## Facts

- Leegin Creative Leather Products, Inc. manufactured women’s accessories sold under the “Brighton” brand and adopted a policy discouraging discounting below suggested retail prices.
- Under the “Brighton Retail Pricing and Promotion Policy,” Leegin generally refused to sell to retailers that sold Brighton products below suggested prices, subject to limited exceptions (e.g., certain store-wide sales).
- PSKS, Inc. (Kay’s Kloset/Kay’s Shoes), an independent retailer, sold Brighton products and discounted them by about 20%.
- After PSKS refused to comply with Leegin’s pricing policy, Leegin stopped supplying PSKS.
- PSKS sued, alleging Leegin entered vertical agreements with retailers to set minimum resale prices in violation of § 1 of the Sherman Act.

## Issues

1. Whether vertical minimum resale price maintenance agreements are per se illegal under Sherman Act § 1.
2. Whether such agreements instead must be evaluated under the rule of reason, allowing consideration of competitive effects and justifications.
3. Whether precedent treating minimum resale price maintenance as per se unlawful should be overruled.

## Decision

- The Supreme Court reversed the judgment for PSKS and remanded.
- The Court overruled Dr. Miles Medical Co. v. John D. Park & Sons Co. to the extent it imposed per se illegality on vertical minimum resale price maintenance.
- The Court held that vertical minimum resale price restraints must be judged under the rule of reason.
- The Court reasoned that per se condemnation is reserved for restraints that almost always reduce output and harm competition, and minimum resale price maintenance can have both procompetitive and anticompetitive effects depending on market context.
- The Court recognized possible procompetitive benefits, including reducing free riding and supporting retailer services and promotion that can improve interbrand competition.
- The Court also recognized possible anticompetitive risks, including facilitating retailer or manufacturer collusion, and directed that these concerns be addressed through fact-specific rule-of-reason analysis.
- The dissent would have retained the per se rule, emphasizing administrability and risks of higher consumer prices.

## Legal Principles

- The default standard under Sherman Act § 1 is the rule of reason, which evaluates a restraint’s competitive effects in light of market circumstances.
- Per se rules apply only to categories of restraints that experience shows almost always harm competition and lack redeeming competitive value.
- Vertical minimum resale price maintenance is not categorically unlawful; its legality turns on effects shown under the rule of reason.
- Overruling precedent is justified where its economic assumptions have been discredited and later doctrine has undermined its foundation, especially in antitrust where analysis centers on economic effects.

## Conclusion

The Court held that agreements setting minimum resale prices are not automatically unlawful under Sherman Act § 1 and must be assessed under the rule of reason, overruling the longstanding per se approach and requiring plaintiffs to prove anticompetitive effects in context.


Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007)