Amendment Re-Aligns Kansas' State Antitrust Law With Sherman Act Standards—Almost

Nearly a year ago the Kansas Supreme Court issued a ruling that boldly separated Kansas, and its state antitrust law, from prevailing federal antitrust precedent in matters of resale price agreements. However, in April 2013, the legislature amended the Kansas antitrust law, so that it now applies a “rule of reasonableness” to resale price agreements.

In O'Brien v. Leegin Creative Leather Products, Inc., 277 P.3d 1062 (May 4, 2012), the Kansas Supreme Court applied the state's antitrust statute (which states that an "arrangement, contract, agreement, trust or combination" that is "designed to advance, reduce or control price" or "tends to" have that effect, is sufficient to establish an antitrust violation) must be read literally, and that the "rule of reason of federal jurisprudence does not apply". An initial attempt to reverse the decision by legislation failed.

In April 2013, the legislature returned to the subject and adopted amendments, signed into law on April 18, 2013. As amended, the Kansas Restraint of Trade Act applies a "rule of reasonableness" to vertical price agreements and, in addition provides that the act should be "construed in harmony" with federal antitrust law and precedents, except for matters involving indirect purchasers, intrastate commerce, and other exceptions.

In broad terms, the amended statute means that manufacturers and re-sellers do not have to worry about carving out Kansas purchasers from maximum or minimum resale price policies or agreements that would pass muster under the federal Sherman Act Rule of Reason, or arguing that the O'Brien decision has an unconstitutional dimension because of possible effects on interstate commerce.

Since the decision in State Oil v. Khan, 522 U.S. 3 (1997). federal antitrust standards applicable to resale price agreements place vertical maximum price agreements under the Rule of Reason. No case has applied that ruling to invalidate maximum price restrictions. Since the US Supreme Court decision in Leegin Creative Leather Products v. PSKS, Inc., 551 U.S. 877 (2007), the same approach has been applied under federal law to vertical minimum price agreements. While certain state regulators have stated that the ruling does not change their state antitrust law and brought cases challenging minimum price restrictions, and Maryland has enacted...