My take on this is that conditions for resale and use are part of the "property" being sold. If you don't like them, don't buy the property.
Radical surgery on Dr. Miles? Argument 3/26/07
SCOTUS BLOG
By Lyle Denniston
In April 1911, Associate Justice Charles Evans Hughes stated a simple economic proposition: "The argument appears to be that, as the manufacturer can make and sell, or not, as he chooses, he may affix conditions as to the use of the article or as to the prices at which purchasers may dispose of it…But because a manufacturer is not bound to make or sell, it does not follow in case of sales actually made he may impose upon purchasers every sort of restriction." In fact, said Hughes, such restrictions on resale rights are "obnoxious to public policy," and thus illegal.
In other words, the Supreme Court was saying, once a product is sold, the right of property passes to the buyer, who can resell it at whatever price he wants and attempts to stop him are always illegal. That is what is known now as the "Dr. Miles rule," from Hughes opinion in Dr. Miles Medical Co. v. John D. Park & Sons Co.
In layman's language, the rule means that it is illegal for a manufacturer to bar a retailer of its goods from selling them at a discount; in legal parlance, it means that vertical "resale price maintenance" is per se (virtually automatically) illegal under the Sherman Antitrust Act.
On Monday, almost exactly 96 years later, the Supreme Court will hear argument on whether to cast aside the "Dr. Miles rule." In the case of Leegin Creative Leather Products Inc. v. PSKS, Inc. (06-480), the Justices will consider whether -- from now on -- manufacturers should be legally free as a general rule to require retailers to charge only what the manufacturer says when the goods are sold in a retail store.
The case pits a maker of a line of women's shoes, bags and other accessories, against a women's outfitting store – Kay's Kloset – in Lewisville, Texas, that was selling Leegin's "Brighton" line of goods at discount prices. Leegin found out, and cut off the store's supply of Brighton items, provoking an antitrust lawsuit. The Fifth Circuit Court, saying it had no choice but to apply the Dr. Miles rule, upheld a $3.6 million tripled antitrust damages award against Leegin because its attempt to control Kay's Kloset prices was illegal. The Supreme Court put that ruling on hold while the case is on appeal.
Amid a welter of economic and legal arguments in the briefs, the Court finds only a simple legal question: should manufacturer's resale price control policies now be judged on a case-by-case basis, applying normal legal and economic reasoning, or will the Court retain the notion that such policies are virtually always illegal?
Four attorneys will argue the case, beginning shortly after 10 a.m. Monday. Theodore B. Olson, the former Solicitor General and now a partner at Gibson Dunn & Crutcher in Washington, will argue for Leegin for 20 minutes, followed by Deputy U.S. Solicitor General Thomas G. Hunger, representing the federal government and arguing for ten minutes in support of overruling the Dr. Miles decision. Speaking for the Texas store will be Robert W. Coykendall of Morris, Laing, Evans, Brock & Kennedy in Wichita, Kan., followed by New York State Solicitor General Barbara D. Underwood, representing 37 states that want the Court to preserve the Dr. Miles rule. |
