Washington Antitrust Report

Washington Antitrust Report

August 01, 1987

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Political momentum is building up in Congress behind legislation to reverse recent judicial interpretations and administrative enforcement policy regarding vertical restraints on product distribution. A pair of bills, H.R. 585 and S. 430, would attempt to fully restore the per se rule of Dr. Miles for vertical price arrangements. (See "RPM Roll Back Rolls On," infra at p. 11). They would also encourage dealers to sue manufacturers over contract terminations by easing evidentiary standards and thereby improving the odds of such court challenges getting before juries.

Opposed by the Justice Department, the Federal Trade Commission, the American Bar Association House of Delegates, and a broad business coalition known as the Monsanto Group, both bills have been criticized for (1) undermining the Sylvania rule of reason standard for vertical non-price restrictions, (2) blurring the distinction between concerted action and unilateral conduct by manufacturers under the Colgate doctrine, (3) bypassing traditional evidentiary standards under the law of conspiracy, (4) encouraging frivolous lawsuits, (5) chilling manufacturers' efforts to police their distribution networks, (6) preempting further judicial modernization of antitrust law concerning vertical restraints, and (7) freezing rigid rules into permanent statutory prohibitions.

But the greatest danger posed by such legislation could well be the long-term harm it might do to consumers seeking products that require special information and services, as described in the following article.