Leegin Creative Leather Products, Inc. v. PSKS, Inc.

OPINION OF THE COURT LEEGIN CREATIVE LEATHER PRODUCTS, INC. V.PSKS, INC. 551 U. S. ____ (2007) SUPREME COURT OF THE UNITED STATES NO. 06-480 LEEGIN CREATIVE LEATHER PRODUCTS, INC., PETITIONER v. PSKS, INC., dba KAY’S KLOSET . . . KAY’S SHOES

															on writ of certiorari to the united states court of
appeals for the fifth circuit

															[June 28, 2007]

															   Justice Kennedy delivered the
opinion of the Court.

															   In Dr. Miles Medical Co. v. John D. Park & Sons Co. , 220
U. S. 373 (1911), the Court established the rule that it is per se illegal under §1 of the Sherman Act, 15 U.
S. C. §1, for a manufacturer to agree with its distributor to
set the minimum price the distributor can charge for the
manufacturer’s goods. The question presented by the instant case is
whether the Court should overrule the per se rule and
allow resale price maintenance agreements to be judged by the rule
of reason, the usual standard applied to determine if there is a
violation of §1. The Court has abandoned the rule of per
se illegality for other vertical restraints a manufacturer
imposes on its distributors. Respected economic analysts,
furthermore, conclude that vertical price restraints can have
procompetitive effects. We now hold that Dr. Miles should
be overruled and that vertical price restraints are to be judged by
the rule of reason.

															I

															   Petitioner, Leegin Creative
Leather Products, Inc. (Leegin), designs, manufactures, and
distributes leather goods and accessories. In 1991, Leegin began to
sell belts under the brand name “Brighton.” The Brighton brand has
now expanded into a variety of women’s fashion accessories. It is
sold across the United States in over 5,000 retail establishments,
for the most part independent, small boutiques and specialty
stores. Leegin’s president, Jerry Kohl, also has an interest in
about 70 stores that sell Brighton products. Leegin asserts that,
at least for its products, small retailers treat customers better,
provide customers more services, and make their shopping experience
more satisfactory than do larger, often impersonal retailers. Kohl
explained: “[W]e want the consumers to get a different experience
than they get in Sam’s Club or in Wal-Mart. And you can’t get that
kind of experience or support or customer service from a store like
Wal-Mart.” 5 Record 127.

															   Respondent, PSKS, Inc. (PSKS),
operates Kay’s Kloset, a women’s apparel store in Lewisville,
Texas. Kay’s Kloset buys from about 75 different manufacturers and
at one time sold the Brighton brand. It first started purchasing
Brighton goods from Leegin in 1995. Once it began selling the
brand, the store promoted Brighton. For example, it ran Brighton
advertisements and had Brighton days in the store. Kay’s Kloset
became the destination retailer in the area to buy Brighton
products. Brighton was the store’s most important brand and once
accounted for 40 to 50 percent of its profits.

															   In 1997, Leegin instituted the “Brighton
Retail Pricing and Promotion Policy.” 4 id., at 939.
Following the policy, Leegin refused to sell to retailers that
discounted Brighton goods below suggested prices. The policy
contained an exception for products not selling well that the
retailer did not plan on reordering. In the letter to retailers
establishing the policy, Leegin stated:

															“In this age of mega stores like Macy’s,
Bloomingdales, May Co. and others, consumers are perplexed by
promises of product quality and support of product which we believe
is lacking in these large stores. Consumers are further confused by
the ever popular sale, sale, sale, etc.

															   “We, at Leegin, choose to break away from the
pack by selling [at] specialty stores; specialty stores that can
offer the customer great quality merchandise, superb service, and
support the Brighton product 365 days a year on a consistent
basis.

															   “We realize that half the equation is Leegin
producing great Brighton product and the other half is you, our
retailer, creating great looking stores selling our products in a
quality manner.” Ibid. Leegin adopted the policy to give its retailers
sufficient margins to provide customers the service central to its
distribution strategy. It also expressed concern that discounting
harmed Brighton’s brand image and reputation. A year after instituting the pricing
policy Leegin introduced a marketing strategy known as the “Heart
Store Program.” See id., at 962–972. It offered retailers
incentives to become Heart Stores, and, in exchange, retailers
pledged, among other things, to sell at Leegin’s suggested prices.
Kay’s Kloset became a Heart Store soon after Leegin created the
program. After a Leegin employee visited the store and found it
unattractive, the parties appear to have agreed that Kay’s Kloset
would not be a Heart Store beyond 1998. Despite losing this status,
Kay’s Kloset continued to increase its Brighton sales.

															   In December 2002, Leegin discovered Kay’s
Kloset had been marking down Brighton’s entire line by 20 percent.
Kay’s Kloset contended it placed Brighton products on sale to
compete with nearby retailers who also were undercutting Leegin’s
suggested prices. Leegin, nonetheless, requested that Kay’s Kloset
cease discounting. Its request refused, Leegin stopped selling to
the store. The loss of the Brighton brand had a considerable
negative impact on the store’s revenue from sales.

															   PSKS sued Leegin in the United States District
Court for the Eastern District of Texas. It alleged, among other
claims, that Leegin had violated the antitrust laws by “enter[ing]
into agreements with retailers to charge only those prices fixed by
Leegin.” Id., at 1236. Leegin planned to introduce expert
testimony describing the procompetitive effects of its pricing
policy. The District Court excluded the testimony, relying on the per se rule established by Dr. Miles . At trial
PSKS argued that the Heart Store program, among other things,
demonstrated Leegin and its retailers had agreed to fix prices.
Leegin responded that it had established a unilateral pricing
policy lawful under §1, which applies only to concerted action. See United States v. Colgate & Co. , 250 U. S. 300 , 307
(1919). The jury agreed with PSKS and awarded it $1.2 million.
Pursuant to 15 U. S. C. §15(a), the District Court trebled the
damages and reimbursed PSKS for its attorney’s fees and costs. It
entered judgment against Leegin in the amount of $3,975,000.80.

															   The Court of Appeals for the Fifth Circuit
affirmed. 171 Fed. Appx. 464 (2006) (per curiam). On
appeal Leegin did not dispute that it had entered into vertical
price-fixing agreements with its retailers. Rather, it contended
that the rule of reason should have applied to those agreements.
The Court of Appeals rejected this argument. Id., at
466–467. It was correct to explain that it remained bound by Dr. Miles “[b]ecause [the Supreme] Court has consistently
applied the per se rule to [vertical minimum price-fixing]
agreements.” 171 Fed. Appx., at 466. On this premise the Court of
Appeals held that the District Court did not abuse its discretion
in excluding the testimony of Leegin’s economic expert, for the per se rule rendered irrelevant any procompetitive
justifications for Leegin’s pricing policy. Id., at 467.
We granted certiorari to determine whether vertical minimum resale
price maintenance agreements should continue to be treated as per se unlawful. 549 U. S. ___ (2006).

															II

															   Section 1 of the Sherman Act
prohibits “[e]very contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or commerce among
the several States.” Ch. 647, 26 Stat. 209, as amended, 15 U.
S. C. §1. While §1 could be interpreted to proscribe all
contracts, see, e.g., Board of Trade of Chicago v. United States , 246 U. S. 231 , 238
(1918), the Court has never “taken a literal approach to [its]
language,” Texaco Inc. v. Dagher , 547 U. S. 1 , 5 (2006).
Rather, the Court has repeated time and again that §1 “outlaw[s]
only unreasonable restraints.” State Oil Co. v. Khan , 522 U.
S. 3 , 10 (1997).

															   The rule of reason is the
accepted standard for testing whether a practice restrains trade in
violation of §1. See Texaco, supra, at 5. “Under this
rule, the factfinder weighs all of the circumstances of a case in
deciding whether a restrictive practice should be prohibited as
imposing an unreasonable restraint on competition.” Continental
T. V., Inc. v. GTE Sylvania Inc. , 433 U. S. 36 , 49 (1977).
Appropriate factors to take into account include “specific
information about the relevant business” and “the restraint’s
history, nature, and effect.” Khan , supra, at 10.
Whether the businesses involved have market power is a further,
significant consideration. See, e.g., Copperweld
Corp. v. Independence Tube Corp. , 467 U. S. 752 , 768
(1984) (equating the rule of reason with “an inquiry into market
power and market structure designed to assess [a restraint’s]
actual effect”); see also Illinois Tool Works Inc. v. Independent Ink, Inc. , 547 U. S. 28 , 45–46
(2006). In its design and function the rule distinguishes between
restraints with anticompetitive effect that are harmful to the
consumer and restraints stimulating competition that are in the
consumer’s best interest.

															   The rule of reason does not govern all
restraints. Some types “are deemed unlawful per se .” Khan , supra, at 10. The per se rule,
treating categories of restraints as necessarily illegal,
eliminates the need to study the reasonableness of an individual
restraint in light of the real market forces at work, Business
Electronics Corp. v. Sharp Electronics Corp. , 485 U. S. 717 ,
723 (1988); and, it must be acknowledged, the per se rule
can give clear guidance for certain conduct. Restraints that are per se unlawful include horizontal agreements among
competitors to fix prices, see Texaco , supra, at
5, or to divide markets, see Palmer v. BRG of Ga.,
Inc. , 498 U. S.
46 , 49–50 (1990) (per curiam) .

															   Resort to per se rules
is confined to restraints, like those mentioned, “that would always
or almost always tend to restrict competition and decrease output.” Business Electronics , supra, at 723 (internal
quotation marks omitted). To justify a per se prohibition
a restraint must have “manifestly anticompetitive” effects, GTE
Sylvania , supra, at 50, and “lack … any redeeming
virtue,” Northwest Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co. , 472 U. S. 284 , 289
(1985) (internal quotation marks omitted).

															   As a consequence, the per
se rule is appropriate only after courts have had considerable
experience with the type of restraint at issue, see Broadcast
Music, Inc. v. Columbia Broadcasting System, Inc. , 441 U. S. 1 , 9
(1979), and only if courts can predict with confidence that it
would be invalidated in all or almost all instances under the rule
of reason, see Arizona v. Maricopa County Medical
Soc. , 457 U. S.
332 , 344 (1982). It should come as no surprise, then, that “we
have expressed reluctance to adopt per se rules with
regard to restraints imposed in the context of business
relationships where the economic impact of certain practices is not
immediately obvious.” Khan , supra, at 10
(internal quotation marks omitted); see also White Motor
Co. v. United States , 372 U. S. 253 , 263
(1963) (refusing to adopt a per se rule for a vertical
nonprice restraint because of the uncertainty concerning whether
this type of restraint satisfied the demanding standards necessary
to apply a per se rule). And, as we have stated, a
“departure from the rule-of-reason standard must be based upon
demonstrable economic effect rather than . . . upon formalistic
line drawing.” GTE Sylvania , supra, at 58–59.

															III

															   The Court has interpreted Dr.
Miles Medical Co. v. John D. Park & Sons Co. , 220
U. S. 373 (1911), as establishing a per se rule
against a vertical agreement between a manufacturer and its
distributor to set minimum resale prices. See, e.g., Monsanto Co. v. Spray-Rite Service Corp. , 465 U. S. 752 ,
761 (1984). In Dr. Miles the plaintiff, a manufacturer of
medicines, sold its products only to distributors who agreed to
resell them at set prices. The Court found the manufacturer’s
control of resale prices to be unlawful. It relied on the
common-law rule that “a general restraint upon alienation is
ordinarily invalid.” 220 U. S., at 404–405. The Court then
explained that the agreements would advantage the distributors, not
the manufacturer, and were analogous to a combination among
competing distributors, which the law treated as void. Id., at 407–408.

															   The reasoning of the Court’s more
recent jurisprudence has rejected the rationales on which Dr.
Miles was based. By relying on the common-law rule against
restraints on alienation, id., at 404–405, the Court
justified its decision based on “formalistic” legal doctrine rather
than “demonstrable economic effect,” GTE Sylvania , supra, at 58–59. The Court in Dr. Miles relied on
a treatise published in 1628, but failed to discuss in detail the
business reasons that would motivate a manufacturer situated in
1911 to make use of vertical price restraints. Yet the Sherman
Act’s use of “restraint of trade” “invokes the common law itself, …
not merely the static content that the common law had assigned to
the term in 1890.” Business Electronics , supra, at 732. The general restraint on alienation, especially in the age
when then-Justice Hughes used the term, tended to evoke policy
concerns extraneous to the question that controls here. Usually
associated with land, not chattels, the rule arose from
restrictions removing real property from the stream of commerce for
generations. The Court should be cautious about putting dispositive
weight on doctrines from antiquity but of slight relevance. We
reaffirm that “the state of the common law 400 or even 100 years
ago is irrelevant to the issue before us: the effect of the
antitrust laws upon vertical distributional restraints in the
American economy today.” GTE Sylvania , 433 U. S., at 53,
n. 21 (internal quotation marks omitted). Dr. Miles , furthermore, treated
vertical agreements a manufacturer makes with its distributors as
analogous to a horizontal combination among competing distributors.
See 220 U. S., at 407–408. In later cases, however, the Court
rejected the approach of reliance on rules governing horizontal
restraints when defining rules applicable to vertical ones. See, e.g., Business Electronics , supra, at
734 (disclaiming the “notion of equivalence between the scope of
horizontal per se illegality and that of vertical per
se illegality”); Maricopa County , supra, at
348, n. 18 (noting that “horizontal restraints are generally less
defensible than vertical restraints”). Our recent cases formulate
antitrust principles in accordance with the appreciated differences
in economic effect between vertical and horizontal agreements,
differences the Dr. Miles Court failed to consider.

															   The reasons upon which Dr. Miles relied do not justify a per se rule. As a consequence, it
is necessary to examine, in the first instance, the economic
effects of vertical agreements to fix minimum resale prices, and to
determine whether the per se rule is nonetheless
appropriate. See Business Electronics , 485 U. S., at
726.

															A

															   Though each side of the debate
can find sources to support its position, it suffices to say here
that economics literature is replete with procompetitive
justifications for a manufacturer’s use of resale price
maintenance. See, e.g., Brief for Economists as Amici
Curiae 16 (“In the theoretical literature, it is essentially
undisputed that minimum [resale price maintenance] can have
procompetitive effects and that under a variety of market
conditions it is unlikely to have anticompetitive effects”); Brief
for United States as Amicus Curiae 9 (“[T]here is a
widespread consensus that permitting a manufacturer to control the
price at which its goods are sold may promote inter brand
competition and consumer welfare in a variety of ways”); ABA
Section of Antitrust Law, Antitrust Law and Economics of Product
Distribution 76 (2006) (“[T]he bulk of the economic literature on
[resale price maintenance] suggests that [it] is more likely to be
used to enhance efficiency than for anticompetitive purposes”); see
also H. Hovenkamp, The Antitrust Enterprise: Principle and
Execution 184–191 (2005) (hereinafter Hovenkamp); R. Bork, The
Antitrust Paradox 288–291 (1978) (hereinafter Bork). Even those
more skeptical of resale price maintenance acknowledge it can have
procompetitive effects. See, e.g., Brief for William S.
Comanor et al. as Amici Curiae 3 (“[G]iven [the]
diversity of effects [of resale price maintenance], one could
reasonably take the position that a rule of reason rather
than a per se approach is warranted”); F.M. Scherer &
D. Ross, Industrial Market Structure and Economic Performance 558
(3d ed. 1990) (hereinafter Scherer & Ross) (“The overall
balance between benefits and costs [of resale price maintenance] is
probably close”).

															   The few recent studies
documenting the competitive effects of resale price maintenance
also cast doubt on the conclusion that the practice meets the
criteria for a per se rule. See T. Overstreet, Resale
Price Maintenance: Economic Theories and Empirical Evidence 170
(1983) (hereinafter Overstreet) (noting that “[e]fficient uses of
[resale price maintenance] are evidently not unusual or rare”); see
also Ippolito, Resale Price Maintenance: Empirical Evidence From
Litigation, 34 J. Law & Econ. 263, 292–293 (1991)
(hereinafter Ippolito).

															   The justifications for vertical price
restraints are similar to those for other vertical restraints. See GTE Sylvania , 433 U. S., at 54–57. Minimum resale price
maintenance can stimulate interbrand competition—the competition
among manufacturers selling different brands of the same type of
product—by reducing intrabrand competition—the competition among
retailers selling the same brand. See id., at 51–52. The
promotion of interbrand competition is important because “the
primary purpose of the antitrust laws is to protect [this type of]
competition.” Khan , 522 U. S., at 15. A single
manufacturer’s use of vertical price restraints tends to eliminate
intrabrand price competition; this in turn encourages retailers to
invest in tangible or intangible services or promotional efforts
that aid the manufacturer’s position as against rival
manufacturers. Resale price maintenance also has the potential to
give consumers more options so that they can choose among
low-price, low-service brands; high-price, high-service brands; and
brands that fall in between.

															   Absent vertical price restraints, the retail
services that enhance interbrand competition might be
underprovided. This is because discounting retailers can free ride
on retailers who furnish services and then capture some of the
increased demand those services generate. GTE Sylvania , supra, at 55. Consumers might learn, for example, about
the benefits of a manufacturer’s product from a retailer that
invests in fine showrooms, offers product demonstrations, or hires
and trains knowledgeable employees. R. Posner, Antitrust Law
172–173 (2d ed. 2001) (hereinafter Posner). Or consumers might
decide to buy the product because they see it in a retail
establishment that has a reputation for selling high-quality
merchandise. Marvel & McCafferty, Resale Price Maintenance and
Quality Certification, 15 Rand J. Econ. 346, 347–349 (1984)
(hereinafter Marvel & McCafferty). If the consumer can then buy
the product from a retailer that discounts because it has not spent
capital providing services or developing a quality reputation, the
high-service retailer will lose sales to the discounter, forcing it
to cut back its services to a level lower than consumers would
otherwise prefer. Minimum resale price maintenance alleviates the
problem because it prevents the discounter from undercutting the
service provider. With price competition decreased, the
manufacturer’s retailers compete among themselves over
services.

															   Resale price maintenance, in addition, can
increase interbrand competition by facilitating market entry for
new firms and brands. “[N]ew manufacturers and manufacturers
entering new markets can use the restrictions in order to induce
competent and aggressive retailers to make the kind of investment
of capital and labor that is often required in the distribution of
products unknown to the consumer.” GTE Sylvania , supra, at 55; see Marvel & McCafferty 349 (noting that
reliance on a retailer’s reputation “will decline as the
manufacturer’s brand becomes better known, so that [resale price
maintenance] may be particularly important as a competitive device
for new entrants”). New products and new brands are essential to a
dynamic economy, and if markets can be penetrated by using resale
price maintenance there is a procompetitive effect.

															   Resale price maintenance can also increase
interbrand competition by encouraging retailer services that would
not be provided even absent free riding. It may be difficult and
inefficient for a manufacturer to make and enforce a contract with
a retailer specifying the different services the retailer must
perform. Offering the retailer a guaranteed margin and threatening
termination if it does not live up to expectations may be the most
efficient way to expand the manufacturer’s market share by inducing
the retailer’s performance and allowing it to use its own
initiative and experience in providing valuable services. See
Mathewson & Winter, The Law and Economics of Resale Price
Maintenance, 13 Rev. Indus. Org. 57, 74–75 (1998) (hereinafter
Mathewson & Winter); Klein & Murphy, Vertical Restraints as
Contract Enforcement Mechanisms, 31 J. Law & Econ. 265,
295 (1988); see also Deneckere, Marvel, & Peck, Demand
Uncertainty, Inventories, and Resale Price Maintenance, 111 Q. J.
Econ. 885, 911 (1996) (noting that resale price maintenance may be
beneficial to motivate retailers to stock adequate inventories of a
manufacturer’s goods in the face of uncertain consumer demand).

															B

															   While vertical agreements setting
minimum resale prices can have procompetitive justifications, they
may have anticompetitive effects in other cases; and unlawful price
fixing, designed solely to obtain monopoly profits, is an ever
present temptation. Resale price maintenance may, for example,
facilitate a manufacturer cartel. See Business
Electronics , 485 U. S., at 725. An unlawful cartel will seek
to discover if some manufacturers are undercutting the cartel’s
fixed prices. Resale price maintenance could assist the cartel in
identifying price-cutting manufacturers who benefit from the lower
prices they offer. Resale price maintenance, furthermore, could
discourage a manufacturer from cutting prices to retailers with the
concomitant benefit of cheaper prices to consumers. See ibid.; see also Posner 172; Overstreet 19–23.

															   Vertical price restraints also
“might be used to organize cartels at the retailer level.” Business Electronics , supra, at 725–726. A group
of retailers might collude to fix prices to consumers and then
compel a manufacturer to aid the unlawful arrangement with resale
price maintenance. In that instance the manufacturer does not
establish the practice to stimulate services or to promote its
brand but to give inefficient retailers higher profits. Retailers
with better distribution systems and lower cost structures would be
prevented from charging lower prices by the agreement. See Posner
172; Overstreet 13–19. Historical examples suggest this possibility
is a legitimate concern. See, e.g., Marvel &
McCafferty, The Welfare Effects of Resale Price Maintenance, 28
J. Law & Econ. 363, 373 (1985) (hereinafter Marvel)
(providing an example of the power of the National Association of
Retail Druggists to compel manufacturers to use resale price
maintenance); Hovenkamp 186 (suggesting that the retail druggists
in Dr. Miles formed a cartel and used manufacturers to
enforce it).

															   A horizontal cartel among competing
manufacturers or competing retailers that decreases output or
reduces competition in order to increase price is, and ought to be, per se unlawful. See Texaco , 547 U. S., at 5; GTE Sylvania , 433 U. S., at 58, n. 28. To the extent
a vertical agreement setting minimum resale prices is entered upon
to facilitate either type of cartel, it, too, would need to be held
unlawful under the rule of reason. This type of agreement may also
be useful evidence for a plaintiff attempting to prove the
existence of a horizontal cartel.

															   Resale price maintenance, furthermore, can be
abused by a powerful manufacturer or retailer. A dominant retailer,
for example, might request resale price maintenance to forestall
innovation in distribution that decreases costs. A manufacturer
might consider it has little choice but to accommodate the
retailer’s demands for vertical price restraints if the
manufacturer believes it needs access to the retailer’s
distribution network. See Overstreet 31; 8 P. Areeda & H.
Hovenkamp, Antitrust Law 47 (2d ed. 2004) (hereinafter Areeda &
Hovenkamp); cf. Toys “R” Us, Inc. v. FTC , 221
F. 3d 928, 937–938 (CA7 2000). A manufacturer with market
power, by comparison, might use resale price maintenance to give
retailers an incentive not to sell the products of smaller rivals
or new entrants. See, e.g., Marvel 366–368. As should be
evident, the potential anticompetitive consequences of vertical
price restraints must not be ignored or underestimated.

															C

															   Notwithstanding the risks of
unlawful conduct, it cannot be stated with any degree of confidence
that resale price maintenance “always or almost always tend[s] to
restrict competition and decrease output.” Business
Electronics , supra, at 723 (internal quotation marks
omitted). Vertical agreements establishing minimum resale prices
can have either procompetitive or anticompetitive effects,
depending upon the circumstances in which they are formed. And
although the empirical evidence on the topic is limited, it does
not suggest efficient uses of the agreements are infrequent or
hypothetical. See Overstreet 170; see also id., at 80
(noting that for the majority of enforcement actions brought by the
Federal Trade Commission between 1965 and 1982, “the use of [resale
price maintenance] was not likely motivated by collusive dealers
who had successfully coerced their suppliers”); Ippolito 292
(reaching a similar conclusion). As the rule would proscribe a
significant amount of procompetitive conduct, these agreements
appear ill suited for per se condemnation.

															   Respondent contends, nonetheless,
that vertical price restraints should be per se unlawful
because of the administrative convenience of per se rules.
See, e.g., GTE Sylvania , supra, at 50,
n. 16 (noting “ per se rules tend to provide guidance
to the business community and to minimize the burdens on litigants
and the judicial system”). That argument suggests per se illegality is the rule rather than the exception. This
misinterprets our antitrust law. Per se rules may decrease
administrative costs, but that is only part of the equation. Those
rules can be counterproductive. They can increase the total cost of
the antitrust system by prohibiting procompetitive conduct the
antitrust laws should encourage. See Easterbrook, Vertical
Arrangements and the Rule of Reason, 53 Antitrust L. J. 135, 158
(1984) (hereinafter Easterbrook). They also may increase litigation
costs by promoting frivolous suits against legitimate practices.
The Court has thus explained that administrative “advantages are
not sufficient in themselves to justify the creation of per
se rules,” GTE Sylvania , 433 U. S., at 50,
n. 16, and has relegated their use to restraints that are
“manifestly anticompetitive,” id., at 49–50. Were the
Court now to conclude that vertical price restraints should be per se illegal based on administrative costs, we would
undermine, if not overrule, the traditional “demanding standards”
for adopting per se rules. Id., at 50. Any
possible reduction in administrative costs cannot alone justify the Dr. Miles rule.

															   Respondent also argues the per se rule is justified because a vertical price restraint can lead to
higher prices for the manufacturer’s goods. See also Overstreet 160
(noting that “price surveys indicate that [resale price
maintenance] in most cases increased the prices of products sold”).
Respondent is mistaken in relying on pricing effects absent a
further showing of anticompetitive conduct. Cf. id., at
106 (explaining that price surveys “do not necessarily tell us
anything conclusive about the welfare effects of [resale price
maintenance] because the results are generally consistent with both
procompetitive and anticompetitive theories”). For, as has been
indicated already, the antitrust laws are designed primarily to
protect interbrand competition, from which lower prices can later
result. See Khan , 522 U. S., at 15. The Court, moreover,
has evaluated other vertical restraints under the rule of reason
even though prices can be increased in the course of promoting
procompetitive effects. See, e.g., Business
Electronics , 485 U. S., at 728. And resale price maintenance
may reduce prices if manufacturers have resorted to costlier
alternatives of controlling resale prices that are not per
se unlawful. See infra , at 22–25; see also Marvel
371.

															   Respondent’s argument, furthermore, overlooks
that, in general, the interests of manufacturers and consumers are
aligned with respect to retailer profit margins. The difference
between the price a manufacturer charges retailers and the price
retailers charge consumers represents part of the manufacturer’s
cost of distribution, which, like any other cost, the manufacturer
usually desires to minimize. See GTE Sylvania , 433 U. S.,
at 56, n. 24; see also id., at 56 (“Economists … have
argued that manufacturers have an economic interest in maintaining
as much intrabrand competition as is consistent with the efficient
distribution of their products”). A manufacturer has no incentive
to overcompensate retailers with unjustified margins. The
retailers, not the manufacturer, gain from higher retail prices.
The manufacturer often loses; interbrand competition reduces its
competitiveness and market share because consumers will “substitute
a different brand of the same product.” Id., at 52,
n. 19; see Business Electronics , supra, at
725. As a general matter, therefore, a single manufacturer will
desire to set minimum resale prices only if the “increase in demand
resulting from enhanced service . . . will more than offset a
negative impact on demand of a higher retail price.” Mathewson
& Winter 67.

															   The implications of respondent’s position are
far reaching. Many decisions a manufacturer makes and carries out
through concerted action can lead to higher prices. A manufacturer
might, for example, contract with different suppliers to obtain
better inputs that improve product quality. Or it might hire an
advertising agency to promote awareness of its goods. Yet no one
would think these actions violate the Sherman Act because they lead
to higher prices. The antitrust laws do not require manufacturers
to produce generic goods that consumers do not know about or want.
The manufacturer strives to improve its product quality or to
promote its brand because it believes this conduct will lead to
increased demand despite higher prices. The same can hold true for
resale price maintenance.

															   Resale price maintenance, it is true, does
have economic dangers. If the rule of reason were to apply to
vertical price restraints, courts would have to be diligent in
eliminating their anticompetitive uses from the market. This is a
realistic objective, and certain factors are relevant to the
inquiry. For example, the number of manufacturers that make use of
the practice in a given industry can provide important instruction.
When only a few manufacturers lacking market power adopt the
practice, there is little likelihood it is facilitating a
manufacturer cartel, for a cartel then can be undercut by rival
manufacturers. See Overstreet 22; Bork 294. Likewise, a retailer
cartel is unlikely when only a single manufacturer in a competitive
market uses resale price maintenance. Interbrand competition would
divert consumers to lower priced substitutes and eliminate any
gains to retailers from their price-fixing agreement over a single
brand. See Posner 172; Bork 292. Resale price maintenance should be
subject to more careful scrutiny, by contrast, if many competing
manufacturers adopt the practice. Cf. Scherer & Ross 558
(noting that “except when [resale price maintenance] spreads to
cover the bulk of an industry’s output, depriving consumers of a
meaningful choice between high-service and low-price outlets, most
[resale price maintenance arrangements] are probably innocuous”);
Easterbrook 162 (suggesting that “every one of the
potentially-anticompetitive outcomes of vertical arrangements
depends on the uniformity of the practice”).

															   The source of the restraint may also be an
important consideration. If there is evidence retailers were the
impetus for a vertical price restraint, there is a greater
likelihood that the restraint facilitates a retailer cartel or
supports a dominant, inefficient retailer. See Brief for William S.
Comanor et al. as Amici Curiae 7–8. If, by contrast,
a manufacturer adopted the policy independent of retailer pressure,
the restraint is less likely to promote anticompetitive conduct.
Cf. Posner 177 (“It makes all the difference whether minimum retail
prices are imposed by the manufacturer in order to evoke
point-of-sale services or by the dealers in order to obtain
monopoly profits”). A manufacturer also has an incentive to protest
inefficient retailer-induced price restraints because they can harm
its competitive position.

															   As a final matter, that a dominant
manufacturer or retailer can abuse resale price maintenance for
anticompetitive purposes may not be a serious concern unless the
relevant entity has market power. If a retailer lacks market power,
manufacturers likely can sell their goods through rival retailers.
See also Business Electronics , supra, at 727,
n. 2 (noting “[r]etail market power is rare, because of the
usual presence of interbrand competition and other dealers”). And
if a manufacturer lacks market power, there is less likelihood it
can use the practice to keep competitors away from distribution
outlets.

															   The rule of reason is designed and used to
eliminate anticompetitive transactions from the market. This
standard principle applies to vertical price restraints. A party
alleging injury from a vertical agreement setting minimum resale
prices will have, as a general matter, the information and
resources available to show the existence of the agreement and its
scope of operation. As courts gain experience considering the
effects of these restraints by applying the rule of reason over the
course of decisions, they can establish the litigation structure to
ensure the rule operates to eliminate anticompetitive restraints
from the market and to provide more guidance to businesses. Courts
can, for example, devise rules over time for offering proof, or
even presumptions where justified, to make the rule of reason a
fair and efficient way to prohibit anticompetitive restraints and
to promote procompetitive ones.

															   For all of the foregoing reasons, we think
that were the Court considering the issue as an original matter,
the rule of reason, not a per se rule of unlawfulness,
would be the appropriate standard to judge vertical price
restraints.

															IV

															   We do not write on a clean slate,
for the decision in Dr. Miles is almost a century old. So
there is an argument for its retention on the basis of stare
decisis alone. Even if Dr. Miles established an
erroneous rule, “ [s]tare decisis reflects a policy
judgment that in most matters it is more important that the
applicable rule of law be settled than that it be settled right.” Khan , 522 U. S., at 20 (internal quotation marks omitted).
And concerns about maintaining settled law are strong when the
question is one of statutory interpretation. See, e.g., Hohn v. United States , 524 U. S. 236 , 251
(1998). Stare decisis is not as
significant in this case, however, because the issue before us is
the scope of the Sherman Act. Khan , supra, at 20
(“[T]he general presumption that legislative changes should be left
to Congress has less force with respect to the Sherman Act”). From
the beginning the Court has treated the Sherman Act as a common-law
statute. See National Soc. of Professional Engineers v. United States , 435 U. S. 679 , 688
(1978); see also Northwest Airlines, Inc. v. Transport
Workers , 451 U.
S. 77 , 98, n. 42 (1981) (“In antitrust, the federal courts …
act more as common-law courts than in other areas governed by
federal statute”). Just as the common law adapts to modern
understanding and greater experience, so too does the Sherman Act’s
prohibition on “restraint[s] of trade” evolve to meet the dynamics
of present economic conditions. The case-by-case adjudication
contemplated by the rule of reason has implemented this common-law
approach. See National Soc. of Professional Engineers , supra, at 688. Likewise, the boundaries of the doctrine of per se illegality should not be immovable. For “[i]t would
make no sense to create out of the single term ‘restraint of trade’
a chronologically schizoid statute, in which a ‘rule of reason’
evolves with new circumstance and new wisdom, but a line of per
se illegality remains forever fixed where it was.” Business Electronics , 485 U. S., at 732.

															A Stare decisis , we
conclude, does not compel our continued adherence to the per
se rule against vertical price restraints. As discussed
earlier, respected authorities in the economics literature suggest
the per se rule is inappropriate, and there is now
widespread agreement that resale price maintenance can have
procompetitive effects. See, e.g., Brief for Economists as Amici Curiae 16. It is also significant that both the
Department of Justice and the Federal Trade Commission—the
antitrust enforcement agencies with the ability to assess the
long-term impacts of resale price maintenance—have recommended that
this Court replace the per se rule with the traditional
rule of reason. See Brief for United States as Amicus
Curiae 6. In the antitrust context the fact that a decision
has been “called into serious question” justifies our reevaluation
of it. Khan , supra, at 21.

															   Other considerations reinforce
the conclusion that Dr. Miles should be overturned. Of
most relevance, “we have overruled our precedents when subsequent
cases have undermined their doctrinal underpinnings.” Dickerson v. United States , 530 U. S. 428 , 443
(2000). The Court’s treatment of vertical restraints has progressed
away from Dr. Miles ’ strict approach. We have distanced
ourselves from the opinion’s rationales. See supra, at
7–8; see also Khan , supra, at 21 (overruling a
case when “the views underlying [it had been] eroded by this
Court’s precedent”); Rodriguez de Quijas v. Shearson/American Express, Inc. , 490 U. S. 477 , 480–481
(1989) (same). This is unsurprising, for the case was decided not
long after enactment of the Sherman Act when the Court had little
experience with antitrust analysis. Only eight years after Dr.
Miles , moreover, the Court reined in the decision by holding
that a manufacturer can announce suggested resale prices and refuse
to deal with distributors who do not follow them. Colgate ,
250 U. S., at 307–308.

															   In more recent cases the Court, following a
common-law approach, has continued to temper, limit, or overrule
once strict prohibitions on vertical restraints. In 1977, the Court
overturned the per se rule for vertical nonprice
restraints, adopting the rule of reason in its stead. GTE
Sylvania , 433 U. S., at 57–59 (overruling United
States v. Arnold, Schwinn & Co. , 388 U. S. 365 (1967));
see also 433 U. S., at 58, n. 29 (noting “that the advantages of
vertical restrictions should not be limited to the categories of
new entrants and failing firms”). While the Court in a footnote in GTE Sylvania suggested that differences between vertical
price and nonprice restraints could support different legal
treatment, see 433 U. S., at 51, n. 18, the central part of
the opinion relied on authorities and arguments that find unequal
treatment “difficult to justify,” id., at 69–70 (White,
J., concurring in judgment).

															   Continuing in this direction, in two cases in
the 1980’s the Court defined legal rules to limit the reach of Dr. Miles and to accommodate the doctrines enunciated in GTE Sylvania and Colgate . See Business
Electronics , supra, at 726–728; Monsanto ,
465 U. S., at 763–764. In Monsanto , the Court required
that antitrust plaintiffs alleging a §1 price-fixing conspiracy
must present evidence tending to exclude the possibility a
manufacturer and its distributors acted in an independent manner. Id., at 764. Unlike Justice Brennan’s concurrence, which
rejected arguments that Dr. Miles should be overruled, see
465 U. S., at 769, the Court “decline[d] to reach the question”
whether vertical agreements fixing resale prices always should be
unlawful because neither party suggested otherwise, id., at 761–762, n. 7. In Business Electronics the Court
further narrowed the scope of Dr. Miles . It held that the per se rule applied only to specific agreements over price
levels and not to an agreement between a manufacturer and a
distributor to terminate a price-cutting distributor. 485 U. S., at
726–727, 735–736.

															   Most recently, in 1997, after examining the
issue of vertical maximum price-fixing agreements in light of
commentary and real experience, the Court overruled a 29-year-old
precedent treating those agreements as per se illegal. Khan , 522 U. S., at 22 (overruling Albrecht v. Herald Co. , 390 U. S. 145 (1968)).
It held instead that they should be evaluated under the traditional
rule of reason. 522 U. S., at 22. Our continued limiting of the
reach of the decision in Dr. Miles and our recent
treatment of other vertical restraints justify the conclusion that Dr. Miles should not be retained.

															   The Dr. Miles rule is also
inconsistent with a principled framework, for it makes little
economic sense when analyzed with our other cases on vertical
restraints. If we were to decide the procompetitive effects of
resale price maintenance were insufficient to overrule Dr.
Miles , then cases such as Colgate and GTE
Sylvania themselves would be called into question. These later
decisions, while they may result in less intrabrand competition,
can be justified because they permit manufacturers to secure the
procompetitive benefits associated with vertical price restraints
through other methods. The other methods, however, could be less
efficient for a particular manufacturer to establish and sustain.
The end result hinders competition and consumer welfare because
manufacturers are forced to engage in second-best alternatives and
because consumers are required to shoulder the increased expense of
the inferior practices.

															   The manufacturer has a number of legitimate
options to achieve benefits similar to those provided by vertical
price restraints. A manufacturer can exercise its Colgate right to refuse to deal with retailers that do not follow its
suggested prices. See 250 U. S., at 307. The economic effects of
unilateral and concerted price setting are in general the same.
See, e.g., Monsanto , 465 U. S., at 762–764. The
problem for the manufacturer is that a jury might conclude its
unilateral policy was really a vertical agreement, subjecting it to
treble damages and potential criminal liability. Ibid.; Business Electronics , supra, at 728 . Even with the stringent standards in Monsanto and Business Electronics , this danger can lead, and has led,
rational manufacturers to take wasteful measures. See, e.g., Brief for PING, Inc., as Amicus Curiae 9–18. A manufacturer might refuse to discuss its pricing policy
with its distributors except through counsel knowledgeable of the
subtle intricacies of the law. Or it might terminate longstanding
distributors for minor violations without seeking an explanation.
See ibid . The increased costs these burdensome measures
generate flow to consumers in the form of higher prices.

															   Furthermore, depending on the type of product
it sells, a manufacturer might be able to achieve the
procompetitive benefits of resale price maintenance by integrating
downstream and selling its products directly to consumers. Dr.
Miles tilts the relative costs of vertical integration and
vertical agreement by making the former more attractive based on
the per se rule, not on real market conditions. See Business Electronics , supra, at 725; see
generally Coase, The Nature of the Firm, 4 Economica, New Series
386 (1937). This distortion might lead to inefficient integration
that would not otherwise take place, so that consumers must again
suffer the consequences of the suboptimal distribution strategy.
And integration, unlike vertical price restraints, eliminates all
intrabrand competition. See, e.g., GTE Sylvania ,
433 U. S., at 57, n. 26.

															   There is yet another consideration. A
manufacturer can impose territorial restrictions on distributors
and allow only one distributor to sell its goods in a given region.
Our cases have recognized, and the economics literature confirms,
that these vertical nonprice restraints have impacts similar to
those of vertical price restraints; both reduce intrabrand
competition and can stimulate retailer services. See, e.g., Business Electronics , supra, at
728; Monsanto , supra, at 762–763; see also Brief
for Economists as Amici Curiae 17–18. Cf. Scherer &
Ross 560 (noting that vertical nonprice restraints “can engender
inefficiencies at least as serious as those imposed upon the
consumer by resale price maintenance”); Steiner, How Manufacturers
Deal with the Price-Cutting Retailer: When Are Vertical Restraints
Efficient?, 65 Antitrust L. J. 407, 446–447 (1997) (indicating
that “antitrust law should recognize that the consumer interest is
often better served by [resale price maintenance]—contrary to its
per se illegality and the rule-of-reason status of vertical
nonprice restraints”). The same legal standard ( per se unlawfulness) applies to horizontal market division and horizontal
price fixing because both have similar economic effect. There is
likewise little economic justification for the current differential
treatment of vertical price and nonprice restraints. Furthermore,
vertical nonprice restraints may prove less efficient for inducing
desired services, and they reduce intrabrand competition more than
vertical price restraints by eliminating both price and service
competition. See Brief for Economists as Amici Curiae 17–18.

															   In sum, it is a flawed antitrust doctrine that
serves the interests of lawyers—by creating legal distinctions that
operate as traps for the unwary—more than the interests of
consumers—by requiring manufacturers to choose second-best options
to achieve sound business objectives.

															B

															   Respondent’s arguments for
reaffirming Dr. Miles on the basis of stare
decisis do not require a different result. Respondent looks to
congressional action concerning vertical price restraints. In 1937,
Congress passed the Miller-Tydings Fair Trade Act, 50 Stat. 693,
which made vertical price restraints legal if authorized by a fair
trade law enacted by a State. Fifteen years later, Congress
expanded the exemption to permit vertical price-setting agreements
between a manufacturer and a distributor to be enforced against
other distributors not involved in the agreement. McGuire Act, 66
Stat. 632. In 1975, however, Congress repealed both Acts. Consumer
Goods Pricing Act, 89 Stat. 801. That the Dr. Miles rule
applied to vertical price restraints in 1975, according to
respondent, shows Congress ratified the rule.

															   This is not so. The text of the
Consumer Goods Pricing Act did not codify the rule of per
se illegality for vertical price restraints. It rescinded
statutory provisions that made them per se legal. Congress
once again placed these restraints within the ambit of §1 of the
Sherman Act. And, as has been discussed, Congress intended §1 to
give courts the ability “to develop governing principles of law” in
the common-law tradition. Texas Industries, Inc. v. Radcliff Materials, Inc. , 451 U. S. 630 , 643
(1981); see Business Electronics , 485 U. S., at 731 (“The
changing content of the term ‘restraint of trade’ was well
recognized at the time the Sherman Act was enacted”). Congress
could have set the Dr. Miles rule in stone, but it chose a
more flexible option. We respect its decision by analyzing vertical
price restraints, like all restraints, in conformance with
traditional §1 principles, including the principle that our
antitrust doctrines “evolv[e] with new circumstances and new
wisdom.” Business Electronics, supra, at 732; see also
Easterbrook 139.

															   The rule of reason, furthermore, is not
inconsistent with the Consumer Goods Pricing Act. Unlike the
earlier congressional exemption, it does not treat vertical price
restraints as per se legal. In this respect, the
justifications for the prior exemption are illuminating. Its goal
“was to allow the States to protect small retail establishments
that Congress thought might otherwise be driven from the
marketplace by large-volume discounters.” California Retail
Liquor Dealers Assn. v. Midcal Aluminum, Inc. , 445 U. S. 97 , 102
(1980). The state fair trade laws also appear to have been
justified on similar grounds. See Areeda & Hovenkamp 298. The
rationales for these provisions are foreign to the Sherman Act.
Divorced from competition and consumer welfare, they were designed
to save inefficient small retailers from their inability to
compete. The purpose of the antitrust laws, by contrast, is “the
protection of competition , not competitors .” Atlantic Richfield Co. v. USA Petroleum Co. , 495 U. S. 328 ,
338 (1990) (internal quotation marks omitted). To the extent
Congress repealed the exemption for some vertical price restraints
to end its prior practice of encouraging anticompetitive conduct,
the rule of reason promotes the same objective.

															   Respondent also relies on several
congressional appropriations in the mid-1980’s in which Congress
did not permit the Department of Justice or the Federal Trade
Commission to use funds to advocate overturning Dr. Miles .
See, e.g., 97 Stat. 1071. We need not pause long in
addressing this argument. The conditions on funding are no longer
in place, see, e.g., Brief for United States as Amicus
Curiae 21, and they were ambiguous at best. As much as they
might show congressional approval for Dr. Miles , they
might demonstrate a different proposition: that Congress could not
pass legislation codifying the rule and reached a short-term
compromise instead.

															   Reliance interests do not require us to
reaffirm Dr. Miles . To be sure, reliance on a judicial
opinion is a significant reason to adhere to it, Payne v. Tennessee , 501 U. S. 808 , 828
(1991), especially “in cases involving property and contract
rights,” Khan , 522 U. S., at 20. The reliance interests
here, however, like the reliance interests in Khan , cannot
justify an inefficient rule, especially because the narrowness of
the rule has allowed manufacturers to set minimum resale prices in
other ways. And while the Dr. Miles rule is longstanding,
resale price maintenance was legal under fair trade laws in a
majority of States for a large part of the past century up until
1975.

															   It is also of note that during this time “when
the legal environment in the [United States] was most favorable for
[resale price maintenance], no more than a tiny fraction of
manufacturers ever employed [resale price maintenance] contracts.”
Overstreet 6; see also id., at 169 (noting that “no more
than one percent of manufacturers, accounting for no more than ten
percent of consumer goods purchases, ever employed [resale price
maintenance] in any single year in the [United States]”); Scherer
& Ross 549 (noting that “[t]he fraction of U.S. retail sales
covered by [resale price maintenance] in its heyday has been
variously estimated at from 4 to 10 percent”). To the extent
consumers demand cheap goods, judging vertical price restraints
under the rule of reason will not prevent the market from providing
them. Cf. Easterbrook 152–153 (noting that “S.S. Kresge (the old
K-Mart) flourished during the days of manufacturers’ greatest
freedom” because “discount stores offer a combination of price and
service that many customers value” and that “[n]othing in
restricted dealing threatens the ability of consumers to find low
prices”); Scherer & Ross 557 (noting that “for the most part,
the effects of the [Consumer Goods Pricing Act] were imperceptible
because the forces of competition had already repealed the
[previous antitrust exemption] in their own quiet way”).

															   For these reasons the Court’s decision in Dr. Miles Medical Co. v. John D. Park & Sons
Co. , 220
U. S. 373 (1911), is now overruled. Vertical price restraints
are to be judged according to the rule of reason.

															V

															   Noting that Leegin’s president
has an ownership interest in retail stores that sell Brighton,
respondent claims Leegin participated in an unlawful horizontal
cartel with competing retailers. Respondent did not make this
allegation in the lower courts, and we do not consider it here.

															   The judgment of the Court of
Appeals is reversed, and the case is remanded for proceedings
consistent with this opinion.

															It is so ordered. BREYER, J., DISSENTING LEEGIN CREATIVE LEATHER PRODUCTS, INC. V.PSKS, INC. 551 U. S. ____ (2007) SUPREME COURT OF THE UNITED STATES NO. 06-480 LEEGIN CREATIVE LEATHER PRODUCTS, INC., PETITIONER v. PSKS, INC., dba KAY’S KLOSET . . . KAY’S SHOES

															on writ of certiorari to the united states court of
appeals for the fifth circuit

															[June 28, 2007]

															   Justice Breyer, with whom Justice
Stevens, Justice Souter, and Justice Ginsburg join, dissenting.

															   In Dr. Miles Medical Co. v. John D. Park & Sons Co. , 220 U. S. 373 , 394,
408–409 (1911), this Court held that an agreement between a
manufacturer of proprietary medicines and its dealers to fix the
minimum price at which its medicines could be sold was “invalid . .
. under the [Sherman Act, 15 U. S. C. §1].” This Court has
consistently read Dr. Miles as establishing a bright-line
rule that agreements fixing minimum resale prices are per
se illegal. See, e.g. , United States v. Trenton Potteries Co. , 273 U. S. 392 , 399–401
(1927); NYNEX Corp. v. Discon, Inc. , 525 U. S. 128 , 133
(1998). That per se rule is one upon which the legal
profession, business, and the public have relied for close to a
century. Today the Court holds that courts must determine the
lawfulness of minimum resale price maintenance by applying, not a
bright-line per se rule, but a circumstance-specific “rule
of reason.” Ante , at 28. And in doing so it overturns Dr. Miles .

															   The Court justifies its departure from
ordinary considerations of stare decisis by pointing to a
set of arguments well known in the antitrust literature for close
to half a century. See ante , at 10–12. Congress has
repeatedly found in these arguments insufficient grounds for
overturning the per se rule. See, e.g. , Hearings
on H. R. 10527 et al. before the Subcommittee on Commerce
and Finance of the House Committee on Interstate and Foreign
Commerce, 85th Cong., 2d Sess., 74–76, 89, 99, 101–102, 192–195,
261–262 (1958). And, in my view, they do not warrant the Court’s
now overturning so well-established a legal precedent.

															I

															   The Sherman Act seeks to maintain
a marketplace free of anticompetitive practices, in particular
those enforced by agreement among private firms. The law assumes
that such a marketplace, free of private restrictions, will tend to
bring about the lower prices, better products, and more efficient
production processes that consumers typically desire. In
determining the lawfulness of particular practices, courts often
apply a “rule of reason.” They examine both a practice’s likely
anticompetitive effects and its beneficial business justifications.
See, e.g. , National Collegiate Athletic Assn. v. Board of Regents of Univ. of Okla. , 468 U. S. 85 , 109–110,
and n. 39 (1984); National Soc. of Professional Engineers v. United States , 435 U. S. 679 , 688–691
(1978); Board of Trade of Chicago v. United
States , 246 U.
S. 231 , 238 (1918).

															   Nonetheless, sometimes the likely
anticompetitive consequences of a particular practice are so
serious and the potential justifications so few (or, e.g. ,
so difficult to prove) that courts have departed from a pure “rule
of reason” approach. And sometimes this Court has imposed a rule of per se unlawfulness—a rule that instructs courts to find
the practice unlawful all (or nearly all) the time. See, e.g. , NYNEX , supra , at 133; Arizona v. Maricopa County Medical Soc. , 457 U. S. 332 , 343–344,
and n. 16 (1982); Continental T. V., Inc. v. GTE
Sylvania Inc. , 433 U. S. 36 , 50, n. 16
(1977); United States v. Topco Associates, Inc. , 405 U. S. 596 ,
609–611 (1972); United States v. Socony-Vacuum Oil
Co. , 310 U. S.
150 , 213–214 (1940) (citing and quoting Trenton
Potteries , supra , at 397–398).

															   The case before us asks which kind of approach
the courts should follow where minimum resale price maintenance is
at issue. Should they apply a per se rule (or a variation)
that would make minimum resale price maintenance always (or almost always) unlawful? Should they apply a “rule of
reason”? Were the Court writing on a blank slate, I would find
these questions difficult. But, of course, the Court is not writing
on a blank slate, and that fact makes a considerable legal
difference.

															   To best explain why the question would be
difficult were we deciding it afresh, I briefly summarize several
classical arguments for and against the use of a per se rule. The arguments focus on three sets of considerations, those
involving: (1) potential anticompetitive effects, (2) potential
benefits, and (3) administration. The difficulty arises out of the
fact that the different sets of considerations point in different
directions. See, e.g. , 8 P. Areeda, Antitrust Law
¶¶1628–1633, pp. 330–392 (1st ed. 1989) (hereinafter Areeda); 8 P.
Areeda & H. Hovenkamp, Antitrust Law ¶¶1628–1633, pp. 288–339
(2d ed. 2004) (hereinafter Areeda & Hovenkamp); Easterbrook,
Vertical Arrangements and the Rule of Reason, 53 Antitrust
L. J. 135, 146–152 (1984) (hereinafter Easterbrook); Pitofsky,
In Defense of Discounters: The No-Frills Case for a Per Se Rule Against Vertical Price Fixing, 71 Geo. L. J. 1487 (1983)
(hereinafter Pitofsky); Scherer, The Economics of Vertical
Restraints, 52 Antitrust L. J. 687, 706–707 (1983)
(hereinafter Scherer); Posner, The Next Step in the Antitrust
Treatment of Restricted Distribution: Per Se Legality, 48 U. Chi.
L. Rev. 6, 22–26 (1981); Brief for William S. Comanor and
Frederic M. Scherer as Amici Curiae 7–10.

															   On the one hand, agreements setting minimum
resale prices may have serious anticompetitive consequences. In
respect to dealers: Resale price maintenance agreements,
rather like horizontal price agreements, can diminish or eliminate
price competition among dealers of a single brand or (if practiced
generally by manufacturers) among multibrand dealers. In doing so,
they can prevent dealers from offering customers the lower prices
that many customers prefer; they can prevent dealers from
responding to changes in demand, say falling demand, by cutting
prices; they can encourage dealers to substitute service, for
price, competition, thereby threatening wastefully to attract too
many resources into that portion of the industry; they can inhibit
expansion by more efficient dealers whose lower prices might
otherwise attract more customers, stifling the development of new,
more efficient modes of retailing; and so forth. See, e.g. , 8 Areeda & Hovenkamp ¶1632c, at 319–321;
Steiner, The Evolution and Applications of Dual-Stage Thinking, 49
The Antitrust Bulletin 877, 899–900 (2004); Comanor, Vertical
Price-Fixing, Vertical Market Restrictions, and the New Antitrust
Policy, 98 Harv. L. Rev. 983, 990–1000 (1985). In respect to producers: Resale price
maintenance agreements can help to reinforce the
competition-inhibiting behavior of firms in concentrated
industries. In such industries firms may tacitly collude, i.e. , observe each other’s pricing behavior, each
understanding that price cutting by one firm is likely to trigger
price competition by all. See 8 Areeda & Hovenkamp ¶1632d, at
321–323; P. Areeda & L. Kaplow, Antitrust Analysis ¶¶231–233,
pp. 276–283 (4th ed. 1988) (hereinafter Areeda & Kaplow). Cf. United States v. Container Corp. of America , 393 U. S. 333 (1969); Areeda & Kaplow ¶¶247–253, at 327–348. Where that is
so, resale price maintenance can make it easier for each producer
to identify (by observing retail markets) when a competitor has
begun to cut prices. And a producer who cuts wholesale prices without lowering the minimum resale price will stand to
gain little, if anything, in increased profits, because the dealer
will be unable to stimulate increased consumer demand by passing
along the producer’s price cut to consumers. In either case, resale
price maintenance agreements will tend to prevent price competition
from “breaking out”; and they will thereby tend to stabilize
producer prices. See Pitofsky 1490–1491. Cf., e.g. , Container Corp. , supra , at 336–337.

															   Those who express concern about the potential
anticompetitive effects find empirical support in the behavior of
prices before, and then after, Congress in 1975 repealed the
Miller-Tydings Fair Trade Act, 50 Stat. 693, and the McGuire Act,
66 Stat. 631. Those Acts had permitted (but not required)
individual States to enact “fair trade” laws authorizing minimum
resale price maintenance. At the time of repeal minimum resale
price maintenance was lawful in 36 States; it was unlawful in 14
States. See Hearings on S. 408 before the Subcommittee on Antitrust
and Monopoly of the Senate Committee on the Judiciary, 94th Cong.,
1st Sess., 173 (1975) (hereinafter Hearings on S. 408) (statement
of Thomas E. Kauper, Assistant Attorney General, Antitrust
Division). Comparing prices in the former States with prices in the
latter States, the Department of Justice argued that minimum resale
price maintenance had raised prices by 19% to 27%. See Hearings on
H. R. 2384 before the Subcommittee on Monopolies and
Commercial Law of the House Committee on the Judiciary, 94th Cong.,
1st Sess., 122 (1975) (hereinafter Hearings on H. R. 2384)
(statement of Keith I. Clearwaters, Deputy Assistant Attorney
General, Antitrust Division).

															   After repeal, minimum resale price maintenance
agreements were unlawful per se in every State. The
Federal Trade Commission (FTC) staff, after studying numerous price
surveys, wrote that collectively the surveys “indicate[d] that
[resale price maintenance] in most cases increased the prices of
products sold with [resale price maintenance].” Bureau of Economics
Staff Report to the FTC, T. Overstreet, Resale Price Maintenance:
Economic Theories and Empirical Evidence, 160 (1983) (hereinafter
Overstreet). Most economists today agree that, in the words of a
prominent antitrust treatise, “resale price maintenance tends to
produce higher consumer prices than would otherwise be the case.” 8
Areeda & Hovenkamp ¶1604b, at 40 (finding “[t]he evidence . . .
persuasive on this point”). See also Brief for William S. Comanor
and Frederic M. Scherer as Amici Curiae 4 (“It is
uniformly acknowledged that [resale price maintenance] and other
vertical restraints lead to higher consumer prices”).

															   On the other hand, those favoring resale price
maintenance have long argued that resale price maintenance
agreements can provide important consumer benefits. The majority
lists two: First, such agreements can facilitate new entry. Ante , at 11–12. For example, a newly entering producer
wishing to build a product name might be able to convince dealers
to help it do so—if, but only if, the producer can assure those
dealers that they will later recoup their investment. Without
resale price maintenance, late-entering dealers might take
advantage of the earlier investment and, through price competition,
drive prices down to the point where the early dealers cannot
recover what they spent. By assuring the initial dealers that such
later price competition will not occur, resale price maintenance
can encourage them to carry the new product, thereby helping the
new producer succeed. See 8 Areeda & Hovenkamp ¶¶1617a, 1631b,
at 193–196, 308. The result might be increased competition at the
producer level, i.e. , greater inter -brand
competition, that brings with it net consumer benefits.

															   Second, without resale price maintenance a
producer might find its efforts to sell a product undermined by
what resale price maintenance advocates call “free riding.” Ante , at 10–11. Suppose a producer concludes that it can
succeed only if dealers provide certain services, say, product
demonstrations, high quality shops, advertising that creates a
certain product image, and so forth. Without resale price
maintenance, some dealers might take a “free ride” on the
investment that others make in providing those services. Such a
dealer would save money by not paying for those services and could
consequently cut its own price and increase its own sales. Under
these circumstances, dealers might prove unwilling to invest in the
provision of necessary services. See, e.g. , 8 Areeda &
Hovenkamp ¶¶1611–1613, 1631c, at 126–165, 309–313; R. Posner,
Antitrust Law 172–173 (2d ed. 2001); R. Bork, The Antitrust Paradox
290–291 (1978) (hereinafter Bork); Easterbrook 146–149.

															   Moreover, where a producer and not a group of
dealers seeks a resale price maintenance agreement, there is a
special reason to believe some such benefits exist. That is
because, other things being equal, producers should want to
encourage price competition among their dealers. By doing so they
will often increase profits by selling more of their product. See Sylvania , 433 U. S., at 56, n. 24; Bork 290. And that is
so, even if the producer possesses sufficient market power to earn
a super-normal profit. That is to say, other things being equal,
the producer will benefit by charging his dealers a competitive (or
even a higher-than-competitive) wholesale price while encouraging
price competition among them. Hence, if the producer is the moving
force, the producer must have some special reason for wanting
resale price maintenance; and in the absence of, say, concentrated
producer markets (where that special reason might consist of a
desire to stabilize wholesale prices), that special reason may well
reflect the special circumstances just described: new entry, “free
riding,” or variations on those themes.

															   The upshot is, as many economists suggest,
sometimes resale price maintenance can prove harmful; sometimes it
can bring benefits. See, e.g. , Brief for Economists as Amici Curiae 16; 8 Areeda & Hovenkamp ¶¶1631–1632, at
306–328; Pitofsky 1495; Scherer 706–707. But before concluding that
courts should consequently apply a rule of reason, I would ask such
questions as, how often are harms or benefits likely to occur? How
easy is it to separate the beneficial sheep from the antitrust
goats?

															   Economic discussion, such as the studies the
Court relies upon, can help provide answers to these
questions, and in doing so, economics can, and should, inform
antitrust law. But antitrust law cannot, and should not, precisely
replicate economists’ (sometimes conflicting) views. That is
because law, unlike economics, is an administrative system the
effects of which depend upon the content of rules and precedents
only as they are applied by judges and juries in courts and by
lawyers advising their clients. And that fact means that courts
will often bring their own administrative judgment to bear,
sometimes applying rules of per se unlawfulness to
business practices even when those practices sometimes produce
benefits. See, e.g. , F.M. Scherer & D. Ross,
Industrial Market Structure and Economic Performance 335–339 (3d
ed. 1990) (hereinafter Scherer & Ross) (describing some
circumstances under which price-fixing agreements could be more
beneficial than “unfettered competition,” but also noting potential
costs of moving from a per se ban to a rule of
reasonableness assessment of such agreements).

															   I have already described studies and analyses
that suggest (though they cannot prove) that resale price
maintenance can cause harms with some regularity—and certainly when
dealers are the driving force. But what about benefits? How often,
for example, will the benefits to which the Court points occur in
practice? I can find no economic consensus on this point. There is
a consensus in the literature that “free riding” takes place. But
“free riding” often takes place in the economy without any legal
effort to stop it. Many visitors to California take free rides on
the Pacific Coast Highway. We all benefit freely from ideas, such
as that of creating the first supermarket. Dealers often take a
“free ride” on investments that others have made in building a
product’s name and reputation. The question is how often the “free
riding” problem is serious enough significantly to deter dealer
investment.

															   To be more specific, one can easily imagine a dealer who refuses to provide important presale
services, say a detailed explanation of how a product works (or who
fails to provide a proper atmosphere in which to sell expensive
perfume or alligator billfolds), lest customers use that “free”
service (or enjoy the psychological benefit arising when a
high-priced retailer stocks a particular brand of billfold or
handbag) and then buy from another dealer at a lower price.
Sometimes this must happen in reality. But does it happen often? We
do, after all, live in an economy where firms, despite Dr.
Miles ’ per se rule, still sell complex technical
equipment (as well as expensive perfume and alligator billfolds) to
consumers.

															   All this is to say that the ultimate question
is not whether, but how much, “free riding” of this sort
takes place. And, after reading the briefs, I must answer that
question with an uncertain “sometimes.” See, e.g. , Brief
for William S. Comanor and Frederic M. Scherer as Amici
Curiae 6–7 (noting “skepticism in the economic literature
about how often [free riding] actually occurs”); Scherer & Ross
551–555 (explaining the “severe limitations” of the free-rider
justification for resale price maintenance); Pitofsky, Why Dr.
Miles Was Right, 8 Regulation, No. 1, pp. 27, 29–30 (Jan./Feb.
1984) (similar analysis).

															   How easily can courts identify instances in
which the benefits are likely to outweigh potential harms? My own
answer is, not very easily . For one thing, it is often
difficult to identify who— producer or dealer—is the moving
force behind any given resale price maintenance agreement. Suppose,
for example, several large multibrand retailers all sell
resale-price-maintained products. Suppose further that small
producers set retail prices because they fear that, otherwise, the
large retailers will favor (say, by allocating better shelf-space)
the goods of other producers who practice resale price maintenance.
Who “initiated” this practice, the retailers hoping for
considerable insulation from retail competition, or the producers,
who simply seek to deal best with the circumstances they find? For
another thing, as I just said, it is difficult to determine just
when, and where, the “free riding” problem is serious enough to
warrant legal protection.

															   I recognize that scholars have sought to
develop check lists and sets of questions that will help courts
separate instances where anticompetitive harms are more likely from
instances where only benefits are likely to be found. See, e.g. , 8 Areeda & Hovenkamp ¶¶1633c–1633e, at 330–339.
See also Brief for William S. Comanor and Frederic M. Scherer as Amici Curiae 8–10. But applying these criteria in court is
often easier said than done. The Court’s invitation to consider the
existence of “market power,” for example, ante , at 18,
invites lengthy time-consuming argument among competing experts, as
they seek to apply abstract, highly technical, criteria to often
ill-defined markets. And resale price maintenance cases, unlike a
major merger or monopoly case, are likely to prove numerous and
involve only private parties. One cannot fairly expect judges and
juries in such cases to apply complex economic criteria without
making a considerable number of mistakes, which themselves may
impose serious costs. See, e.g. , H. Hovenkamp, The
Antitrust Enterprise 105 (2005) (litigating a rule of reason case
is “one of the most costly procedures in antitrust practice”). See
also Bok, Section 7 of the Clayton Act and the Merging of Law and
Economics, 74 Harv. L. Rev. 226, 238–247 (1960) (describing
lengthy FTC efforts to apply complex criteria in a merger
case).

															   Are there special advantages to a bright-line
rule? Without such a rule, it is often unfair, and consequently
impractical, for enforcement officials to bring criminal
proceedings. And since enforcement resources are limited, that loss
may tempt some producers or dealers to enter into agreements that
are, on balance, anticompetitive.

															   Given the uncertainties that surround key
items in the overall balance sheet, particularly in respect to the
“administrative” questions, I can concede to the majority that the
problem is difficult. And, if forced to decide now, at most I might
agree that the per se rule should be slightly modified to
allow an exception for the more easily identifiable and temporary
condition of “new entry.” See Pitofsky 1495. But I am not now
forced to decide this question. The question before us is not what
should be the rule, starting from scratch. We here must decide
whether to change a clear and simple price-related antitrust rule
that the courts have applied for nearly a century.

															II

															   We write, not on a blank slate,
but on a slate that begins with Dr. Miles and goes on to
list a century’s worth of similar cases, massive amounts of advice
that lawyers have provided their clients, and untold numbers of
business decisions those clients have taken in reliance upon that
advice. See, e.g. , United States v. Bausch
& Lomb Optical Co. , 321 U. S. 707 , 721
(1944); Sylvania , 433 U. S., at 51, n. 18 (“The per se illegality of [vertical] price restrictions has
been established firmly for many years . . .”). Indeed a Westlaw
search shows that Dr. Miles itself has been cited dozens
of times in this Court and hundreds of times in lower courts. Those
who wish this Court to change so well-established a legal precedent
bear a heavy burden of proof. See Illinois Brick Co. v. Illinois , 431 U. S. 720 , 736
(1977) (noting, in declining to overrule an earlier case
interpreting §4 of the Clayton Act, that “considerations of stare decisis weigh heavily in the area of statutory
construction, where Congress is free to change this Court’s
interpretation of its legislation”). I am not aware of any case in
which this Court has overturned so well-established a statutory
precedent. Regardless, I do not see how the Court can claim that
ordinary criteria for over-ruling an earlier case have been met.
See, e.g. , Planned Parenthood of Southeastern Pa. v. Casey , 505 U. S. 833 , 854–855
(1992). See also Federal Election Comm’n v. Wisconsin
Right to Life, Inc., ante , at 19–21 (Scalia, J., concurring in
part and concurring in judgment).

															A

															   I can find no change in
circumstances in the past several decades that helps the majority’s
position. In fact, there has been one important change that argues
strongly to the contrary. In 1975, Congress repealed the McGuire
and Miller-Tydings Acts. See Consumer Goods Pricing Act of 1975, 89
Stat. 801. And it thereby consciously extended Dr.
Miles ’ per se rule. Indeed, at that time the
Department of Justice and the FTC, then urging application of the per se rule, discussed virtually every argument presented
now to this Court as well as others not here presented. And they
explained to Congress why Congress should reject them. See Hearings
on S. 408, at 176–177 (statement of Thomas E. Kauper, Assistant
Attorney General, Antitrust Division); id. , at 170–172
(testimony of Lewis A. Engman, Chairman of the FTC); Hearings on
H. R. 2384, at 113–114 (testimony of Keith I. Clearwaters,
Deputy Assistant Attorney General, Antitrust Division). Congress
fully understood, and consequently intended, that the result of its
repeal of McGuire and Miller-Tydings would be to make minimum
resale price maintenance per se unlawful. See, e.g. , S. Rep. No. 94–466, pp. 1–3 (1975) (“Without
[the exemptions authorized by the Miller-Tydings and McGuire Acts,]
the agreements they authorize would violate the antitrust laws. . .
. [R]epeal of the fair trade laws generally will prohibit
manufacturers from enforcing resale prices”). See also Sylvania , supra , at 51, n. 18 (“Congress
recently has expressed its approval of a per se analysis
of vertical price restrictions by repealing those provisions of the
Miller-Tydings and McGuire Acts allowing fair-trade pricing at the
option of the individual States”).

															   Congress did not prohibit this
Court from reconsidering the per se rule. But enacting
major legislation premised upon the existence of that rule
constitutes important public reliance upon that rule. And doing so
aware of the relevant arguments constitutes even stronger reliance
upon the Court’s keeping the rule, at least in the absence of some
significant change in respect to those arguments.

															   Have there been any such changes? There have
been a few economic studies, described in some of the briefs, that
argue, contrary to the testimony of the Justice Department and FTC
to Congress in 1975, that resale price maintenance is not harmful.
One study, relying on an analysis of litigated resale price
maintenance cases from 1975 to 1982, concludes that resale price
maintenance does not ordinarily involve producer or dealer
collusion. See Ippolito, Resale Price Maintenance: Empirical
Evidence from Litigation, 34 J. Law & Econ. 263, 281–282,
292 (1991). But this study equates the failure of plaintiffs to allege collusion with the absence of collusion—an
equation that overlooks the superfluous nature of allegations of
horizontal collusion in a resale price maintenance case and the
tacit form that such collusion might take. See H. Hovenkamp,
Federal Antitrust Policy §11.3c, p. 464, n. 19 (3d ed. 2005); supra , at 4–5.

															   The other study provides a theoretical basis
for concluding that resale price maintenance “need not lead to
higher retail prices.” Marvel & McCafferty, The Political
Economy of Resale Price Maintenance, 94 J. Pol. Econ. 1074, 1075
(1986). But this study develops a theoretical model “under the
assumption that [resale price maintenance] is
efficiency-enhancing.” Ibid. Its only empirical support is
a 1940 study that the authors acknowledge is much criticized. See id. , at 1091. And many other economists take a different
view. See Brief for William S. Comanor and Frederic M. Scherer as Amici Curiae 4.

															   Regardless, taken together, these studies at
most may offer some mild support for the majority’s position. But
they cannot constitute a major change in circumstances.

															   Petitioner and some amici have also
presented us with newer studies that show that resale price
maintenance sometimes brings consumer benefits. Overstreet 119–129
(describing numerous case studies). But the proponents of a per
se rule have always conceded as much. What is remarkable about
the majority’s arguments is that nothing in this respect is new. See supra , at 3, 12 (citing articles and
congressional testimony going back several decades). The only new
feature of these arguments lies in the fact that the most current
advocates of overruling Dr. Miles have abandoned a host of
other not-very-persuasive arguments upon which prior resale price
maintenance proponents used to rely. See, e.g. , 8 Areeda
¶1631a, at 350–352 (listing “ ‘[t]raditional’ justifications”
for resale price maintenance).

															   The one arguable exception consists of the
majority’s claim that “even absent free riding,” resale price
maintenance “may be the most efficient way to expand the
manufacturer’s market share by inducing the retailer’s performance
and allowing it to use its own initiative and experience in
providing valuable services.” Ante , at 12. I cannot count
this as an exception, however, because I do not understand how, in
the absence of free-riding (and assuming competitiveness), an
established producer would need resale price maintenance. Why, on
these assumptions, would a dealer not “expand” its “market share”
as best that dealer sees fit, obtaining appropriate payment from
consumers in the process? There may be an answer to this question.
But I have not seen it. And I do not think that we should place
significant weight upon justifications that the parties do not
explain with sufficient clarity for a generalist judge to
understand.

															   No one claims that the American economy has
changed in ways that might support the majority. Concentration in
retailing has increased. See, e.g. , Brief for Respondent
18 (since minimum resale price maintenance was banned nationwide in
1975, the total number of retailers has dropped while the growth in
sales per store has risen); Brief for American Antitrust Institute
as Amicus Curiae 17, n. 20 (citing private study
reporting that the combined sales of the 10 largest retailers
worldwide has grown to nearly 30% of total retail sales of top 250
retailers; also quoting 1999 Organisation for Economic Co-operation
and Development report stating that the “ ‘last twenty years
have seen momentous changes in retail distribution including
significant increases in concentration’ ”); Mamen, Facing
Goliath: Challenging the Impacts of Supermarket Consolidation on
our Local Economies, Communities, and Food Security, The Oakland
Institute, 1 Policy Brief, No. 3, pp. 1, 2 (Spring 2007),
http://www.oaklandinstitute.org/pdfs/facing_goliath.pdf (as visited
June 25, 2007, and available in Clerks of Court’s case file)
(noting that “[f]or many decades, the top five food retail firms in
the U. S. controlled less than 20 percent of the market”; from 1997
to 2000, “the top five firms increased their market share from 24
to 42 percent of all retail sales”; and “[b]y 2003, they controlled
over half of all grocery sales”). That change, other things being
equal, may enable (and motivate) more retailers, accounting for a
greater percentage of total retail sales volume, to seek resale
price maintenance, thereby making it more difficult for
price-cutting competitors (perhaps internet retailers) to obtain
market share.

															   Nor has anyone argued that concentration among
manufacturers that might use resale price maintenance has
diminished significantly. And as far as I can tell, it has not.
Consider household electrical appliances, which a study from the
late 1950’s suggests constituted a significant portion of those
products subject to resale price maintenance at that time. See
Hollander, United States of America, in Resale Price Maintenance
67, 80–81 (B. Yamey ed. 1966). Although it is somewhat difficult to
compare census data from 2002 with that from several decades ago
(because of changes in the classification system), it is clear that
at least some subsets of the household electrical appliance
industry are more concentrated, in terms of manufacturer
market power, now than they were then. For instance, the top eight
domestic manufacturers of household cooking appliances accounted
for 68% of the domestic market (measured by value of shipments) in
1963 (the earliest date for which I was able to find data),
compared with 77% in 2002. See Dept. of Commerce, Bureau of Census,
1972 Census of Manufacturers, Special Report Series, Concentration
Ratios in Manufacturing, No. MC72(SR)–2, p. SR2–38 (1975)
(hereinafter 1972 Census); Dept. of Commerce, Bureau of Census,
2002 Economic Census, Concentration Ratios: 2002, No. EC02–31SR–1,
p. 55 (2006) (hereinafter 2002 Census). The top eight domestic
manufacturers of household laundry equipment accounted for 95% of
the domestic market in 1963 (90% in 1958), compared with 99% in
2002. 1972 Census, at SR2–38; 2002 Census, at 55. And the top eight
domestic manufacturers of household refrigerators and freezers
accounted for 91% of the domestic market in 1963, compared with 95%
in 2002. 1972 Census, at SR2–38; 2002 Census, at 55. Increased
concentration among manufacturers increases the likelihood that
producer-originated resale price maintenance will prove more
prevalent today than in years past, and more harmful. At the very
least, the majority has not explained how these, or other changes
in the economy could help support its position.

															   In sum, there is no relevant change. And
without some such change, there is no ground for abandoning a
well-established antitrust rule.

															B

															   With the preceding discussion in
mind, I would consult the list of factors that our case law
indicates are relevant when we consider overruling an earlier case.
Justice Scalia, writing separately in another of our cases this
Term, well summarizes that law. See Wisconsin Right to Life,
Inc., ante , at 19–21. (opinion concurring in part and
concurring in judgment). And every relevant factor he mentions
argues against overruling Dr. Miles here.

															   First, the Court applies stare decisis more “rigidly” in statutory than in
constitutional cases. See Glidden Co. v. Zdanok , 370 U. S. 530 ,
543 (1962); Illinois Brick Co. , 431 U. S., at 736. This is
a statutory case.

															   Second, the Court does sometimes overrule
cases that it decided wrongly only a reasonably short time ago. As
Justice Scalia put it, “[o]verruling a constitutional case
decided just a few years earlier is far from unprecedented.” Wisconsin Right to Life, ante , at 19 (emphasis added). We
here overrule one statutory case, Dr. Miles ,
decided 100 years ago, and we overrule the cases that reaffirmed
its per se rule in the intervening years. See, e.g. , Trenton Potteries , 273 U. S., at 399–401; Bausch & Lomb , 321 U. S., at 721; United
States v. Parke, Davis & Co. , 362 U. S. 29 , 45–47
(1960); Simpson v. Union Oil Co. of Cal. , 377 U. S. 13 ,
16–17 (1964).

															   Third, the fact that a decision creates an
“unworkable” legal regime argues in favor of overruling. See Payne v. Tennessee , 501 U. S. 808 , 827–828
(1991); Swift & Co. v. Wickham , 382 U. S. 111 , 116
(1965). Implementation of the per se rule, even with the
complications attendant the exception allowed for in United
States v. Colgate & Co. , 250 U. S. 300 (1919),
has proved practical over the course of the last century,
particularly when compared with the many complexities of litigating
a case under the “rule of reason” regime. No one has shown how
moving from the Dr. Miles regime to “rule of reason”
analysis would make the legal regime governing minimum resale price
maintenance more “administrable,” Wisconsin Right to Life,
ante , at 20 (opinion of Scalia, J.), particularly since Colgate would remain good law with respect to unreasonable price maintenance.

															   Fourth, the fact that a decision “unsettles”
the law may argue in favor of overruling. See Sylvania ,
433 U. S., at 47; Wisconsin Right to Life, ante , at 20–21
(opinion of Scalia, J.). The per se rule is well-settled
law, as the Court itself has previously recognized. Sylvania,
supra , at 51, n. 18. It is the majority’s change here
that will unsettle the law.

															   Fifth, the fact that a case involves property
rights or contract rights, where reliance interests are involved,
argues against overruling. Payne , supra , at 828.
This case involves contract rights and perhaps property rights
(consider shopping malls). And there has been considerable reliance
upon the per se rule. As I have said, Congress relied upon
the continued vitality of Dr. Miles when it repealed
Miller-Tydings and McGuire. Supra , at 12–13. The Executive
Branch argued for repeal on the assumption that Dr. Miles stated the law. Ibid. Moreover, whole sectors of the
economy have come to rely upon the per se rule. A factory
outlet store tells us that the rule “form[s] an essential part of
the regulatory background against which [that firm] and many other
discount retailers have financed, structured, and operated their
businesses.” Brief for Burlington Coat Factory Warehouse Corp. as Amicus Curiae 5. The Consumer Federation of America tells
us that large low-price retailers would not exist without Dr.
Miles ; minimum resale price maintenance, “by stabilizing price
levels and preventing low-price competition, erects a potentially
insurmountable barrier to entry for such low-price innovators.”
Brief for Consumer Federation of America as Amicus Curiae 5, 7–9 (discussing, inter alia , comments by Wal-Mart’s
founder 25 years ago that relaxation of the per se ban on
minimum resale price maintenance would be a “ ‘great
danger’ ” to Wal-Mart’s then-relatively-nascent business). See
also Brief for American Antitrust Institute as Amicus
Curiae 14–15, and sources cited therein (making the same
point). New distributors, including internet distributors, have
similarly invested time, money, and labor in an effort to bring yet
lower cost goods to Americans.

															   This Court’s overruling of the per se rule jeopardizes this reliance, and more. What about malls built on
the assumption that a discount distributor will remain an anchor
tenant? What about home buyers who have taken a home’s distance
from such a mall into account? What about Americans, producers,
distributors, and consumers, who have understandably assumed, at
least for the last 30 years, that price competition is a legally
guaranteed way of life? The majority denies none of this. It simply
says that these “reliance interests . . . , like the reliance
interests in Khan , cannot justify an inefficient rule.” Ante , at 27.

															   The Court minimizes the importance of this
reliance, adding that it “is also of note” that at the time resale
price maintenance contracts were lawful “ ‘no more than a tiny
fraction of manufacturers ever employed’ ” the practice. Ibid. (quoting Overstreet 6). By “tiny” the Court means
manufacturers that accounted for up to “ ‘ten percent of
consumer goods purchases’ ” annually. Ibid. . That
figure in today’s economy equals just over $300 billion. See Dept.
of Commerce, Bureau of Census, Statistical Abstract of the United
States: 2007, p. 649 (126th ed.) (over $3 trillion in U. S. retail
sales in 2002). Putting the Court’s estimate together with the
Justice Department’s early 1970’s study translates a legal regime
that permits all resale price maintenance into retail bills that
are higher by an average of roughly $750 to $1000 annually for an
American family of four. Just how much higher retail bills will be
after the Court’s decision today, of course, depends upon what is
now unknown, namely how courts will decide future cases under a
“rule of reason.” But these figures indicate that the amounts
involved are important to American families and cannot be dismissed
as “tiny.”

															   Sixth, the fact that a rule of law has become
“embedded” in our “national culture” argues strongly against
overruling. Dickerson v. United States , 530 U. S. 428 , 443–444
(2000). The per se rule forbidding minimum resale price
maintenance agreements has long been “embedded” in the law of
antitrust. It involves price, the economy’s “ ‘central nervous
system.’ ” National Soc. of Professional Engineers ,
435 U. S., at 692 (quoting Socony-Vacuum Oil , 310 U. S.,
at 226, n. 59). It reflects a basic antitrust assumption (that
consumers often prefer lower prices to more service). It embodies a
basic antitrust objective (providing consumers with a free choice
about such matters). And it creates an easily administered and
enforceable bright line, “Do not agree about price,” that
businesses as well as lawyers have long understood.

															   The only contrary stare decisis factor that the majority mentions consists of its claim that this
Court has “[f]rom the beginning . . . treated the Sherman Act as a
common-law statute,” and has previously overruled antitrust
precedent. Ante , at 20, 21–22. It points in support to State Oil Co. v. Khan , 522 U. S. 3 (1997),
overruling Albrecht v. Herald Co. , 390 U. S. 145 (1968), in
which this Court had held that maximum resale price
agreements were unlawful per se , and to Sylvania ,
overruling United States v. Arnold, Schwinn &
Co. , 388 U. S.
365 (1967), in which this Court had held that producer-imposed
territorial limits were unlawful per se .

															   The Court decided Khan, however, 29
years after Albrecht —still a significant period, but
nowhere close to the century Dr. Miles has stood. The
Court specifically noted the lack of any significant
reliance upon Albrecht . 522 U. S., at 18–19
( Albrecht has had “little or no relevance to ongoing
enforcement of the Sherman Act”). Albrecht had far less
support in traditional antitrust principles than did Dr.
Miles . Compare, e.g. , 8 Areeda & Hovenkamp ¶1632,
at 316–328 (analyzing potential harms of minimum resale price
maintenance), with id., ¶1637, at 352–361 (analyzing
potential harms of maximum resale price maintenance). See also, e.g. , Pitofsky 1490, n. 17. And Congress had nowhere
expressed support for Albrecht’ s rule. Khan,
supra, at 19.

															   In Sylvania , the Court, in overruling Schwinn , explicitly distinguished Dr. Miles on
the ground that while Congress had “recently . . . expressed its
approval of a per se analysis of vertical price
restrictions” by repealing the Miller-Tydings and McGuire Acts,
“[n]o similar expression of congressional intent exists for
nonprice restrictions.” 433 U. S., at 51, n. 18. Moreover, the
Court decided Sylvania only a decade after Schwinn . And it based its overruling on a generally
perceived need to avoid “confusion” in the law, 433 U. S., at
47–49, a factor totally absent here.

															   The Court suggests that it is following “the
common-law tradition.” Ante at 26. But the common law
would not have permitted overruling Dr. Miles in these
circumstances. Common-law courts rarely overruled well-established
earlier rules outright. Rather, they would over time issue
decisions that gradually eroded the scope and effect of the rule in
question, which might eventually lead the courts to put the rule to
rest. One can argue that modifying the per se rule to make
an exception, say, for new entry, see Pitofsky 1495, could prove
consistent with this approach. To swallow up a century-old
precedent, potentially affecting many billions of dollars of sales,
is not. The reader should compare today’s “common-law” decision
with Justice Cardozo’s decision in Allegheny College v. National Chautauqua Cty. Bank of Jamestown , 246 N. Y.
369, 159 N. E. 173 (1927), and note a gradualism that does not
characterize today’s decision.

															   Moreover, a Court that rests its decision upon
economists’ views of the economic merits should also take account
of legal scholars’ views about common-law overruling. Professors
Hart and Sacks list 12 factors (similar to those I have mentioned)
that support judicial “adherence to prior holdings.” They all
support adherence to Dr. Miles here. See H. Hart & A.
Sacks, The Legal Process 568–569 (W. Eskridge & P. Frickey eds.
1994). Karl Llewellyn has written that the common-law judge’s
“conscious reshaping” of prior law “must so move as to hold the
degree of movement down to the degree to which need truly presses.”
The Bramble Bush 156 (1960). Where here is the pressing need? The
Court notes that the FTC argues here in favor of a rule of reason.
See ante , at 20–21. But both Congress and the FTC, unlike
courts, are well-equipped to gather empirical evidence outside the
context of a single case. As neither has done so, we cannot
conclude with confidence that the gains from eliminating the per se rule will outweigh the costs.

															   In sum, every stare decisis concern
this Court has ever mentioned counsels against overruling here. It
is difficult for me to understand how one can believe both that (1)
satisfying a set of stare decisis concerns justifies
over-ruling a recent constitutional decision, Wisconsin Right
to Life, Inc., ante , at 19–21 (Scalia, J., joined by Kennedy
and Thomas, JJ., concurring in part and concurring in judgment),
but (2) failing to satisfy any of those same concerns nonetheless
permits overruling a longstanding statutory decision. Either those
concerns are relevant or they are not.

															*  *  *

															   The only safe predictions to make
about today’s decision are that it will likely raise the price of
goods at retail and that it will create considerable legal
turbulence as lower courts seek to develop workable principles. I
do not believe that the majority has shown new or changed
conditions sufficient to warrant overruling a decision of such long
standing. All ordinary stare decisis considerations
indicate the contrary. For these reasons, with respect, I
dissent.