The Franchise Memorandum

Congress is considering overruling the United States Supreme Court’s decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 127 S.Ct. 2705 (2007), in which the court overturned near century-old precedent and held that manufacturers could set minimum price standards for retailers if they encouraged competition.  By eliminating the threat of per se liability, some have believed that Leegin provided suppliers and franchisors with at least limited comfort in setting minimum resale prices for their dealers and franchisees.  But even this may be short-lived.  On January 13, 2010, the Discount Pricing Consumer Protection Act of 2009 (H.R. 3190) cleared the judiciary committee of the House of Representatives and could head to the House for a full vote.  The bill states:  “Any agreement setting a price below which a product or service cannot be sold by a retailer, wholesaler, or distributor shall violate section 1 of the Sherman Act.” 

A related bill (S. 148) was introduced in the Senate on January 6, 2010, by Senator Kohl (D-Wis.) and was referred to the Senate’s judiciary committee for consideration.  The purpose of the Senate bill is to “correct the Supreme Court’s mistaken interpretation of the Sherman Act in the Leegin decision.”