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Monday, March 26, 2007

Deciphering The Oral Arguments in Leegin

Posted by Shubha Ghosh

The Supreme Court heard oral arguments today, and the exchange was spirited and stimulating. The text of the oral argument can be dowloaded here:  Download 06-480.pdf  Here are some thoughts:

(1) There are four Justices clearly in favor of retaining the per se rule against minimum retail price maintenance.  Justice Breyer emphasized the historic role of limiting the use of retail price maintenance, as evidenced by the ban on fair trade in 1975, in promoting the development of the retail sector.   His questioning of Theodore Olsen, representing the petitioner Leegin, was fairly vigorous and pointed, citing a 1966 study by B.S Yamey that paralleled all of the arguments made in favor of overruling Dr. Miles.  Justices Ginsburg, Stevens, and Souter also expressed skepticism over the rule of reason treatment of minimum RPM.

(2) Justice Scalia was clearly in favor of reversing.  As is well known, he urged the grant of cert, and he questioned Robert W. Coykendall, representing the respondent Kay's Kloset, perhaps more intensely than Justice Breyer grilled the petitioner.  Justice Scalia's questioning emphasized the need for sacrificing low price for high service and the importance of that sacrifice for interbrand competition. Interestingly, Justice Stevens questioned how far one would go with that argument: would it justify a horizontal agreement among competitors in order to prevent free riding and promote quality?

(3) The votes of Justices Roberts, Kennedy, Alito, and Thomas are the most difficult to predict.  Justice Roberts questioning was the most evenhanded, challenging Mr. Olsen by pointing out the benefits of banning minimum RPM on the development of retail and challenging Mr. Coykendall by pointing out that many of the harms he identifies could be addressed through a rule of reason analysis.   Justice Kennedy expressed some skepticism with Mr. Coykendall's argument that the benefits of minimum RPM could be obtained through non-price restrictions and requirements for investment in quality and services.  He also referred to the per se approach as a cookie cutter approach in response to the respondent's similar characterization of the rule of reason.  Justice Alito's few questions, in some ways, were the most interesting.  They focused on the potentially conflicting views of large retailers, like WalMart and Target, and smaller retailers.  He asked why the larger retailers did not submit an amici supporting Dr. Miles if they were so much benefitted by Dr. Miles.   The respondent's answer was that large retailers were indifferent to the rule since they had the bargaining power to impose desirable terms on manufacturers, and it was smaller retailers who directly benefited from the per se rule.   Justices and advocates alike made references to the amici brief of Ping Golf Manufacturing Inc. which urged the reversal of Dr. Miles in order to promote competition at the retail level.

So what to predict?  With four votes solidly in favor and one against, Justices Breyer, Ginsburg, Souter, and Stevens need to win over one vote to uphold Dr. Miles.  Will Justice Kennedy prove to be the swing vote or will Chief Justice Roberts' love of precedent, super or otherwise, save Dr. Miles?   As Justice Souter stated in oral argument, the decision has the potential of changing the face of retailing in the United States.

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Several newspaper covered the oral arguments yesterday, including, the New York Times, the Washington Post, the LA Times and USA Today.  The WSJ Law Blog highlighted Scalias consumer welfare questions; Mark Thoma at Economists View highl... [Read More]

Tracked on Mar 27, 2007 7:57:43 AM

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