Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
manufacturers have resorted to costlier alternatives of controlling resale prices
consumers of a meaningful choice between high-service and low-price outlets,
most [resale price maintenance arrangements] are probably innocuous”);
Easterbrook 162 (suggesting that “every one of the potentially-anticompetitive
the restraint is less likely to promote 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-sale services or by the dealers in order to
obtain monopoly profits”). A manufacturer also has an incentive to protest
inefficient retailer-induceddddd price restraints because they can harm its
power is rare, because of the usual presence of interbrand competition and other
dealers”). And if a manufacturer lacks market power, there is less likelihood it can
use the practice to keep competitors away from distribution outlets.
The rule of reason is designed and used to eliminate anticompetitive transactions
from the market. This standard principle applies to vertical price restraints. A
more guidance to businesses. Courts can, for example, devise rules over time for
offering proof, or even presumptions where justified, to make the rule of reason a
fair and efficient way to prohibit anticompetitive restraints and to promote
procompetitive ones.
For all of the foregoing reasons, we think that were the Court considering the
[s]tare decisis reflects a policy judgment that in most matters it is more important
that the applicable rule of law be settled than that it be settled right.” Khan, 522
U.S., at 20, 118 S.Ct. 275 (internal quotation marks omitted). And concerns
about maintaining settled law are strong when the question is one of statutory
interpretation. See, e.g., Hohn v. United States, 524 U.S. 236, 251, 118 S.Ct.
statute. See National Soc. of Professional Engineers v. United States, 435 U.S.
679, 688, 98 S.Ct. 1355, 55 L.Ed.2d 637 (1978); see also Northwest Airlines, Inc.
v. Transport Workers, 451 U.S. 77, 98, n. 42, 101 S.Ct. 1571, 67 L.Ed.2d 750
(1981) (“In antitrust, the federal courts ... act more as common-law courts than in
other areas governed by federal statute”). Just as the common law adapts to
no sense to create out of the single term ‘restraint of trade’ a chronologically
schizoid statute, in which a ‘rule of reason’ evolves with new circumstance and
new wisdom, but a line of per se illegality remains forever fixed where it was.”
Business Electronics, 485 U.S., at 732, 108 S.Ct. 1515.
A
Justice and the Federal Trade Commission-the antitrust enforcement agencies
with the ability to assess the long-term impacts of resale price maintenance-have
recommended that this Court replace the per se rule with the traditional rule of
reason. See Brief for United States as Amicus Curiae 6. In the antitrust context
the fact that a decision has been “called into serious question” justifies our
approach. We have distanced ourselves from the opinion's rationales. See supra,
at 2713 - 2714; see also Khan, supra, at 21, 118 S.Ct. 275 (overruling a case
when “the views underlying [it had been] eroded by this Court's precedent”);
Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 480-
481, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989) (same). This is unsurprising, for the
continued to temper, limit, or overrule once strict prohibitions on vertical
restraints. In 1977, the Court overturned the per se rule for vertical nonprice
restraints, adopting the rule of reason in its stead. GTE Sylvania, 433 U.S., at 57-
59, 97 S.Ct. 2549 (overruling United States v. Arnold, Schwinn & Co., 388 U.S.
365, 87 S.Ct. 1856, 18 L.Ed.2d 1249 (1967)); see also 433 U.S., at 58, n. 29, 97
2549 (White, J., concurring in judgment).
Continuing in this direction, in two cases in the 1980's the Court defined legal
rules to limit the reach of Dr. Miles and to accommodate the doctrines enunciated
in GTE Sylvania and Colgate. See Business Electronics, supra, at 726-728, 108
S.Ct. 1515; Monsanto, 465 U.S., at 763-764, 104 S.Ct. 1464. In Monsanto, the
unlawful because neither party suggested otherwise, id., at 761-762, n. 7, 104
S.Ct. 1464. In Business Electronics the Court further narrowed the scope of Dr.
Miles. It held that the per se rule applied only to specific agreements over price
levels and not to an agreement between a manufacturer and a distributor to
terminate a price-cutting distributor. 485 U.S., at 726-727, 735-736, 108 S.Ct.
under the traditional rule of reason. 522 U.S., at 22, 118 S.Ct. 275. Our continued
limiting of the reach of the decision in Dr. Miles and our recent treatment of other
vertical restraints justify the conclusion that Dr. Miles should not be retained.
The Dr. Miles rule is also inconsistent with a principled framework, for it makes
little economic sense when analyzed with our other cases on vertical restraints. If
less efficient for a particular manufacturer to establish and sustain. The end
result hinders competition and consumer welfare because manufacturers are
forced to engage in second-best alternatives and because consumers are
required to shoulder the increased expense of the inferior practices.
The manufacturer has a number of legitimate options to achieve benefits similar
to treble damages and potential criminal liability. Ibid.; Business Electronics,
supra, at 728, 108 S.Ct. 1515 . Even with the stringent standards in Monsanto
and Business Electronics, this danger can lead, and has led, rational
manufacturers to take wasteful measures. See, e.g., Brief for PING, Inc., as
Amicus Curiae 9-18. A manufacturer might refuse to discuss its pricing policy
integrating downstream and selling its products directly to consumers. Dr. Miles
tilts the relative costs of vertical integration and vertical agreement by making the
former more attractive based on the per se rule, not on real market conditions.
See Business Electronics, supra, at 725, 108 S.Ct. 1515; see generally Coase,
The Nature of the Firm, 4 Economica, New Series 386 (1937). This distortion
given region. Our cases have recognized, and the economics literature confirms,
that these vertical nonprice restraints have impacts similar to those of vertical
price restraints; both reduce intrabrand competition and can stimulate retailer
services. See, e.g., Business Electronics, supra, at 728, 108 S.Ct. 1515;
Monsanto, supra, at 762-763, 104 S.Ct. 1464; see also Brief for Economists as
contrary to its per se illegality and the rule-of-reason status of vertical nonprice
restraints”). The same legal standard ( per se unlawfulness) applies to horizontal
market division and horizontal price fixing because both have similar economic
effect. There is likewise little economic justification for the current differential
treatment of vertical price and nonprice restraints. Furthermore, vertical nonprice
options to achieve sound business objectives.
B
Respondent's arguments for reaffirming Dr. Miles on the basis of stare decisis do
not require a different result. Respondent looks to congressional action
concerning vertical price restraints. In 1937, Congress passed the Miller-Tydings
the Dr. Miles rule applied to vertical price restraints in 1975, according to
respondent, shows Congress ratified the rule.
This is not so. The text of the Consumer Goods Pricing Act did not codify the rule
of per se illegality for vertical price restraints. It rescinded statutory provisions
that made them per se legal. Congress once again placed these restraints within
could have set the Dr. Miles rule in stone, but it chose a more flexible option. We
respect its decision by analyzing vertical price restraints, like all restraints, in
conformance with traditional § 1 principles, including the principle that our
antitrust doctrines “evolv[e] with new circumstances and new wisdom.” Business
Electronics, supra, at 732, 108 S.Ct. 1515; see also Easterbrook 139.
v. Midcal Aluminum, Inc., 445 U.S. 97, 102, 100 S.Ct. 937, 63 L.Ed.2d 233
(1980). The state fair trade laws also appear to have been justified on similar
grounds. See Areeda & Hovenkamp 298. The rationales for these provisions are
foreign to the Sherman Act. Divorced from competition and consumer welfare,
they were designed to save inefficient small retailers from their inability to
Respondent also relies on several congressional appropriations in the mid-1980's
in which Congress did not permit the Department of Justice or the Federal Trade
Commission to use funds to advocate overturning Dr. Miles. See, e.g., 97 Stat.
1071. We need not pause long in addressing this argument. The conditions on
funding are no longer in place, see, e.g., Brief for United States as Amicus
U.S. 808, 828, 111 S.Ct. 2597, 115 L.Ed.2d 720 (1991), especially “in cases
involving property and contract rights,” Khan, 522 U.S., at 20, 118 S.Ct. 275. The
reliance interests here, however, like the reliance interests in Khan, cannot justify
an inefficient rule, especially because the narrowness of the rule has allowed
manufacturers to set minimum resale prices in other ways. And while the Dr.
manufacturers, accounting for no more than ten percent of consumer goods
purchases, ever employed [resale price maintenance] in any single year in the
[United States]”); Scherer & Ross 549 (noting that “[t]he fraction of U.S. retail
sales covered by [resale price maintenance] in its heyday has been variously
estimated at from 4 to 10 percent”). To the extent consumers demand cheap
most part, the effects of the [Consumer Goods Pricing Act] were imperceptible
because the forces of competition had already repealed the [previous antitrust
exemption] in their own quiet way”).
For these reasons the Court's decision in Dr. Miles Medical Co. v. John D. Park &
Sons Co., 220 U.S. 373, 31 S.Ct. 376, 55 L.Ed. 502 (1911), is now overruled.
The judgment of the Court of Appeals is reversed, and the case is remanded for
proceedings consistent with this opinion.
It is so ordered.
consumers of a meaningful choice between high-service and low-price outlets,
most [resale price maintenance arrangements] are probably innocuous”);
Easterbrook 162 (suggesting that “every one of the potentially-anticompetitive
the restraint is less likely to promote 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-sale services or by the dealers in order to
obtain monopoly profits”). A manufacturer also has an incentive to protest
inefficient retailer-induceddddd price restraints because they can harm its
power is rare, because of the usual presence of interbrand competition and other
dealers”). And if a manufacturer lacks market power, there is less likelihood it can
use the practice to keep competitors away from distribution outlets.
The rule of reason is designed and used to eliminate anticompetitive transactions
from the market. This standard principle applies to vertical price restraints. A
more guidance to businesses. Courts can, for example, devise rules over time for
offering proof, or even presumptions where justified, to make the rule of reason a
fair and efficient way to prohibit anticompetitive restraints and to promote
procompetitive ones.
For all of the foregoing reasons, we think that were the Court considering the
[s]tare decisis reflects a policy judgment that in most matters it is more important
that the applicable rule of law be settled than that it be settled right.” Khan, 522
U.S., at 20, 118 S.Ct. 275 (internal quotation marks omitted). And concerns
about maintaining settled law are strong when the question is one of statutory
interpretation. See, e.g., Hohn v. United States, 524 U.S. 236, 251, 118 S.Ct.
statute. See National Soc. of Professional Engineers v. United States, 435 U.S.
679, 688, 98 S.Ct. 1355, 55 L.Ed.2d 637 (1978); see also Northwest Airlines, Inc.
v. Transport Workers, 451 U.S. 77, 98, n. 42, 101 S.Ct. 1571, 67 L.Ed.2d 750
(1981) (“In antitrust, the federal courts ... act more as common-law courts than in
other areas governed by federal statute”). Just as the common law adapts to
no sense to create out of the single term ‘restraint of trade’ a chronologically
schizoid statute, in which a ‘rule of reason’ evolves with new circumstance and
new wisdom, but a line of per se illegality remains forever fixed where it was.”
Business Electronics, 485 U.S., at 732, 108 S.Ct. 1515.
A
Justice and the Federal Trade Commission-the antitrust enforcement agencies
with the ability to assess the long-term impacts of resale price maintenance-have
recommended that this Court replace the per se rule with the traditional rule of
reason. See Brief for United States as Amicus Curiae 6. In the antitrust context
the fact that a decision has been “called into serious question” justifies our
approach. We have distanced ourselves from the opinion's rationales. See supra,
at 2713 - 2714; see also Khan, supra, at 21, 118 S.Ct. 275 (overruling a case
when “the views underlying [it had been] eroded by this Court's precedent”);
Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 480-
481, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989) (same). This is unsurprising, for the
continued to temper, limit, or overrule once strict prohibitions on vertical
restraints. In 1977, the Court overturned the per se rule for vertical nonprice
restraints, adopting the rule of reason in its stead. GTE Sylvania, 433 U.S., at 57-
59, 97 S.Ct. 2549 (overruling United States v. Arnold, Schwinn & Co., 388 U.S.
365, 87 S.Ct. 1856, 18 L.Ed.2d 1249 (1967)); see also 433 U.S., at 58, n. 29, 97
2549 (White, J., concurring in judgment).
Continuing in this direction, in two cases in the 1980's the Court defined legal
rules to limit the reach of Dr. Miles and to accommodate the doctrines enunciated
in GTE Sylvania and Colgate. See Business Electronics, supra, at 726-728, 108
S.Ct. 1515; Monsanto, 465 U.S., at 763-764, 104 S.Ct. 1464. In Monsanto, the
unlawful because neither party suggested otherwise, id., at 761-762, n. 7, 104
S.Ct. 1464. In Business Electronics the Court further narrowed the scope of Dr.
Miles. It held that the per se rule applied only to specific agreements over price
levels and not to an agreement between a manufacturer and a distributor to
terminate a price-cutting distributor. 485 U.S., at 726-727, 735-736, 108 S.Ct.
under the traditional rule of reason. 522 U.S., at 22, 118 S.Ct. 275. Our continued
limiting of the reach of the decision in Dr. Miles and our recent treatment of other
vertical restraints justify the conclusion that Dr. Miles should not be retained.
The Dr. Miles rule is also inconsistent with a principled framework, for it makes
little economic sense when analyzed with our other cases on vertical restraints. If
less efficient for a particular manufacturer to establish and sustain. The end
result hinders competition and consumer welfare because manufacturers are
forced to engage in second-best alternatives and because consumers are
required to shoulder the increased expense of the inferior practices.
The manufacturer has a number of legitimate options to achieve benefits similar
to treble damages and potential criminal liability. Ibid.; Business Electronics,
supra, at 728, 108 S.Ct. 1515 . Even with the stringent standards in Monsanto
and Business Electronics, this danger can lead, and has led, rational
manufacturers to take wasteful measures. See, e.g., Brief for PING, Inc., as
Amicus Curiae 9-18. A manufacturer might refuse to discuss its pricing policy
integrating downstream and selling its products directly to consumers. Dr. Miles
tilts the relative costs of vertical integration and vertical agreement by making the
former more attractive based on the per se rule, not on real market conditions.
See Business Electronics, supra, at 725, 108 S.Ct. 1515; see generally Coase,
The Nature of the Firm, 4 Economica, New Series 386 (1937). This distortion
given region. Our cases have recognized, and the economics literature confirms,
that these vertical nonprice restraints have impacts similar to those of vertical
price restraints; both reduce intrabrand competition and can stimulate retailer
services. See, e.g., Business Electronics, supra, at 728, 108 S.Ct. 1515;
Monsanto, supra, at 762-763, 104 S.Ct. 1464; see also Brief for Economists as
contrary to its per se illegality and the rule-of-reason status of vertical nonprice
restraints”). The same legal standard ( per se unlawfulness) applies to horizontal
market division and horizontal price fixing because both have similar economic
effect. There is likewise little economic justification for the current differential
treatment of vertical price and nonprice restraints. Furthermore, vertical nonprice
options to achieve sound business objectives.
B
Respondent's arguments for reaffirming Dr. Miles on the basis of stare decisis do
not require a different result. Respondent looks to congressional action
concerning vertical price restraints. In 1937, Congress passed the Miller-Tydings
the Dr. Miles rule applied to vertical price restraints in 1975, according to
respondent, shows Congress ratified the rule.
This is not so. The text of the Consumer Goods Pricing Act did not codify the rule
of per se illegality for vertical price restraints. It rescinded statutory provisions
that made them per se legal. Congress once again placed these restraints within
could have set the Dr. Miles rule in stone, but it chose a more flexible option. We
respect its decision by analyzing vertical price restraints, like all restraints, in
conformance with traditional § 1 principles, including the principle that our
antitrust doctrines “evolv[e] with new circumstances and new wisdom.” Business
Electronics, supra, at 732, 108 S.Ct. 1515; see also Easterbrook 139.
v. Midcal Aluminum, Inc., 445 U.S. 97, 102, 100 S.Ct. 937, 63 L.Ed.2d 233
(1980). The state fair trade laws also appear to have been justified on similar
grounds. See Areeda & Hovenkamp 298. The rationales for these provisions are
foreign to the Sherman Act. Divorced from competition and consumer welfare,
they were designed to save inefficient small retailers from their inability to
Respondent also relies on several congressional appropriations in the mid-1980's
in which Congress did not permit the Department of Justice or the Federal Trade
Commission to use funds to advocate overturning Dr. Miles. See, e.g., 97 Stat.
1071. We need not pause long in addressing this argument. The conditions on
funding are no longer in place, see, e.g., Brief for United States as Amicus
U.S. 808, 828, 111 S.Ct. 2597, 115 L.Ed.2d 720 (1991), especially “in cases
involving property and contract rights,” Khan, 522 U.S., at 20, 118 S.Ct. 275. The
reliance interests here, however, like the reliance interests in Khan, cannot justify
an inefficient rule, especially because the narrowness of the rule has allowed
manufacturers to set minimum resale prices in other ways. And while the Dr.
manufacturers, accounting for no more than ten percent of consumer goods
purchases, ever employed [resale price maintenance] in any single year in the
[United States]”); Scherer & Ross 549 (noting that “[t]he fraction of U.S. retail
sales covered by [resale price maintenance] in its heyday has been variously
estimated at from 4 to 10 percent”). To the extent consumers demand cheap
most part, the effects of the [Consumer Goods Pricing Act] were imperceptible
because the forces of competition had already repealed the [previous antitrust
exemption] in their own quiet way”).
For these reasons the Court's decision in Dr. Miles Medical Co. v. John D. Park &
Sons Co., 220 U.S. 373, 31 S.Ct. 376, 55 L.Ed. 502 (1911), is now overruled.
The judgment of the Court of Appeals is reversed, and the case is remanded for
proceedings consistent with this opinion.
It is so ordered.
