States Challenge Resale Price Maintenance Agreement; Settlement
In a complaint filed on 3/21/08 in the S.D.N.Y., the states of New York, Illinois, and Michigan challenged what appears to be a pure intra-brand resale price restraint between the manufacturer of the Aeron chair and its distributors. The manufacturer required the retailers not to advertise below a specified price.
As a result of these anticompetitive practices, consumers were denied the benefits of unrestrained price competition on the Aeron chairs and Aeron prices were raised above their competitive levels.This case addresses the issue of RPM after Leegin head on. The plaintiffs’ don’t seem to claim any loss of inter-brand competition. Rather
HMH [the manufacturer] implemented its SRP [suggested resale price] policy to improve retail margins and by most accounts, the program did so. The few retailers who chose not to follow the SRP were either terminated or lost access to the Aeron they advertised at less than the SRP. The vast majority of retailers raised and maintained their retail prices at the SRP level.The case settled the same day for $750,000.
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March 26th, 2008 at 6:05 pm
This case was discussed quite a bit today during the Spring Meeting panel on Leegin. The complaint was generally described as what it would look like if Leegin never happened. My favorite parts of the complaint include:
“Aeron chairs are very popular and sought-after.”
The complaint only alleged higher prices for the chairs. No discussion about output.
No relevant product market definition (nor geographic market definition).
“Some retailers who wanted to sell Aerons for less by advertising a lower price attempted to do so. When a retailer advertised below HMH’s minimum price, HMH terminated the retailer’s access to the Aeron chair for one year.” [Sounds like a MAP case.]
“HMH implemented its SRP policy to improve retail margins and by most accounts, the program did so. The few retailers who chose not to follow the SRP were either terminated or lost access to the Aeron they advertised at less than the SRP . The vast majority of retailers raised and maintained their retail price at the SRP level.” [Again, sounds like MAP and/or Colgate.]