The Franchise Memorandum

In affirming the dismissal of the plaintiff’s second amended complaint, the Fifth Circuit appears to have put an end to the parties’ long-running legal battle in a case that resulted in the United States Supreme Court’s 2007 reversal of the century-old per se ban on minimum resale price agreements. PSKS, Inc. v. Leegin Creative Leather Prod., Inc., No. 09-40506 (5th Cir. Aug. 17, 2010). Plaintiff PSKS had been a retailer of the high-end Brighton® brand of women’s accessories manufactured by Leegin. Leegin had instituted a minimum resale price maintenance policy through which it induced retailers to agree to follow Leegin’s suggested pricing policy at all times, and it threatened and ultimately refused to deal with any retailer that violated its pricing policy by offering discounts. Following the Supreme Court’s reversal and remand, PSKS filed a second amended complaint alleging the same violations but adding relevant market allegations, as it was required to do under the rule of reason. Both of PSKS’s two alternative product markets were rejected by the district court, which accordingly dismissed the second amended complaint for failure to state a claim.

In affirming the district court’s decision, the Fifth Circuit held that the district court properly rejected the two alternative product markets alleged:  (1) the “retail market for Brighton’s women’s accessories”; and (2) the “wholesale sale of brand-name women’s accessories to independent retailers.” The court agreed that Brighton products do not constitute their own market and only in rare “lock-in” situations will a single brand of product or service constitute a relevant market for antitrust purposes. The court further agreed that “wholesale sale” does not adequately define a relevant market, “because the relevant market definition must focus on the product rather than the distribution level.” Also, the court held that “women’s accessories” is too broad and vague a definition to constitute a market. As for alleged discussions about discounts between Leegin and its dealers, the court declared: “A manufacturer’s discussion of pricing policy with retailers and its subsequent decision to adjust pricing to enhance its competitive position do not create an antitrust violation or give rise to an antitrust claim.”