Case Overboard!

Yes, yes, everybody's paying attention to the Supreme Court's decision striking down a school district's attempt to use race to achieve racially balanced schools, but I want to discuss today's other big decision, an antitrust case about resale price maintenance.

"Resale price maintenance" occurs when a manufacturer and a retailer agree that the retailer will charge at least a specified amount when selling the manufacturer's product. In today's case, a manufacturer of leather goods instituted a policy of refusing to sell to retailers who sold the products for less than the manufacturer's suggested prices.

In a case called Dr. Miles Medical Co. v. John D. Park and Sons, the Supreme Court previously decided that resale price maintenance is a "per se" violation of the antitrust laws -- that is, it's always illegal. But today, the Court overruled Dr. Miles. After today, resale price maintenance is to be judged by the "rule of reason" -- that is, courts are to look, on a case-by-case basis, at whether a particular resale price maintenance agreement helps or harms competition.

Now, I confess I don't know much about antitrust law -- it's an area I've always neglected. As the Court said, one can imagine some cases in resale price maintenance could be pro-competitive -- it could encourage retailers to take on new products knowing that they won't be undercut by discounters. One can also imagine anti-competitive effects of resale price maintenance -- most obviously, it prevents price competition among retailers selling the same good, thereby increasing the price consumers must pay for that good. So one can see arguments on both sides, and I'm not the expert.

But I do know this: Dr. Miles was decided by the Supreme Court in 1911. It's been the law for 96 years. The Court even reaffirmed it several times during that period. Congress had every opportunity to overrule it statutorily and didn't. Indeed, in 1937 Congress passed a law allowing individual states to "opt out" of Dr. Miles and permit resale price maintenance agreements, but then in 1975 Congress repealed that law, suggesting that Congress was happy to have resale price maintenance banned on a uniform, national basis. This makes the decision to overrule Dr. Miles particularly startling.

Today's decision to throw Dr. Miles overboard shows, I would say, that President Bush's appointments to the Court have had their desired effect. There's no doubt that the new Justices are taking the Court on a sharp right turn. And notably, they seem to have no particular compunction about smashing precedents they don't like in order to get where they want to go.

Some of this week's other big cases show the new Justices formally preserving precedent while functionally eviscerating it. Sometimes that strategy doesn't work -- precedents like Dr. Miles are just too clear to work around. When that happens, the new Court seems ready to dump them.

If the Court will overrule 96-year-old cases touching the heart of antitrust law, that have been repeatedly reaffirmed, it's hard to see what precedents are safe. We are truly in a new era of Supreme Court decisionmaking.