(By Ted Frank, adjunct fellow with the Center for Legal Policy at the Manhattan Institute)
As we discussed in 2007, the U.S. Supreme Court in Leegin recognized that it was economically irrational to treat “resale price maintenance” as a per se violation of the antitrust laws, especially given existing jurisprudence recognizing economically equivalent vertical restraints as a benefit to consumers. (See also my AEI discussion; Overlawyered.)
But that hasn’t stopped the plaintiffs’ bar from forum-shopping for courts that might ignore economic reality in favor of soaking out-of-state defendants. Last week, they hit paydirt with another lawsuit against Leegin Creative Leather Products, as the Kansas Supreme Court held resale price maintenance per se illegal. But the decision goes beyond that, arguing that Kansas law holds other so-called restraints on trade illegal, even when adjudged “reasonable” (i.e., beneficial to consumers) by federal antitrust standards.
Such a rule would effectively hold illegal common business practices recognized as proper for decades, and would be a pure wealth transfer from society to lawyers, and from out-of-state businesses and consumers to Kansas. It would force interstate businesses who could not readily operate differently in Kansas than in the rest of the country to change their practices, to the detriment of consumers in all fifty states. It’s not just bad policy, but an impingement on interstate commerce and should be held a violation of the Commerce Clause for its attempt to expropriate the benefits of interstate commerce. One hopes defendant Leegin gets the U.S. Supreme Court involved; one also hopes that the Kansas legislature fixes this mess as quickly as possible before the state becomes a judicial hellhole.