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Kansas Supreme Court Rules Resale Price Agreements Illegal Under State Law

On May 4, 2012, the Kansas Supreme Court in O’Brien v. Leegin Creative Leather Products, Inc., Mo. 101,000 (May 4, 2012), held that any arrangement, contract, agreement, or combination “designed to” advance, reduce, or control prices, or that “tends to” advance, reduce, or control prices, is illegal and violates the Kansas Restraint of Trade Act.  In addition, the Court held that a plaintiff need not show a relationship rising to the level of an agreement, nor show that the combination actually succeeded in increasing prices, in order to assert a viable claim under Kansas antitrust law.  It is enough to demonstrate that the combination’s purpose is to fix prices.

Although a plaintiff must prove injury resulting from the defendant’s conduct, such proof may be based on circumstantial evidence of resale price increases.  The effect of this ruling is to make resale price agreements, whether “vertical” between a manufacturer and its customers or “horizontal” in a dual distribution setting in which a manufacturer also owns retail outlets, per se illegal under the Kansas Restraint of Trade Act.  In reaching its decision, the Kansas Supreme Court expressly rejected applicability of federal antitrust jurisprudence to claims brought under the Kansas antitrust statutes.  Accordingly, the “rule of reason” does not apply under Kansas antitrust law to resale pricing arrangements.  The sole defense appears to be the longstanding requirement established in U.S. v. Colgate, 250 U.S. 300 (1919), that something more than a unilateral pricing policy adopted by a wholesale supplier is necessary for a violation.

This decision by the Kansas Supreme Court rejects the more lenient “rule of reason” treatment accorded resale price agreements under federal antitrust law by the U.S. Supreme Court decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007).  As a result, any business that sells products in the state of Kansas should examine its pricing policies carefully to ensure compliance with Kansas antitrust law.