23 June 2011
Richard M. Steuer
In early 2011, a New York trial-level court issued a highly anticipated decision dismissing a case brought by the New York Attorney General against mattress manufacturer Tempur-Pedic. In the decision, the court rejected charges that Tempur-Pedic had entered into minimum resale price maintenance agreements with retailers, thereby committing a per se violation of the state’s General Business Law. People v. Tempur-Pedic International, Inc., No. 400837/10 (N.Y. Sup. Ct., N.Y. Cty., dated Jan. 14, 2011).
In granting Tempur-Pedic’s motion to dismiss, the court held that the only relevant bilateral agreements between Tempur-Pedic and its retailers were retail advertising agreements, which restricted price advertising but did not contain provisions on the prices retailers actually charge. These advertising agreements were accompanied by a unilateral retail pricing policy, which provided that Tempur-Pedic would suspend shipments to discounters. Although the advertising agreements included language requiring the retailers to agree to Tempur-Pedic’s termination policies, the court held that those policies could not properly be considered part of the advertising agreements themselves.
There was evidence that Tempur-Pedic occasionally contacted retailers it suspected of violating its pricing policy in order to clarify that policy with them. However, while recognizing that coercion followed by compliance may sometimes create a bilateral oral agreement, the court ruled that there was not enough evidence presented here to support such an agreement.
Borrowing from federal law, particularly the US Supreme Court’s Colgate and Monsanto decisions, the court held that the State had failed to prove the existence of bilateral resale price maintenance agreements, because of a lack of evidence that retailers had communicated their acquiescence or agreement not to sell at discount prices. Notably, the State had relied on an unusual provision of New York law rendering minimum resale price contracts unenforceable, rather than on the New York antitrust statute, which makes certain anticompetitive conduct illegal. The court held that the provision in question only could render contracts unenforceable, not unlawful, per se or otherwise. The State argued that, regardless, it had the power to enjoin an unenforceable contract, not just an illegal contract; however, the court rejected that argument on the ground that Tempur-Pedic’s unilateral policy statement did not amount to a contract at all.
If the New York Attorney General discovers a genuine bilateral agreement between a manufacturer and a retailer fixing minimum resale prices in New York, would the Attorney General try again to apply a rule of per se illegality? The court’s decision (unless overturned) provides little basis for adopting such a theory under any provision of New York law.
In any event, as the State of California interprets California’s antitrust law to render minimum resale price maintenance agreements per se unlawful, and the State of Maryland has adopted legislation explicitly applying per se illegality, the defeat of the New York Attorney General does not provide the last word for products that are marketed nationwide.