This post was also written by Jeremy D. Feinstein and Jessica R. Rose.
Pennsylvania officials are taking steps to enact a comprehensive state antitrust law that would subject businesses to new antitrust risks at the state level. Most notably, the legislation would make minimum resale price maintenance per se illegal under Pennsylvania law. Minimum resale price maintenance is a practice by which actors at one level of the distribution chain seek to dictate resale prices to those further down the chain, such as manufacturers agreeing with wholesalers or retailers not to sell their goods below a certain price. Under federal law, minimum resale price maintenance has been considered lawful if reasonable under the circumstances since the Supreme Court’s 2007 decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007). Because Pennsylvania has had no comprehensive antitrust law of its own, antitrust actions in the state have usually been decided based on federal law, and thus Leegin has been the de facto law of Pennsylvania. But that will change if the new legislation is approved.
State Senator Stewart Greenleaf (R-Montgomery/Bucks), with the cooperation of Pennsylvania Attorney General Kathleen Kane, is reintroducing comprehensive antitrust legislation – Senate Bill 1565 – that stalled in the judiciary committee during the last legislative session.
In a March 14, 2013 memorandum to all Pennsylvania Senate members, Greenleaf announced his reintroduction of the legislation, stating that it addresses three main problems: (1) the Attorney General lacks the authority to subpoena documents in order to investigate an antitrust violation; (2) because the Attorney General must bring antitrust actions in federal court, she risks losing control of the litigation if it is consolidated in a multi-district litigation proceeding; and (3) the state cannot recover damages if it is an indirect purchaser. The legislation is designed to address each of these concerns.
Modeled largely on federal antitrust law, the proposed legislation deviates from its source in two significant respects: (1) section 904(2) prohibits minimum resale price maintenance, a practice that is no longer per se illegal under federal antitrust law. The Supreme Court concluded in Leegin that such agreements should be evaluated under the rule of reason; and (2) section 905(d) allows damages for indirect purchasers, which are barred in federal antitrust law under Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). The second of these exceptions will have less of an impact on Pennsylvania citizens and businesses because only the state may recover damages under the proposed law. The first exception, however, will raise antitrust risk for all entities that have drafted distribution policies, effective in Pennsylvania, that rely on the Supreme Court’s Leegin precedent.
In practice, the proposed law will permit only civil actions brought by the Attorney General. There is no private right of action and no criminal liability for state antitrust violations. Pennsylvania’s Commonwealth Court will have original jurisdiction over actions brought by the Attorney General for violations of the statute.
