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U.S. District Court Draws Rule of Reason Around Relationships with Retailers Who Compete with Their Own Store Brands

November 25, 2008

By Michael P.A. Cohen and Kristen Warden

Agreements between suppliers and retailers are typically viewed under a rule of reason applicable now to virtually all vertical relationships in a supply chain. Many retailers, however, also market their own store brands which compete with branded products they purchase from their suppliers. Where the retail buyer is also a competitor, agreements can raise questions of per se illegality under antitrust laws. The line is not always clear and the risk in the ambiguity can be loaded.

In Bedi v. Hewlett-Packard Company and Staples Inc. (Bedi), No. 07-12318-RWZ (D. Mass. November 17, 2008), the United States District Court for the District of Massachusetts just unpacked some of that risk in a decision continuing the U.S. federal judiciarys pragmatic, economics-based walk through the antitrust landscape, consistent with the tone set by the U.S. Supreme Courts 2007 term, refusing to view modern market arrangements through rigid lenses crafted from historical eras where supply chains were formalistic and less fluid.