Originally published in Blakes Bulletin on Competition Law, September, 2007
In the recently decided case of Leegin Creative Leather Products, Inc. v. PSKS, Inc., the U.S. Supreme Court overturned the outright ban on agreements between suppliers and customers regarding minimum resale prices. That ban was created in 1911 as a result of the case of Dr. Miles Medical Co. v. John D. Park & Sons Co., which stood for the proposition that such agreements were per se (or, inherently) illegal and were not to be evaluated in light of their surrounding circumstances.
The Court in Leegin, however, held that the per se illegality test will not apply to these agreements. Instead, they must be examined pursuant to the rule of reason test; in other words, the U.S. courts must now consider the parties’ market power and assess the effect that such impugned agreements have on competition in the relevant market.
As a result of the U.S. Supreme Court’s decision in Leegin, there is now a sharp difference in the treatment of resale price maintenance in the U.S. and in Canada under the Competition Act. In particular, these agreements are per se illegal in Canada. Parties that contravene the price maintenance provision of Canada’s Competition Act may be liable to a fine in the discretion of the court or to imprisonment for up to five years. It is important to note that the price maintenance provision of the Act is regularly enforced by the Canadian Competition Bureau. Additionally, private civil actions are possible under Canada’s resale price provision of the Competition Act.
As a result of the decision in Leegin, North American manufacturers and distributors will have to redouble their efforts to manage the stark differences in the treatment of resale price maintenance in Canada and the United States. A copy of the U.S. Supreme Court’s decision can be found at: http://www.law.cornell.edu/supct/html/06-480.ZS.html
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