Maryland Legislature Passes Law Prohibiting Minimum Prices

A recently enacted Maryland law, the Maryland Antitrust Act, prohibits manufacturers and resellers from imposing minimum prices on the resale of their products. This law, which applies to dealers or retailers doing business in Maryland, as well as transactions in which consumers in Maryland purchase products on the internet, may have a substantial impact on how franchisors and distributors approach pricing decisions for their products.

Specifically, the law provides that “a contract, combination, or conspiracy that establishes a minimum price below which a retailer, wholesaler, or distributor may not sell a commodity or service is an unreasonable restraint of trade.” The law will take effect on October 1 of this year.

Prior to 2007, setting minimum prices for the resale of products, or minimum vertical price fixing, was considered “per-se” illegal. However, a controversial U.S. Supreme Court case, Leegin Creative Leather Products, Inc. v. PSKS, Inc., provided that minimum vertical price fixing would be reviewed on a case-by case basis to ensure that antitrust laws are not violated, and thus are not “per se” illegal. According to Leegin, those agreements that do not stifle competition are allowable under the law. Thus, this Supreme Court decision allowed many franchisors to consider setting minimum prices across the franchise system.

The Maryland Antitrust Act is just one piece of legislation aimed at addressing and pre-empting the Leegin decision. An identical bill was previously introduced in the U.S. Senate, but died prior to enactment. According to a Wall Street Journal article entitled "State Law Targets 'Minimum Pricing,'” published on April 28, 2009, more than 30 states filed briefs in the Leegin Supreme Court case, and these states may consider similar legislation.