LEEGIN CREATIVE LEATHER PRODUCTS, INC. v. PSKS, INC., dba KAY’S KLOSET . . . KAY’S SHOES

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LEEGIN CREATIVE LEATHER PRODUCTS, INC. v.
PSKS, INC., dba KAY’S KLOSET . . . KAY’S SHOES
certiorari to the united states court of appeals for
the fifth circuit
No. 06–480. Argued March 26, 2007—Decided June 28, 2007
Given its policy of refusing to sell to retailers that discount its goods below
suggested prices, petitioner (Leegin) stopped selling to respondent’s
(PSKS) store. PSKS filed suit, alleging, inter alia, that Leegin vio
lated the antitrust laws by entering into vertical agreements with its
retailers to set minimum resale prices. The District Court excluded
expert testimony about Leegin’s pricing policy’s procompetitive effects
on the ground that Dr. Miles Medical Co. v. John D. Park & Sons Co.,
220 U. S. 373, makes it per se illegal under § 1 of the Sherman Act for a
manufacturer and its distributor to agree on the minimum price the
distributor can charge for the manufacturer’s goods. At trial, PSKS
alleged that Leegin and its retailers had agreed to fix prices, but Leegin
argued that its pricing policy was lawful under § 1. The jury found for
PSKS. On appeal, the Fifth Circuit declined to apply the rule of reason
to Leegin’s vertical price-fixing agreements and affirmed, finding that
Dr. Miles’ per se rule rendered irrelevant any procompetitive justifica
tions for Leegin’s policy.
Held: Dr. Miles is overruled, and vertical price restraints are to be judged
by the rule of reason. Pp. 885–908.
(a) The accepted standard for testing whether a practice restrains
trade in violation of § 1 is the rule of reason, which requires the fact
finder to weigh “all of the circumstances,” Continental T. V., Inc. v. GTE
Sylvania Inc., 433 U. S. 36, 49, including “specific information about the
relevant business” and “the restraint’s history, nature, and effect,” State
Oil Co. v. Khan, 522 U. S. 3, 10. The rule distinguishes between re
straints with anticompetitive effect that are harmful to the consumer
and those with procompetitive effect that are in the consumer’s best
interest. However, when a restraint is deemed “unlawful per se,” ibid.,
the need to study an individual restraint’s reasonableness in light of
real market forces is eliminated, Business Electronics Corp. v. Sharp
Electronics Corp., 485 U. S. 717, 723. Resort to per se rules is confined
to restraints “that would always or almost always tend to restrict com
petition and decrease output.” Ibid. Thus, a 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

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System, Inc., 441 U. S. 1, 9, and only if they can predict with confidence
that the restraint 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. Pp. 885–887.
(b) Because the reasons upon which Dr. Miles relied do not justify a
per se rule, it is necessary to examine, in the first instance, the economic
effects of vertical agreements to fix minimum resale prices and to deter
mine whether the per se rule is nonetheless appropriate. Were this
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. Pp. 887–899.
(1) Economics literature is replete with procompetitive justifica
tions for a manufacturer’s use of resale price maintenance, and the few
recent studies on the subject also cast doubt on the conclusion that the
practice meets the criteria for a per se rule. The justifications for verti
cal price restraints are similar to those for other vertical restraints.
Minimum resale price maintenance can stimulate interbrand competi
tion among manufacturers selling different brands of the same type of
product by reducing intrabrand competition among retailers selling the
same brand. This is important because the antitrust laws’ “primary
purpose . . . is to protect interbrand competition,” Khan, supra, at 15.
A single manufacturer’s use of vertical price restraints tends to elimi
nate intrabrand price competition; this in turn encourages retailers to
invest in services or promotional efforts that aid the manufacturer’s
position as against rival manufacturers. Resale price maintenance may
also give consumers more options to choose among low-price, low
service brands; high-price, high-service brands; and brands falling in
between. Absent vertical price restraints, retail services that enhance
interbrand competition might be underprovided because discounting re
tailers can free ride on retailers who furnish services and then capture
some of the demand those services generate. Retail price maintenance
can also increase interbrand competition by facilitating market entry
for new firms and brands and by encouraging retailer services that
would not be provided even absent free riding. Pp. 889–892.
(2) Setting minimum resale prices may also have anticompetitive
effects; 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 or be used to organize retail
cartels. It can also be abused by a powerful manufacturer or retailer.
Thus, the potential anticompetitive consequences of vertical price re
straints must not be ignored or underestimated. Pp. 892–894.
(3) Notwithstanding the risks of unlawful conduct, it cannot be
stated with any degree of confidence that retail price maintenance “al

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ways or almost always tend[s] to restrict competition and decrease out
put,” Business Electronics, supra, at 723. Vertical retail price agree
ments have either procompetitive or anticompetitive effects, depending
on the circumstances in which they were formed; and the limited empiri
cal evidence available does not suggest efficient uses of the agreements
are infrequent or hypothetical. A per se rule should not be adopted for
administrative convenience alone. Such rules can be counterproduc
tive, increasing the antitrust system’s total cost by prohibiting procom
petitive conduct the antitrust laws should encourage. And a per se rule
cannot be justified by the possibility of higher prices absent a further
showing of anticompetitive conduct. The antitrust laws primarily are
designed to protect interbrand competition from which lower prices can
later result. Respondent’s argument overlooks that, in general, the in
terests of manufacturers and consumers are aligned with respect to re
tailer profit margins. Resale price maintenance has economic dangers.
If the rule of reason were to apply, courts would have to be diligent in
eliminating their anticompetitive uses from the market. Factors rele
vant to the inquiry are the number of manufacturers using the practice,
the restraint’s source, and a manufacturer’s market power. The rule
of reason is designed and used to ascertain whether transactions are
anticompetitive or procompetitive. This standard principle applies to
vertical price restraints. As courts gain experience with these re
straints 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. Pp. 894–899.
(c) Stare decisis does not compel continued adherence to the per se
rule here. Because the Sherman Act is treated as a common-law stat
ute, its prohibition on “restraint[s] of trade” evolves to meet the dynam
ics of present economic conditions. The rule of reason’s case-by-case
adjudication implements this common-law approach. Here, respected
economics authorities suggest that the per se rule is inappropriate.
And both the Department of Justice and the Federal Trade Commission
recommend replacing the per se rule with the rule of reason. In addi
tion, this Court has “overruled [its] precedents when subsequent cases
have undermined their doctrinal underpinnings.” Dickerson v. United
States, 530 U. S. 428, 443. It is not surprising that the Court has dis
tanced itself from Dr. Miles’ rationales, for the case was decided not
long after the Sherman Act was enacted, when the Court had little expe
rience with antitrust analysis. Only eight years after Dr. Miles, the
Court reined in the decision, holding that a manufacturer can suggest
resale prices and refuse to deal with distributors who do not follow
them, United States v. Colgate & Co., 250 U. S. 300, 307–308; and more

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recently the Court has tempered, limited, or overruled once strict verti
cal restraint prohibitions, see, e. g., GTE Sylvania, 433 U. S., at 57–59.
The Dr. Miles rule is also inconsistent with a principled framework, for
it makes little economic sense when analyzed with the Court’s other
vertical restraint cases. Deciding that procompetitive effects of resale
price maintenance are insufficient to overrule Dr. Miles would call into
question cases such as Colgate and GTE Sylvania. Respondent’s argu
ments for reaffirming Dr. Miles based on stare decisis do not require a
different result. Pp. 899–907.
171 Fed. Appx. 464, reversed and remanded.
Kennedy, J., delivered the opinion of the Court, in which Roberts,
C. J., and Scalia, Thomas, and Alito, JJ., joined. Breyer, J., filed a
dissenting opinion, in which Stevens, Souter, and Ginsburg, JJ., joined,
post, p. 908.
Theodore B. Olson argued the cause for petitioner. With
him on the briefs were Michael L. Denger, Joshua Lipton,
Amir C. Tayrani, Tyler A. Baker, Jeffrey S. Levinger, and
Gary Freedman.
Deputy Solicitor General Hungar argued the cause for
the United States as amicus curiae urging reversal. With
him on the brief were Solicitor General Clement, Assistant
Attorney General Barnett, Deputy Assistant Attorney Gen
eral Masoudi, Lisa S. Blatt, Catherine G. O’Sullivan, and
David Seidman.
Robert W. Coykendall argued the cause for respondent.
With him on the brief were Ken M. Peterson, Tim J. Moore,
Nelson J. Roach, D. Neil Smith, and Stephen R. McAllister.
Barbara D. Underwood, Solicitor General of New York,
argued the cause for the State of New York et al. as amici
curiae urging affirmance. With her on the brief were An
drew M. Cuomo, Attorney General of New York, Benjamin
N. Gutman, Acting Deputy Solicitor General, Daniel J.
Chepaitis, Assistant Solicitor General, and Jay L. Himes and
Robert L. Hubbard, Assistant Attorneys General, and the
Attorneys General for their respective States as follows:
Talis J. Colberg of Alaska, Dustin McDaniel of Arkansas,
Richard Blumenthal of Connecticut, Joseph R. Biden III of

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Delaware, Bill McCollum of Florida, Mark J. Bennett of
Hawaii, Lawrence G. Wasden of Idaho, Lisa Madigan of Illi
nois, Thomas Miller of Iowa, Paul Morrison of Kansas, Greg
Stumbo of Kentucky, Charles C. Foti, Jr., of Louisiana, G.
Steven Rowe of Maine, Douglas F. Gansler of Maryland,
Martha Coakley of Massachusetts, Mike Cox of Michigan,
Lori Swanson of Minnesota, Jim Hood of Mississippi, Jere
miah W. (Jay) Nixon of Missouri, Mike McGrath of Mon
tana, Catherine Cortez Masto of Nevada, Kelly A. Ayotte of
New Hampshire, Stuart Rabner of New Jersey, Gary King
of New Mexico, Roy Cooper of North Carolina, Marc Dann
of Ohio, W. A. Drew Edmondson of Oklahoma, Hardy Myers
of Oregon, Thomas W. Corbett, Jr., of Pennsylvania, Henry
McMaster of South Carolina, Larry Long of South Dakota,
Mark L. Shurtleff of Utah, William H. Sorrell of Vermont,
Robert M. McKenna of Washington, Darrell V. McGraw, Jr.,
of West Virginia, and Patrick J. Crank of Wyoming.*
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 mini
mum price the distributor can charge for the manufactur
er’s goods. The question presented by the instant case is
*Briefs of amici curiae urging reversal were filed for the American
Petroleum Institute by Robert A. Long, Harry M. Ng, and Douglas W.
Morris; for CTIA—The Wireless Association by Roy T. Englert, Jr., Don
ald J. Russell, and Michael Field Altshul; for Economists by Joseph Ang
land and Stephen V. Bomse; and for PING, Inc., by Thomas C. Walsh,
Lawrence G. Scarborough, Aaron S. Bayer, and Robert M. Langer.
Briefs of amici curiae urging affirmance were filed for the American
Antitrust Institute by Albert Foer; for the Anderson Economic Group,
LLC, by Theodore R. Bolema; for the Burlington Coat Factory Warehouse
Corp. by Jonathan W. Cuneo, Matthew Wiener, and Robert J. Cynkar; and
for the Consumer Federation of America by Peter A. Barile III.
Eugene Crew filed a brief for William S. Comanor et al. as amici curiae.

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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 manufac
turer imposes on its distributors. Respected economic ana
lysts, 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. (Lee
gin), 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 establish
ments, 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. Lee
gin 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 Brigh
ton 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.

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Kay’s Kloset became the destination retailer in the area to
buy Brighton products. Brighton was the store’s most im
portant 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 ex
ception 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 prom
ises 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 prod
ucts in a quality manner.” Ibid.
Leegin adopted the policy to give its retailers sufficient mar
gins to provide customers the service central to its distribu
tion strategy. It also expressed concern that discounting
harmed Brighton’s brand image and reputation.
A year after instituting the pricing policy Leegin intro
duced a marketing strategy known as the “Heart Store Pro
gram.” 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

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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 Brigh
ton 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 ef
fects 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 es
tablished a unilateral pricing policy lawful under § 1, which
applies only to concerted action. See United States v. Col
gate & 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 reim
bursed 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

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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 eco
nomic 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 verti
cal minimum resale price maintenance agreements should
continue to be treated as per se unlawful. 549 U. S. 1092
(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 “out
law[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 re
strictive practice should be prohibited as imposing an unrea
sonable 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, na
ture, and effect.” Khan, supra, at 10. Whether the busi

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nesses 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 struc
ture 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 distin
guishes between restraints with anticompetitive effect that
are harmful to the consumer and restraints stimulating com
petition 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 necessar
ily 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 acknowl
edged, the per se rule can give clear guidance for certain
conduct. Restraints that are per se unlawful include hori
zontal agreements among competitors to fix prices, see Tex
aco, 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 re
strict competition and decrease output.” Business Elec
tronics, supra, at 723 (internal quotation marks omitted).
To justify a per se prohibition a restraint must have “mani
festly 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 invali

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dated 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 imme
diately 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 con
cerning whether this type of restraint satisfied the demand
ing 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, 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 medi
cines, sold its products only to distributors who agreed to
resell them at set prices. The Court found the manufactur
er’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 distribu
tors, not the manufacturer, and were analogous to a combina
tion 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

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based on “formalistic” legal doctrine rather than “demon
strable economic effect,” GTE Sylvania, 433 U. S., 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 ver
tical price restraints. Yet the Sherman Act’s use of “re
straint 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 irrele
vant to the issue before us: the effect of the antitrust laws
upon vertical distributional restraints in the American econ
omy today.” GTE Sylvania, supra, 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 horizon
tal 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”); Mari
copa County, supra, at 348, n. 18 (noting that “horizontal
restraints are generally less defensible than vertical re
straints”). Our recent cases formulate antitrust principles
in accordance with the appreciated differences in economic
effect between vertical and horizontal agreements, differ
ences the Dr. Miles Court failed to consider.

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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 agree
ments 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 manufac
turer’s use of resale price maintenance. See, e. g., Brief for
Economists as Amici Curiae 16 (“In the theoretical litera
ture, 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 anticom
petitive effects”); Brief for United States as Amicus Curiae
9 (“[T]here is a widespread consensus that permitting a man
ufacturer to control the price at which its goods are sold may
promote interbrand 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 effi
ciency than for anticompetitive purposes”); see also H. Ho
venkamp, The Antitrust Enterprise: Principle and Execution
184–191 (2005) (hereinafter Hovenkamp); R. Bork, The Anti
trust Paradox 288–291 (1978) (hereinafter Bork). Even
those more skeptical of resale price maintenance acknowl
edge 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. Scherer & D. Ross,
Industrial Market Structure and Economic Performance 558
(3d ed. 1990) (hereinafter Scherer & Ross) (“The overall bal

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ance between benefits and costs [of resale price maintenance]
is probably close”).
The few recent studies documenting the competitive ef
fects of resale price maintenance also cast doubt on the
conclusion that the practice meets the criteria for a per se
rule. See Bureau of Economics Staff Report to the FTC,
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 competi
tion 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 pro
tect [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 en
courages 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 retail
ers who furnish services and then capture some of the in
creased demand those services generate. GTE Sylvania,
supra, at 55. Consumers might learn, for example, about

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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, Anti
trust 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 provid
ing 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 alle
viates the problem because it prevents the discounter from
undercutting the service provider. With price competi
tion decreased, the manufacturer’s retailers compete among
themselves over services.
Resale price maintenance, in addition, can increase inter
brand competition by facilitating market entry for new firms
and brands. “[N]ew manufacturers and manufacturers en
tering new markets can use the restrictions in order to in
duce 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 com
petitive 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

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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 expecta
tions may be the most efficient way to expand the manufac
turer’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 & Win
ter); Klein & Murphy, Vertical Restraints as Contract En
forcement 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 anti
competitive 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, fa
cilitate 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, further
more, 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.

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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 un
lawful 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 ineffi
cient retailers higher profits. Retailers with better distri
bution systems and lower cost structures would be pre
vented 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 Mainte
nance, 28 J. Law & Econ. 363, 373 (1985) (hereinafter Marvel)
(providing an example of the power of the National Associa
tion of Retail Druggists to compel manufacturers to use re
sale price maintenance); Hovenkamp 186 (suggesting that the
retail druggists in Dr. Miles formed a cartel and used manu
facturers to enforce it).
A horizontal cartel among competing manufacturers or
competing retailers that decreases output or reduces compe
tition 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 set
ting 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 fore
stall innovation in distribution that decreases costs. A man
ufacturer might consider it has little choice but to accommo
date the retailer’s demands for vertical price restraints if
the manufacturer believes it needs access to the retailer’s

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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 conse
quences 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 al
though 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 (not
ing 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 suppli
ers”); Ippolito 292 (reaching a similar conclusion). As the
rule would proscribe a significant amount of procompeti
tive conduct, these agreements appear ill suited for per se
condemnation.
Respondent contends, nonetheless, that vertical price re
straints should be per se unlawful because of the administra
tive convenience of per se rules. See, e. g., GTE Sylvania,
supra, at 50, n. 16 (noting “per se rules tend to provide guid
ance to the business community and to minimize the burdens
on litigants and the judicial system”). That argument sug

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gests per se illegality is the rule rather than the exception.
This misinterprets our antitrust law. Per se rules may de
crease administrative costs, but that is only part of the equa
tion. Those rules can be counterproductive. They can in
crease 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 East
erbrook). They also may increase litigation costs by pro
moting 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 rele
gated their use to restraints that are “manifestly anticompet
itive,” 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”). Re
spondent 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 any
thing 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

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increased in the course of promoting procompetitive effects.
See, e. g., Business Electronics, 485 U. S., at 728. And re
sale 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 902–904;
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 differ
ence 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 compe
tition as is consistent with the efficient distribution of their
products”). A manufacturer has no incentive to overcom
pensate 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 gen
eral 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 man
ufacturer might, for example, contract with different suppli
ers 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

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Sherman Act because they lead to higher prices. The anti
trust laws do not require manufacturers to produce generic
goods that consumers do not know about or want. The man
ufacturer strives to improve its product quality or to pro
mote 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 eliminat
ing 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 likeli
hood 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 prac
tice. Cf. Scherer & Ross 558 (noting that “except when [re
sale price maintenance] spreads to cover the bulk of an in
dustry’s output, depriving consumers of a meaningful choice
between high-service and low-price outlets, most [resale
price maintenance arrangements] are probably innocu
ous”); Easterbrook 162 (suggesting that “every one of the
potentially-anticompetitive outcomes of vertical arrange
ments depends on the uniformity of the practice”).
The source of the restraint may also be an important con
sideration. If there is evidence retailers were the impetus

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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. Com
anor et al. as Amici Curiae 7–8. If, by contrast, a manufac
turer adopted the policy independent of retailer pressure,
the restraint is less likely to promote anticompetitive con
duct. 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 re
straints because they can harm its competitive position.
As a final matter, that a dominant manufacturer or retailer
can abuse resale price maintenance for anticompetitive pur
poses may not be a serious concern unless the relevant entity
has market power. If a retailer lacks market power, manu
facturers 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 distribu
tion outlets.
The rule of reason is designed and used to eliminate anti
competitive transactions from the market. This standard
principle applies to vertical price restraints. A party alleg
ing 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 con
sidering 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, de
vise rules over time for offering proof, or even presumptions

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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 set
tled 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 legisla
tive 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 prohibi
tion 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

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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 circumstances 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 Econo
mists as Amici Curiae 16. It is also significant that both
the Department of Justice and the Federal Trade Commis
sion—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 un
dermined their doctrinal underpinnings.” Dickerson v.
United States, 530 U. S. 428, 443 (2000). The Court’s treat
ment of vertical restraints has progressed away from Dr.
Miles’ strict approach. We have distanced ourselves from
the opinion’s rationales. See supra, at 887–889; see also
Khan, supra, at 21 (overruling a case when “the views un
derlying [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

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Sherman Act when the Court had little experience with anti
trust analysis. Only eight years after Dr. Miles, moreover,
the Court reined in the decision by holding that a manufac
turer 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 Syl
vania suggested that differences between vertical price and
nonprice restraints could support different legal treatment,
see id., 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 “de
cline[d] to reach the question” whether vertical agreements
fixing resale prices always should be unlawful because nei
ther party suggested otherwise, id., at 761–762, n. 7. In

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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 agree
ment 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 prece
dent 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 contin
ued 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 meth
ods. 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 alterna
tives 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 uni

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lateral 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 stand
ards 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 Cu
riae 9–18. A manufacturer might refuse to discuss its pric
ing policy with its distributors except through counsel
knowledgeable of the subtle intricacies of the law. Or it
might terminate longstanding distributors for minor viola
tions without seeking an explanation. See ibid. The in
creased 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 down
stream and selling its products directly to consumers. Dr.
Miles tilts the relative costs of vertical integration and verti
cal agreement by making the former more attractive based
on the per se rule, not on real market conditions. See Busi
ness Electronics, supra, at 725; see generally Coase, The Na
ture 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, supra,
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

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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 mainte
nance”); Steiner, How Manufacturers Deal with the Price-
Cutting Retailer: When Are Vertical Restraints Efficient?
65 Antitrust L. J. 407, 446–447 (1997) (indicating that “anti
trust 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 verti
cal nonprice restraints”). The same legal standard (per se
unlawfulness) applies to horizontal market division and hori
zontal price fixing because both have similar economic effect.
There is likewise little economic justification for the cur
rent 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 re
straints 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 op
erate 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. Re
spondent 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

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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 re
pealed both Acts. Consumer Goods Pricing Act, 89 Stat.
801. That the Dr. Miles rule applied to vertical price re
straints 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 Elec
tronics, 485 U. S., at 731 (“The changing content of the term
‘restraint of trade’ was well recognized at the time the Sher
man 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 princi
ples, including the principle that our antitrust doctrines
“evolv[e] with new circumstances and new wisdom.” Busi
ness 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 con
gressional exemption, it does not treat vertical price re
straints 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 mar
ketplace by large-volume discounters.” California Retail
Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U. S.

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97, 102 (1980). The state fair trade laws also appear to have
been justified on similar grounds. See Areeda & Hoven
kamp 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 retail
ers from their inability to compete. The purpose of the anti
trust 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 omit
ted). To the extent Congress repealed the exemption for
some vertical price restraints to end its prior practice of en
couraging anticompetitive conduct, the rule of reason pro
motes the same objective.
Respondent also relies on several congressional appropria
tions 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 argu
ment. 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 con
gressional approval for Dr. Miles, they might demonstrate a
different proposition: that Congress could not pass legisla
tion codifying the rule and reached a short-term compro
mise instead.
Reliance interests do not require us to reaffirm Dr. Miles.
To be sure, reliance on a judicial opinion is a significant rea
son 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 longstand
ing, resale price maintenance was legal under fair trade laws

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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] con
tracts.” 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 mainte
nance] 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 rea
son 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’ great
est 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 con
sumers to find low prices”); Scherer & Ross 557 (noting that
“for the most part, the effects of the [Consumer Goods Pric
ing Act] were imperceptible because the forces of competi
tion had already repealed the [previous antitrust exemption]
in their own quiet way”).
For these reasons the Court’s decision in Dr. Miles Medi
cal 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

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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.
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 agree
ment 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 mini
mum 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, busi
ness, and the public have relied for close to a century.
Today the Court holds that courts must determine the law
fulness of minimum resale price maintenance by applying,
not a bright-line per se rule, but a circumstance-specific “rule
of reason.” Ante, at 907. And in doing so it overturns
Dr. Miles.
The Court justifies its departure from ordinary considera
tions 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 889–892. 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 Com
mittee on Interstate and Foreign Commerce, 85th Cong., 2d
Sess., 74–76, 89, 99, 101–102, 192–195, 261–262 (1958). And,

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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 prac
tice’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 conse
quences of a particular practice are so serious and the poten
tial 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 un
lawfulness—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 Potter
ies, 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

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would make minimum resale price maintenance always (or
almost always) unlawful? Should they apply a “rule of rea
son”? 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 in
volving: (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 dif
ferent 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 Discount
ers: 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 Distri
bution: Per Se Legality, 48 U. Chi. L. Rev. 6, 22–26 (1981);
Brief for William S. Comanor et al. 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 multi
brand 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

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in demand, say, falling demand, by cutting prices; they can
encourage dealers to substitute service, for price, competi
tion, thereby threatening wastefully to attract too many re
sources into that portion of the industry; they can inhibit
expansion by more efficient dealers whose lower prices
might otherwise attract more customers, stifling the devel
opment 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 Restric
tions, and the New Antitrust Policy, 98 Harv. L. Rev. 983,
990–1000 (1985).
In respect to producers: Resale price maintenance agree
ments can help to reinforce the competition-inhibiting behav
ior 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. Con
tainer 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 de
mand 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.

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Those who express concern about the potential anticom
petitive 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 re
quired) individual States to enact “fair trade” laws author
izing 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 mini
mum 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 agree
ments were unlawful per se in every State. The Federal
Trade Commission (FTC) staff, after studying numerous
price surveys, wrote that collectively the surveys “indi
cate[d] that [resale price maintenance] in most cases in
creased the prices of products sold with [resale price mainte
nance].” 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 promi
nent 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 et al. as Amici Curiae 4 (“It is uni

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formly acknowledged that [resale price maintenance] and
other vertical restraints lead to higher consumer prices”).
On the other hand, those favoring resale price mainte
nance have long argued that resale price maintenance agree
ments can provide important consumer benefits. The ma
jority lists two: First, such agreements can facilitate new
entry. Ante, at 891. For example, a newly entering pro
ducer wishing to build a product name might be able to
convince dealers to help it do so—if, but only if, the pro
ducer can assure those dealers that they will later recoup
their investment. Without resale price maintenance, late
entering dealers might take advantage of the earlier invest
ment 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 en
courage 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 in
creased 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 890–891. Suppose a producer concludes that it can suc
ceed 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 in
crease 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,

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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 spe
cial reason to believe some such benefits exist. That is be
cause, 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 supernormal 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 compe
tition among them. Hence, if the producer is the moving
force, the producer must have some special reason for want
ing resale price maintenance; and in the absence of, say, con
centrated 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 de
scribed: new entry, “free riding,” or variations on those
themes.
The upshot is, as many economists suggest, sometimes re
sale price maintenance can prove harmful; sometimes it can
bring benefits. See, e. g., Brief for Economists as Amici Cu
riae 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

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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. Scherer & D. Ross, Industrial
Market Structure and Economic Performance 335–339 (3d
ed. 1990) (hereinafter Scherer & Ross) (describing some cir
cumstances under which price-fixing agreements could be
more beneficial than “unfettered competition,” but also not
ing 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 deal
ers 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

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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 et al. 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 Regu
lation, No. 1, pp. 27, 29–30 (Jan. /Feb. 1984) (similar analysis).
How easily can courts identify instances in which the bene
fits are likely to outweigh potential harms? My own answer
is, not very easily. For one thing, it is often difficult to iden
tify 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 com
petition, 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.

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I recognize that scholars have sought to develop checklists
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 et al. 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 898, 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, un
like 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? With
out such a rule, it is often unfair, and consequently impracti
cal, 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 “admin
istrative” 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 modi
fied to allow an exception for the more easily identifiable

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and temporary condition of “new entry.” See Pitofsky 1495.
But I am not now forced to decide this question. The ques
tion 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 simi
lar cases, massive amounts of advice that lawyers have pro
vided 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 overruling 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 500–503 (Scalia, J.,
concurring in part and concurring in judgment).

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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 con
trary. 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, dis
cussed virtually every argument presented now to this
Court as well as others not here presented. And they ex
plained 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, Anti
trust Division). Congress fully understood, and conse
quently 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 au
thorize 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

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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 sig
nificant 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 the FTC to Congress in 1975, that resale price mainte
nance 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 super
fluous 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 911.
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 et al. 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 some

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times brings consumer benefits. Overstreet 119–129 (de
scribing numerous case studies). But the proponents of a
per se rule have always conceded as much. What is remark
able about the majority’s arguments is that nothing in this
respect is new. See supra, at 910, 919 (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 aban
doned 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]ra
ditional’ 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 provid
ing valuable services.” Ante, at 892. 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 mainte
nance. Why, on these assumptions, would a dealer not “ex
pand” its “market share” as best that dealer sees fit, obtain
ing 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 nation
wide 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

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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 re
tail distribution including significant increases in concentra
tion’ ”); 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 Clerk 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 mak
ing it more difficult for price-cutting competitors (perhaps
internet retailers) to obtain market share.
Nor has anyone argued that concentration among manufac
turers that might use resale price maintenance has dimin
ished significantly. And as far as I can tell, it has not. Con
sider 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 concen
trated, in terms of manufacturer market power, now than
they were then. For instance, the top eight domestic manu
facturers of household cooking appliances accounted for 68%

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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 Manufactures, Special
Report Series, Concentration Ratios in Manufacturing,
No. MC72(SR)–2, p. SR2–38 (1975) (hereinafter 1972 Cen
sus); 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 house
hold refrigerators and freezers accounted for 91% of the do
mestic market in 1963, compared with 95% in 2002. 1972
Census, at SR2–38; 2002 Census, at 55. Increased concen
tration 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 500–503 (opinion concurring in part and concurring
in judgment). And every relevant factor he mentions ar
gues against overruling Dr. Miles here.
First, the Court applies stare decisis more “rigidly” in
statutory than in constitutional cases. See Glidden Co. v.

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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 Jus
tice Scalia put it, “[o]verruling a constitutional case de
cided just a few years earlier is far from unprecedented.”
Wisconsin Right to Life, ante, at 501 (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 Potter
ies, 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. Wick
ham, 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 cen
tury, particularly when compared with the many complexi
ties 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 “admin
istrable,” Wisconsin Right to Life, ante, at 501 (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 502 (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.

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Fifth, the fact that a case involves property rights or con
tract rights, where reliance interests are involved, argues
against overruling. Payne, supra, at 828. This case in
volves 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 919–920. The Executive
Branch argued for repeal on the assumption that Dr. Miles
stated the law. Supra, at 919–920. Moreover, whole sec
tors of the economy have come to rely upon the per se rule.
A factory outlet store tells us that the rule “form[s] an essen
tial part of the regulatory background against which [that
firm] and many other discount retailers have financed, struc
tured, 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 insur
mountable barrier to entry for such low-price innovators.”
Brief for Consumer Federation of America as Amicus Cu
riae 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 dan
ger’ ” to Wal-Mart’s then-relatively-nascent business). See
also Brief for American Antitrust Institute as Amicus Cu
riae 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 assump
tion that a discount distributor will remain an anchor tenant?
What about home buyers who have taken a home’s distance

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from such a mall into account? What about Americans, pro
ducers, distributors, and consumers, who have understand
ably assumed, at least for the last 30 years, that price compe
tition 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 [State Oil Co. v.]
Khan, [522 U. S. 3 (1997),] cannot justify an inefficient rule.”
Ante, at 906.
The Court minimizes the importance of this reliance, add
ing that it “is also of note” that at the time resale price main
tenance contracts were lawful “ ‘no more than a tiny fraction
of manufacturers ever employed’ ” the practice. Ante, at
907 (quoting Overstreet 6). By “tiny” the Court means
manufacturers that accounted for up to “ ‘ten percent of con
sumer goods purchases’ ” annually. Ante, at 907. 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 main
tenance into retail bills that are higher by an average of
roughly $750 to $1,000 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 mainte
nance 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

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U. S., at 692 (quoting Socony-Vacuum Oil, 310 U. S., at 226,
n. 59). It reflects a basic antitrust assumption (that consum
ers often prefer lower prices to more service). It embod
ies 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 899, 900–902. 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 maxi
mum 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 Al
brecht—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 mainte
nance), 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 ex
pressed 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 analy
sis of vertical price restrictions” by repealing the Miller

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Tydings and McGuire Acts, “[n]o similar expression of con
gressional 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 905. 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 deci
sions 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 bil
lions of dollars of sales, is not. The reader should compare
today’s “common-law” decision with Justice Cardozo’s deci
sion 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. Profes
sors Hart and Sacks list 12 factors (similar to those I have
mentioned) that support judicial “adherence to prior hold
ings.” They all support adherence to Dr. Miles here. See
H. Hart & A. Sacks, The Legal Process 568–569 (W. Esk
ridge & 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 900. But both Congress and the FTC,

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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 500–503 (Scalia, J., joined by Kennedy
and Thomas, JJ., concurring in part and concurring in judg
ment), but (2) failing to satisfy any of those same concerns
nonetheless permits overruling a longstanding statutory de
cision. 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 suf
ficient to warrant overruling a decision of such long standing.
All ordinary stare decisis considerations indicate the con
trary. For these reasons, with respect, I dissent.