Kansas Supreme Court Declares 'Rule Of Reason' Inapplicable To Kansas Antitrust Law; Legislature May Have A Different Idea

In Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007), the U.S. Supreme Court expressly overruled the categorical ban on vertical price fixing agreements that had existed for nearly a century prior. See Dr. Miles Medical Co. v. John D. Park & Sons, 220 U.S. 373 (1911). Leegin, a designer and manufacturer of high-end leather goods, instituted a policy under which it "refused to sell to retailers that discounted Brighton [a Leegin brand] goods below [manufacturer] suggested prices." 551 U.S. at 883. Leegin discovered that Kay's Kloset (PSKS) was discounting Brighton products, and asked it to stop. PSKS refused, and Leegin discontinued sales. PSKS sued, alleging vertical price fixing in violation of Section 1 of the Sherman Act. The Supreme Court rejected the rationale of Dr. Miles, recognizing that advances in economic analysis now demonstrate that vertical resale price maintenance may sometimes have pro-competitive justifications under the rule of reason. The Court held that the justifications for analysis under the rule of reason were similar to those of other vertical restraints, including territorial restraints and the use of location clauses. It recognized that "[m]inimum resale price maintenance can stimulate inter-brand competition," the protection of which is "the primary purpose of the antitrust laws." Id.

Based upon substantially the same facts, the Kansas Supreme Court has now rejected the application of Leegin to Kansas law, holding that a rule of reason approach was incompatible with the unambiguous language of the applicable Kansas Restraint of Trade Act, Sections K.S.A. 50-101, and 50-112. O'Brien v. Leegin Creative Leather Prods., Inc., No. 101000, 2012 WL 1563976 (Kansas Supreme Court May 4, 2012). The Kansas high court held that while the intent of the legislature governs, the first judicial approach is to ascertain the legislature's intent through the statutory language enacted. Here, the court held that the term "all" was "plain and unambiguous", and that as used in K.S.A. 50-112, "all" means "all." As stated in K.S.A. 50-112:

All arrangements, contracts, agreements, trusts, or combinations between persons made with a view or which tend to prevent full and free competition ... and all arrangements, contracts, agreements, trusts or combinations between persons, designed or which tend to advance, reduce, or control the price of the cost to the producer or to the consumer of any such products or articles...