So By Financial Regulation, You Mean More Lawsuits?

The financial regulatory legislation being debated by the Senate is attracting the usual sort of special-interest amendments you expect with major pieces of legislation. Attaching separate bills to major legislation is a tried-and-true maneuver that has, no doubt, helped legislation that manufacturers support, so we won’t pretend outrage. It’s the substance of these specific provisions that is objectionable.

Below, we noted Sen. Specter’s amendment to countermand the Supreme Court’s ruling in Stoneridge v. Scientific Atlanta, which would allow trial lawyers to throw their class-action lawsuit nets wider, suing manufacturers even if they had no role in investment fraud. A stand-alone bill, S. 1551, wasn’t moving, so the Senator now seeks to attach it to the financial reg bill.

Sen. Herb Kohl (D-WI) has now  transformed his S. 148, Discount Pricing Consumer Protection Act, into Senate Amendment 3788. The legislation would overturn the Supreme Court’s 2007 decision in Leegin Creative Leather Products, Inc. v. PSKS. The decision held that resale price maintenance agreements between a manufacturer and a retailer are not per se a violation of federal anti-trust laws.

As Rosario Palmieri, the NAM’s vice president for infrastructure, legal and regulatory policy, wrote in a March 16th letter to the Senate Judiciary Committee:

Leegin requires courts to make decisions based on substance –- the effect of the restraint on competition in a market –- rather than on formalistic analysis of whether conduct shows an agreement between a manufacturer and a reseller. In addition, it will permit defendants to defend themselves in these cases by proving facts about competitive effects that they were precluded from using under the per se rule. Leegin does not give manufacturers the green light to enter into minimum resale price agreements without the possibility of challenge; resale price maintenance is not per se legal. Resale price maintenance imposed as a result of an agreement with competing suppliers will remain per se illegal.

Sen. Jon Kyl (R-AZ) also did an excellent job explaining the impact of the Supreme Court ruling — and refuting the misrepresentations of it — during the Judiciary Committee’s consideration of the bill.

To the debate, we add this now-relevant point: The proposed legislation has nothing to do with financial regulation.

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