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Court rules on pricing agreements: immigration bill fails in Senate, questionable in House.

It's a rare moment when we highlight a Supreme Court decision. Yet, one of the last decisions handed down at the end of the current court term involves resale price maintenance agreements that have been considered anti-competitive under the Sherman Anti-Trust Act.

A bit of background. In 1911, the Supreme Court set out principles governing resale pricing agreements between manufacturers and their distributor/retailer customers. In the case of Dr. Miles Medical Co. vs. John D. Park & Son, the court ruled that resale price maintenance agreements were illegal per se--illegal by their very nature--and defendants had to prove their actions did not violate anti-competitive provisions of the Sherman Anti-Trust Act.

Companies could, however, vertically integrate manufacturing and retail operations, establish exclusive retail territories or require retailers to provide certain kinds of information or services to consumers.

This year's case (Leegin Creative Leather Products Inc. vs. PSKS Inc.) involved the legality of minimum resale price maintenance agreements. Leegin Creative Leather Products stopped selling its products to Kay's KIoset, owned by PSKS Inc., when the retailer refused to honor the manufacturer's suggested retail price.

In its decision, the court said that minimum resale pricing agreements are not illegal per se, that the more appropriate legal approach is the "rule of reason." This means all factors involved in an agreement must be considered before deciding whether it violates the Sherman Anti-Trust Act.

It shifts the burden of proof from the defendant to the plaintiff, who must make the case that the agreement was anti-competitive and therefore illegal. It should give manufacturers more latitude in setting up and enforcing agreements over the lowest price at which their products can be sold.

This is the third in a series of Supreme Court decisions that have shifted aspects of vertical agreements between manufacturers and their customers away from per se to rule of reason. Thirty years ago the court said that vertical non-price restrictions imposed by manufacturers were subject to the rule of reason (ContinentalTV vs. GTE Sylvania Inc.). Ten years ago the court applied the same principle to maximum resale price maintenance agreements (State Oil Co. vs. Kahn).

The current decision involves minimum resale price agreements between manufacturers and distributors or retailers. It leaves horizontal pricing agreements--collusion among competitors--under the per se illegality rule. These types of agreements are still illegal--period!

Immigration Reform Gone ... For Now

Battles raged within the Senate over the Comprehensive Immigration Reform Act before the bill went down to defeat. The legislation was designed to combine enforcement measures--border enforcement and verification of employee work eligibility--with legalization processes--a guest worker program and a means to citizenship.

The bill came to the Senate floor, where it faced a large number of amendments. When Majority Leader Harry Reid (D-NV) tried to cut off debate, he could not gather up the necessary 60 votes. He pulled the bill from the floor.

After President Bush made a rare trip to Capitol Hill to cajole recalcitrant Republicans into supporting the bill, Reid asked for a vote to reconsider it. He got that vote, but the bill didn't go far. Within a few days, it fell to another cloture vote. This time support had weakened even further. There were only 46 votes to proceed--nowhere near the 60 required to stop debate, not even enough to pass with a simple 51-vote majority.

It is unlikely the bill will return again this year, but some provisions, such as revisions to the H-1B visa program for highly skilled professionals and easing shortages of agricultural workers, could return as parts of other legislation.

An immigration reform bill has been introduced in the House that also combines enforcement with legalization, but, as of this writing, House leaders were hesitant to move forward, given events in the Senate.
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Title Annotation:Capitol Retail Report
Publication:Hardware Retailing
Date:Aug 1, 2007
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