Recent Development by Katherine J. Alprin
Barkat Khan operated a gasoline station that received its supply of gasoline from the State Oil Co. Khan's contract with State Oil contained what were essentially maximum pricing provisions. Khan eventually found himself unable to pay his rent and State Oil notified him that the contract would be terminated. Khan sued State Oil, alleging that it had engaged in vertical maximum price fixing, a practice considered per se unlawful under the Sherman Act.
The district court found that the alleged activity was not per se illegal, but instead was to be judged under the rule of reason. The district court found that Khan had not met the criteria to make out a rule of reason case, and granted summary judgment for State Oil. The United States Court of Appeals for the Seventh Circuit reversed, finding that vertical maximum price fixing was indeed per se illegal as dictated by the United States Supreme Court's decision in Albrecht v. Herald Co.. In an opinion written by Judge Posner, the court criticized the Albrecht decision as resting on economically unsound theories, but determined that the Supreme Court's decision mandated the application of the per se rule. Judge Posner suggested that the Supreme Court overrule the Albrecht decision, which he considered to be hollow in light of “all its infirmities [and] its increasingly wobbly, moth-eaten foundations.” The Supreme Court took note of these weaknesses and overruled Albrecht, holding that vertical maximum price fixing arrangements should be restored to a rule of reason analysis. State Oil Co. v. Khan, 118 S. Ct. 275 (1997).
About the Author
Katherine J. Alprin.
Citation
73 Tul. L. Rev. 353 (1998)