Working Paper No. 15-04: Resale Price Maintenance After Leegin: The Curious Case of Contact Lenses
The American Antitrust Institute (AAI) is pleased to announce the publication of AAI working paper No. 15-04 Resale Price Maintenance After Leegin: The Curious Case of Contact Lenses coauthored by Gregory T. Gundlach and Riley T. Krotz.
Resale price maintenance (RPM) is a controversial pricing practice for managing retail distribution channels. In Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2007), the Supreme Court abolished a nearly century-old per se rule against RPM established in Dr. Miles Medicine Co. v. John D. Park & Sons (1911). Henceforth, RPM will be judged under federal antitrust law by the rule of reason – a less restrictive standard that requires courts to weigh all the relevant circumstances of a case to assess whether a practice unreasonably restrains trade. Despite that the decision in Leegin leaves many unanswered questions, the decision has prompted an increasing number of consumer goods manufacturers to adopt RPM in the management of their retailer relationships. Recently, the widespread use of restrictive pricing practices in the retail distribution of contact lenses have drawn attention and elevated debate over the practice. Pending lawsuits in the industry have been identified as an important “test case” for antitrust’s new vertical pricing regime following Leegin. Drawing upon relevant literatures from law, economics, and business, together with publically available information, important questions in the debate and related cases that share significance for scholarship and practice are elaborated upon and examined in the paper. This examination reveals insights helpful to understanding the antitrust implications of contact lens manufacturers’ pricing practices and for advancing academic knowledge, marketing practice, and competition policy involving RPM.
The American Antitrust Institute is an independent, nonprofit education, research, and advocacy organization working to increase the role of competition, assure that competition serves the interests of consumers, and challenge abuses of concentrated economic power in the American and world economy.
Gregory T. Gundlach, J.D., Ph.D.
Coggin Distinguished Professor of Marketing,
Coggin College of Business
University of North Florida
Jacksonville, FL 32224-2675
Director & Senior Research Fellow,
American Antitrust Institute