further that smallproducers set retail prices because they fear that, otherwise, the l a rge retailers will favo r (say, by allocating better shelf-space) the goods of other producers who practi ce resale price maintenance. Who “initiated” t h is practice , the retailers hoping f o r consider

able insula tion from retail comp etition, or the producers, who simply seek to deal best with the circu mstances the y find? For another thing, as I just said, it is difficult to determine just when, and where, t h e “free riding” problem is serious enough to w a rrant legal protection. I recognize that scholars have sought to develop check lists and sets of questions that wi ll help courts separate instances where anticompetitive harms are more lik ely from instances where only benefits are likely t o be f o und. See, e.g. , 8 Areeda & Hovenkam p ¶¶1633c– 1633e, at 330– 339. See also Brief for William S. Comanor a n d Frederic M. Scherer as Amici Curiae8–1 0. But applying thes e criteria in court is often easier said than done. The Court’s inv i tation to consider the existence of “market power,” forexample, ante , at 18 , invites lengthy timeconsuming argument among competing expe rts, as the y seek to app l y abstrac t , highly tec hnical, crit e ria to often ill-defined markets. And resale price maintenance cases, unlik e a major merger or monopoly case, are lik ely to prove numerous and involve onl yprivate parties. One cannot fairly expect judges and juries in s u ch cases to apply comp lex economic criteri a without maki ng a consid

erable number of mist akes, which themselves may impos e serious cos t s. See, e.g. , H. Hov e nkamp, T h e Antitru st Enterprise 105 (2005) (litigating a rule of reason case i s “one of the most costly procedures in antitrus tprac tice”). See also Bok, Section 7 of the Cla yton Act an d the Merg

ing of La w and Econo m ics, 74 Harv. L. Rev. 226, 238–2 47 (1960) (describing lengthy FTC efforts to apply compl e x criteria in a merger cas e ).11 Cite as: 55 1 U

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B REYER , J., dissenting Are there special advantagesto a bright-line rule? Without such a rule, it is of tenu n fair, and consequentl y impractical, for enforcement officials to bring crimina l proceedings. And since enforcement resources are limited, that loss may tempt some prod ucers or dealers to ente r into agreements that are, on balanc e, anticompetitive. Given the uncertainties that sur r ound keyitems in th e overall balance sheet, particularl y in respec t to the “a d

ministrativ e ” questions, I can concede to the majority th at the problem is difficult. And, if forced to decide now, a t most I might agree th at the per s erule shoul dbe slightly modified to allow an exception for the more easily identifi

able and te mporary co ndition of “ n ew entry.” See Pitofs k y 1495. But I am not now forced to decide this question. The question before us is not what shoul dbe the rule, starting fro mscratch. We he re must decide whether to change a clear and simple price- related antitrust rule that the courts have applied for nearly a century. II We write, n o t on a blan k slate, but on a slate that begins with Dr. M iles andgo es on to list a centu r y’s worth o f similar cas e s, massive amounts of advice that lawyers have provi d ed their cl ients, and untold numbers of busi

ness decisi ons those c lients have taken in reliance upon that advice

. See, e.g. , United Statesv. Bau sch & Lomb Opti cal Co. , 321 U. S. 7 07, 721 (1944); Sylvani a , 433 U. S., at 51, n. 18 (“The per seillegality of [vertical] price restric

tions has been establi s hed firmly for many years . . .”). Indeed a Westlaw search shows that Dr . Mile sitself ha s been cited dozens of times in this Court and hundreds of times in lower courts. Those who wish this Court to change so well-establi s hed a legal precedent bear a heavy burden of p r oof. See Il linois BrickCo. v. Illinois , 431 U. S. 720, 736 (1 977) (notin g, in declini n g to overrule anearli e r case interpreting §4 of the Clayt o n Act, tha t“consider a -12 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. B REYER , J., dissenting tions of star e decisi swe igh heavily in the area of statutory constructio n , where Congress is free to chang e this Court’s interpretati on of its legislation”). I am not aware of any
case in which this Court has overturned so wellestablished a statutory precedent. Regardless, I do n o t see how the Court can cla i m that ordinary criter i a for over

ruling an e a rlier case have been met. See, e.g
. , Plann e d Paren thood of Southea s tern Pa. v. Casey , 50 5 U. S. 833, 854–855 (1992). See also Fede ral El ec tion Comm’nv. Wisconsin Right to Life, Inc., an te , at 19–21 (S CALIA , J. , concurring i npart and concurring i njudgment). A I can find no change in circumstan c es in the past several decades that helps the majority ’s position. In fact, there has been on e important change tha targues strongly to the contrary. In 1975, Congress repealed the McGuire a n d Miller-Tydings Acts. See Cons umer Goods Pricing Act of 1975, 89 Stat. 801. An d it thereby consciously extende d Dr. Mile s ’ per s e rule. Indeed, at that time the Depart

ment of Ju stice and the FTC, then urging application of the per se rule, discussed virtually every argument pre

sented now to this Court as well as others not here pre

sented. And they explained to Congress why Congres s should reject them. See Hearings on S. 408 , at 176–17 7 (statement of Thomas E. Kauper, Assistant Attorne y General, Antitrust Div i sion); id. , a t170–172 (testimony of Lewis A. Engman, Ch airman of the FTC); Hearings on H. R. 2384, at 113–114 (testimony of Keith I. Clearwaters, Deputy Assistant Atto rney Gener a l, Antitru st Division). Congress fully understood, and consequen t ly intended, that the result of its repealof McGuire and Mi ller-Tydings would be to make mini mum resale price main tenance per seunlawful

. See, e.g. , S. Rep. No. 94–466, pp. 1–3 (1975) (“Without [the exemptions authorized by the MillerTydings an d McGuire Acts,] the a greements they author

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B REYER , J., dissenting ize would violate the antitrust laws . . . . [R]epeal of the fair trade laws generally will prohibit manufacturers fro m enforcing resale prices ”). See also Sylvania , supra , at 51,
n. 18 (“Congress recently has expressed its approval of a per seanalysis of vertical price restrictions by repealin g those provisions of the Miller-Tydings and McGuire Acts allowing fair-trade p r ic ing at the option of the individual States”). Congress di d not prohi b it this Court from rec o nsidering the per serule. But enacting ma jor legislation premised upon the existence of that rule constitute s important public relia nce upon that rule. And doing so aware of the relevant arguments constitutes even stronger reliance upon the Court’s keepi n g the rule, at least in the absence of some s i gnificant change in respect to those arguments. Have there been any s u ch change s ? There have been a few economic studies, described in some of the briefs, that argue, cont raryto the testimonyof the Jus tice Depar t

ment and FTC to Congress in 1975, that resale pri c e maintenance is n o t harmful. One study, relying on an analysis of litigated resale price maintenance cases from 1975 to 1982, concludes that resale price maintenance does not ordinarily involve prod ucer or dealer collusio n
. See Ippolit o, Resale Price Maintenance: Empirical Evi

dence from Litigation, 34 J. Law & Econ. 263, 281–282, 292 (1991). But this study equate s the failure of plaintiffs to allegecollusion with the absenceof collus i on—an equa tion that overlook s the superfluous nature of allegations o f horizontal collusion ina resale price main tenance ca se and the tac i t form thatsuch collusion might take. See H

. Hovenkam p, Federal Antitrust Policy §11.3c, p. 464, n. 19 (3d ed. 2005); supra , a t4–5. The other study provides a theoretical basis fo r conclud

ing that resale price maintenance “need not lead to higher retail price s .” Marvel & M c Caffe rty, The Po litical Econ

omy of Res a le Price Maintenance, 94 J. Pol. Econ. 1074,14 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. B REYER , J., dissenting 1075 (1986). But this study de velops a theoretical model “under the assumption that [resale price mai n tenance] is efficiency-enhancing.” Ibid. Its only empirical support is a 1940 study that the authors acknowledge is much criti

cized. See id

. , at 1091. And many other economists take a different view. See Brief for William S. Comanor and Frederic M. Scherer as Amici Curi ae4. Regardless, taken toge ther, these studies at most may offer some mild support for th e majority’s position. But they cannot constitute a major change in circu mstances. Petitioner and some am i c ihave also present e d us with newer studies that sh ow t hat resale price maintenance sometimes brings consumer benef i ts. Overstreet 119–12 9 (describing numerous case studies)

. But the proponents o f
a pe r se ru le have always conceded as mu ch. What is remarkable about the majority’s arguments is that noth

ing in this respect is n ew. See su pra , at 3, 1 2 (citing arti

cles and congressionaltest imony going back several dec

ades). The only new feature of these arguments lies in the fact that t h e most current adv o cates of overruling Dr. Mileshave abandoned a host of other not-very-persuasive arguments upon which prior re sale price maintenance proponents used to re ly. See, e. g. , 8 Areeda ¶1631a, at 350–352 (li s ting “ ‘[t]r a ditional’ justifications” for resale price maintenance). The one arguable exception consists of the majority’s claim that “even absent free riding,” resale price mainte

nance “may be the mos tefficient way to expand the manu

facturer ’ s market sh are by inducing the retailer’s per

formance and allowing it to use its own i n itiative an d experience in providing valuable services.” Ante , at 12. I cannot cou n t this as an exception, however, because I do not understand how, in the abs ence of free-riding (and assuming competitiveness), an established producer would need resale price mai n tenance. Why, on th ese assump tions, woul d a dealer not “expand” its “market share” as15 Cite as: 55 1 U

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B REYER , J., dissenting best that dealer sees f i t, obtaining appropriate payment from consumers in the process? There may be an answer to this question. But I have notseen it. And I do not think that we should place significant weigh tupon justifi

cations that the parties do not explain with sufficient clarity for ageneralist judge to understand. No one cla i ms that the American economy ha s changed in ways tha tmight sup p ort the ma jority. Con c entration in retailing has increased. See, e. g. , Brief for Re spondent 18 (since mini mum resale price maintenance was banned nationwide in 1975, the total n u mber of r e tailers ha s dropped while the growth in sal e s per stor e has ris e n) ; Brief for A m erican An titrust Inst itute as Amicus Cu riae 17, n. 20 (citing priva t e study repo rting tha tthe combined sales of the 10 largestretailers worldwide has grown to nearly 30% of total retail sales of top 250 retailers; als o quoting 1999 Organisation for Economic Co-operation and Development report s t ating thatthe “ ‘last twenty years have seen momentous changes i nretail dis tribution in

cluding significant increases in c o ncentration’ ”); Mamen, Facing Goliath: Challenging the Impacts of Supermar ket Consolidati o n on our Local Economies, Com m unities, a n d Food Secur i ty, The Oa kland Insti t ute, 1 Poli cy Brief, N o
. 3, pp. 1, 2 (Spring 2007), http://www.oaklandinsti

tute.org/pdfs/facing_goliath. pdf (as visited June 25, 2007, and available inClerks of Court’s case fil e ) (noting that “[f]or many decades, the top fi ve food retail firms in the U. S. contro lled less than 20 percent of the market”; f r om 1997 to 2000, “the to p five firm s increased their marke t share from 24 to 42 pe rcent of allretail sales”; and “[b]y 2003, they controlled over half of all grocery sales”). That change, oth e r things b e ing equal, may enabl e (and moti

vate) more retailers, accountin g fora greater p e rcentage of total retail sales volume, to seek re sale price maintenance, thereby making it more difficult for price-cut t ing compet i

tors (perhaps internet retailers) to obtain market share.16 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. B REYER , J., dissenting Nor has anyone argued that conce n tration among manu

facturers that might use resale price maintenance has diminishedsignificantly. And as far as I can tell, it ha s not. Consider household electrical appliances, which a study from the late 1950’s sugge sts constituted a signifi

cant portio nof those products subj ect to resale price main

tenance at that time. See Hollander, Uni t ed States of America, in Resale Price Maintenance 67, 80–81 ( B

. Yamey ed. 1966). Al though it i s somewhat difficult to compare ce nsus data from 2002 with tha tfrom several decades ago (because of changes in the class i fication sys

tem), it is cl ear that at least some s ubsets of th e househ old electrical appliance industryare moreconc entrated, i n terms of manufacturer market power, now th an they were then. For i n stance, the top eight domestic manufacturers of househol d cook ing appliances accounted fo r 68% of the domestic mark et (measured by value of shipments) in 1963 (the earliest date for which I was able to find data), compared with 77% in 2002. See Dept. of Commerce, Bureau of Census, 19 72 Census of Manufacturers, Spe c ial Report Seri es, Concentration Ra tios in Manufacturing, No. MC72(SR)– 2, p. SR2–38 (1975) (hereinafter 1972 Census); Dept. of Commerce, Bureau of Census, 2002 Economic Census, Concentration Ratios: 2002, No. EC02–31SR–1, p. 55 (2006) (hereina fter 2002 Census). The top ei ght domestic manufacturers of househ old laundry equipment accounted for 95% of the domestic market in 1963 (90% i n 1958), compared with 9 9 % in 2002. 1972 Census, at SR2– 38; 2002 Census, at 55. And the top eight domestic manu

facturers o f househol d refrigerators and freezers ac

counted for 91% of the domest ic market in 1963, compared with 95% i n2002. 1972 Census, at SR2–38; 2002 Census, at 55. In creased co ncentration among m anufacturers increases the lik eliho o d that producer-originated resale price maintenance will prove mo re prevalent today than i n years past, and more harmful. At the ve ry least, the17 Cite as: 55 1 U

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B REYER , J., dissenting majority has not explai ned how these, or other changes in the econom y could help support its position. In sum, there is no relevant chan ge. And wi thout some such change, there is no ground for abandoning a well

established antitrust ru le. B With the preceding discussion in mind, I would consult the list of factors that our case law indicates are relevan t when we c o nsider overruling an earlier case. J U S TI CE S CALI A , wr iting separately in another of our cases this Term, well summarizes that la w. See Wi sco nsin R i gh t to Life, Inc., ante , at 19– 21. (opinionconcurring in part an d concurring in judgment). And ev ery relevant factor he mentions ar gues against overruling Dr. Mile sh e re. First, the Court applies stare de cisismore “rigidly” i n statutory than in cons titutional cases. See Glidden Co. v. Zdanok , 37 0 U. S. 530, 543 (1962) ; Illinois Brick Co. , 431 U. S., at 73 6. This is a statutory case. Second, the Court does someti mes overrule cases that it decided wr ongly only a reasonably short ti me ago. As J USTICE S CALIA put i t , “[o]verruling a co nsti t u tio n alcas e decided jus ta few ye ars earlier is far fro munprece dented.” Wis c o n sin R i ght toLife, ante , a t19 (emphasis added). W e here overrule one statutorycas e , Dr. M ile s , decided 100 years ago, and we overrule the cases that reaffirmed its per s erule in the i n tervening years. See, e.g. , Tr ento n Potteri es , 273 U. S., at 399–40 1; Bausch & Lomb , 321 U. S., at 721; United S t atesv. P a rk e, Da vis & Co. , 362 U. S. 29, 45–4 7 (1960); Si mpsonv. U n ion Oil Co. of Cal. , 377 U. S. 13, 16–17 (1964). Third, the fact that a decision creates an “unworkable ” legal regime argues in favor of overruling. See Paynev. Tennessee , 501 U. S. 8 08, 827–828 (1991); S w ift & Co. v. Wickham , 382 U. S. 111, 116 (19 65). Implementation of the per ser u le, even with the complications attendant th e18 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. B REYER , J., dissenting exception allowed for in United S t atesv. Col gate & Co. , 250 U. S. 3 00 (1919), has proved practical o v er the course of the last century, pa rticularly w h en compar ed with the many comp lexities of litigating a case under the “rule of reason” regime. No one has shown how movi ng from the Dr. Milesregime to “rule of reason” analysis would make the legal regime governing minimum resale price mainte

nance more “administrable,” Wisco nsin Right to Life, ante , at 20 (opinion of S CALIA , J.), pa rticularly s i nce Colgate would remain good law with respect to unreasonableprice maintenance. Fourth, the fact that adecision “unsettles” the law may argue in favor of overruling. See Sylvania , 4 33 U. S., a t 47; Wiscon s in Right to Life, ante , at 20–21 (opinion of S CALI A , J.). The per serule is well-settled law, as the Court itself has previously recognized. Sylvani a, sup ra , a t 51, n. 18. It is the majority’s chan ge here that will unset

tle the law. Fifth, the fact that a case involves propertyrights or contract rights, wher e reliance interests are involved, argues against overruling. Payne , supra , a t828. Thi s case involves contract rights and perhaps pr operty righ ts (consider shopping malls). And there has been conside r able relianc e upon the per s erule

. As I have said, Con

gress relied upon the continued vitality of Dr. Mileswhe n it repealed Miller-Tydings and McGuire. Sup ra , at 12–1 3. The Executive Branch argued for repeal on the assump

tion that Dr. Miles stated the law. Ibid. Mor eover, whol e sectors of the economy have come to rely upon the perse rule. A fac t ory outlet store tells us that the rule “form[ s] an essentia l part of the regulatory backgro und against which [tha t firm] and many other discount retailers have financed, structu red, and operated their b u sinesses.” Brief for Burlington Coat Factory Wareho use Corp. as Amicus Cu riae5. The Consume rFederation of Ameri c a tells us tha tlarge low-price retailers would not exist with

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B REYER , J., dissenting out Dr. Mi les ; minim u m resale price maintenance, “b y stabilizing price levels and pr eve n ting low-price competi

tion, erects a potentially insurmountable barrier to entr y for such low-price inn o vators .” Brief for Consumer Fed

eration of America as Amicus Curiae5, 7– 9 (discussing, inter alia , comments b yWal-Mart’s founder 25 years ago that relaxation of the per seban on minimu m resale price maintenance would be a “ ‘great danger’ ” to Wal-Mart’s then-relatively-nascent business). See also Brief fo r American Antitrust Institute as Am icu sCu ri ae14–15, a n d sources cited therein (making the same point). Newdi s tributors, i n cluding in ternet distributors, have similarly invested ti me, money, and labor in an effort to bring yet lower cost g oods to Americans. This Court’s overruling of the per serule jeopardizes this reliance, and more. What about malls built on the assumption that a di scount distributor wil lremain an anchor tena nt? What a b out home buyers who have ta ken a home’s distance from such a ma ll into account? What about Americans, producers, di stributors, and consumers, who have u n derstanda b ly assumed, at least for the last 30 years, that price competitio n is a legally guaranteed wa y of life? The majority denies no n e o f t h i s
. I ts i m p l ys a y s that these “reliance int e rests . . . , like the reliance inter

ests in Kha n , cannot justify an inefficient rul e .” Ante , at 27. The Court minimizes the import ance of this reliance, adding that it “is als o of note” that at the time resale price maintenance contracts were lawful “ ‘no more than a tiny fraction of manufacturers ever e m ployed’ ” t h e practice

. Ibid. (quoting Overst r eet 6). By “tiny” the Court means manufacturers that accounted for up to “ ‘ t enp e r c e n tof consumer goods purchases’ ” annually. Ibid

. . That figu re in today’s economy equals just over $300 billion

. See Dept. of Commerce, Bureau of Census, Statistical Abstrac t of the United States: 2007, p. 649 (126th ed.) (over $ 320 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. B REYER , J., dissenting trillion in U. S. retail sales in 20 02). Puttin gthe Cou r t’s estimate together wit hthe Just i ce Depart ment’s early 1970’s study translate s a legal regime that permits all resale price maintenan ce into reta il bil l s thatare highe r by an a v erage of roughly $750 to $1000 ann ually for a n American family of fou r
. Just how much high er retail bill s will be after the Court’s decisi on today, of cou r se, depends upon what i s now unkn o wn, namely how courts will decide future cases under a “r ule of reason.” But these figures indicate that the amounts involv ed are important to American families andcannot be dismissed as “tiny.” Sixth, the fact that a r u le of law has become “embedded” in our “national culture” argues strongly aga i nst overrul

ing. Dicke rsonv. United States , 530 U. S. 428, 443–44 4 (2000). The per se rule forbidding minimum resale price maintenance agreements has long been “embedded” in th e law of antitrust. It involves price, the econom y’ s “ ‘central nervous system.’ ” Na ti onal Soc. of Professiona l Enginee rs , 435 U. S., a t692 (quoti ng Socony-Vacuum Oil , 310 U. S., at 226, n. 59). It ref l ects a basi cantitrust assumption (that consumers often prefer lowe r prices to more service). It embodies a basic antitrust objective (providing consum

ers with a free choice about such matters). And it creates an easily a d ministered and enforceable bright line, “Do not agree a b out price,” that busin esses as well as lawyers have long understood. The only contrary sta r e decisi sfactor that th e majority mentions consists of it s claim that this Court has “[f]ro m the beginning . . . treated the She r man Act a s a commonlaw statute,” and has previous ly overruled antitrust pre c e dent. Ante , at 20, 21–2 2. It points in support to State Oil Co. v. Khan , 522 U. S. 3 (1997), overruling Albrechtv. Her a ld Co. , 390 U. S. 1 45 (1968), in which thi s Court had held that maximum resale price agreements were unlaw

ful per se , and to Syl v ania , overruling United Sta t esv. Arnold, Schwinn & Co. , 388 U. S. 3 65 (1967), i nwhich thisCite as: 55 1 U

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B REYER , J., dissenting Court had held that producer-i mposed territorial limits were unlawful per se
. The Court decided Khan, however, 29 years after Albrech t—s till a significant perio d , but no where close to the century Dr. Miles has stood. The Court specificall y noted the lack of any significant reliance upon Albrech t

. 522 U. S., at 18–19 ( Albrech tha s had “littl e or no rel e vance to ongoing enforcement of the Sherman Act”). Albrech thad far less support in traditional antitrust principles than did Dr. Miles

. Co mpare, e.g. , 8 Areeda & Hovenkam p ¶1632, at 316–328 (a nalyzing potential harms of minimu m resale price maintenance), with id., ¶1637, at 352–361 (analyzing potential harms of maxi mum resal e price maintenance). See also, e.g. , Pitofsky 1490, n. 17. And Congress had nowhere expressed support for Albrech t’ s rule. Khan, supra, at 19

. In Sylvania , the Court, in overruling Sch w inn , explicitly distinguished Dr. Mil e son the gro und that while Congress had “recently . . . expressed its approval of a per seanal y sis of vertical price restriction s” by repealin g the Mill erTydings an d Mc Guire Acts, “[n] o similar expression of congressional intent exists fo r nonprice restri ctions.” 433 U. S., at 51, n. 18. Moreover, the Court decided Sylvania only a decade after Schwinn

. An d it based its overruling on a generally perceived need to avoid “confusion” in the law, 433 U. S., at 47–49, a factor totally absen t here. The Court suggests tha tit is follow i ng “the common-la w tradition.” Ante a t26. Butthe common law would n o t have permitted overruling Dr. Miles in t h ese circum

stances. Common-law cour ts rarely ove rruled wel l

established earlier rules outri ght. Rather, they would over time issue decisions thatgradually eroded the scope and effect of the rule in question, which might eventually lead the courts to put the rule to rest. One c an argue th at modifying the per se r u le to make an except ion, say, for new entry, see Pitofsky1495, could prove consistent with22 LEEGIN CRE ATIVE LEAT HER PRODUCTS, INC. v. PSKS, INC. B REYER , J., dissenting this approach. To swallow up a century-ol d precedent, potentially affecting many billion s of dollars of sa les, i s not. The reader should compare today’ s “common-la w” decision with Justice Cardozo’s decision in Allegh en y Collegev. National Chautauqua Cty. Bank of Jamestown , 246 N. Y. 369, 159 N. E. 173 (1927), and note a gradualism that does not character i ze today’s decision. Moreover, a Court that rests its decisionu p on econo mists’views of the economic merits should also tak e ac count of legal scholars’ views about common-law overrul

ing. Professors Hart a n d Sac k s list 12 factor s (similar to those I have mentioned) that support judi cial “adherence to prior holdings.” The yall support adherence to Dr. Mil e s here. See H. Ha rt & A. Sacks, The Legal Process 568–5 69 (W. Eskridge & P. Frickey eds. 1994). Karl Llewellyn has written tha tthe common-law judge’s “cons cious reshap

ing” of prio r law “must so move as to hold the degree of movement down to the degr ee to which need truly presses.” The Bramb l e Bush 15 6 (1960). Where here is the pressing need? The Court notes that the FTC argues here in favor of a rule of reason. See ante , at 20–21. Bu t both Congress and the FTC, un like courts, are wellequipped to gather empirical evidence outside the context of a single case. As neither has done so, we cannot con

clude with confidence that the gains from eliminating the per s erule will outweigh the costs. In sum, eve r y s t ar e dec i sis concernthis Court has ever mentioned counsels ag ainst overruling here. It is difficu l t for me to understand how one c an beli eve both that (1) satisfying a set of s t are d eci sis concerns justifies over

ruling a recent constitutional decision, Wisco nsin R i ght to Life, Inc., ante , at 19– 21 (S CALIA , J., joined by K EN NED Y and T HOMAS , JJ., co ncurring in part an d concurring in judgment), but (2) failing to sat i sfy any of those same concerns nonetheles s permits overruling a longstanding statutory decision. Ei ther th ose concerns are relevant or23 Cite as: 55 1 U

. S. ____ (2007)

B REYER , J., dissenting they are not. * * * The only sa fe predictions to mak e about today’ s decision are that it will likely raise th e pri c e of goods at retail and that it will create considerable l e gal turbulence as lower courts seek to develop wor k able principles. I do not b e lieve that the majority has shownnew or ch anged condi

tions sufficient to warrant overru ling a decision of such long standing. All ordinary sta r e deci sis co nsiderations indicate th e contrary. For th ese reasons, with respect, I dissent.