In O'Brien v. Leegin Creative Leather Products, Inc. (O'Brien), the Kansas Supreme Court held that minimum resale price maintenance (RPM) is per se illegal under Kansas antitrust law, departing 180 degrees from federal antitrust law.

Kansas is the latest state to reject the 2007 US Supreme Court ruling in Leegin Creative Leather Products, Inc. v. PSKS, Inc. (Leegin), which overturned the nearly century-old rule that minimum RPM agreements are per se or, automatic, violations of the federal antitrust laws.

In Leegin, the US Supreme Court held that RPM agreements are not all per se illegal as a matter of law, but, rather, RPM agreements are reviewed under the rule of reason. RPM is illegal under rule of reason review only where the anti-competitive effects of the particular agreement at issue outweigh its presumptive pro-competitive benefits. For more information on RPM agreements and the rule of reason, see Practice Note, Vertical Price Restraints in the US. For a further discussion of the Leegin case, see Legal Update, US Supreme Court overturns 96-year old rule that minimum resale price maintenance is per se illegal.

In O’Brien, the Kansas Supreme Court held that Kansas antitrust law condemns all RPM agreements as illegal, despite the ruling by the US Supreme Court in Leegin. Moreover, the same RPM agreement that was before the US Supreme Court in Leegin was before the Kansas Supreme Court in O'Brien, leaving no doubt that Kansas wholly rejected Leegin. The Kansas Supreme Court was free to do this because federal antitrust law does not preempt state antitrust law, as explained in Practice Note, Private Antitrust Actions: Private Enforcement of State Antitrust Laws.

While important as a matter of antitrust policy, the ruling affects government enforcement more than it does private enforcement. Private plaintiffs must prove the degree of economic harm in calculating damages in private cases. Proving damages, therefore, demands marshalling much of the same economic evidence in the damages phase, as is required in the rule of reason liability phase, making the per se/rule of reason distinction at times somewhat academic. Firms doing business in Kansas must recognize, however, that Kansas does not require proof of the degree of economic harm to obtain damages. Under Kansas law, private plaintiffs may elect to obtain full consideration damages, which are a simple return of the full purchase price of the good or service that was the object of the antitrust violation.

After O'Brien, the Kansas legislature took up proposed legislation that would have made RPM agreements subject to the rule of reason in line with federal law. However, the bill did not win enough votes to pass the Kansas State Senate.

Kansas joins several state courts and enforcers that refuse to apply Leegin, making the formation of national distribution programs a challenge for manufacturers. Manufacturers with national distribution policies should take into account not only the federal rule of reason standard, but also the continually evolving state law landscape.