In 2005, Federated Department Stores, which does business as Macy's and Bloomingdales, acquired May Company Department Stores for $17 billion. Federal antitrust regulators took no action against this merger and in fact released an unprecedented statement explaining the decision to permit the merger.

State antitrust regulators demanded that Federated sell approximately 20% of the former May stores, including branches of L.S. Ayres, Marshall Field, Lord & Taylor, Filenes, Hecht and Strawbridge & Clothier. In the fall of 2006, Federated sold the remaining Lord & Taylor stores to a private investment group. Substantially all of the stores remaining with Federated were converted to the Macy's nameplate; a few were converted to Bloomingdales.

The Federal Trade Commission's (FTC) decision that this merger did not substantially lessen competition under the Clayton Act raises important questions.

First, the FTC suggested there was no antitrust product market comprised of conventional department stores, or middle-market department stores. Numerous retail studies, the department stores' own market studies and the common sense experience of most consumers suggest otherwise.

Second, FTC's unusual public statement listed reasons that the merger would not substantially lessen competition. Many of these reasons do not stand up to closer scrutiny.

Third, through an empirical study created for this article that compares prices before and after the merger, Federated appears to have significantly raised prices throughout the United States.

For these reasons, it is likely that the Federated/May merger did in fact substantially lessen competition in the conventional department store market.

This essay analyzes the June 2007 Supreme Court decision of Leegin v. PSKS. That case overruled a 96 year old Supreme Court case, Dr. Miles v. Park & Sons. The Leegin case eliminated Dr. Miles' per se rule in antitrust for minimum resale price maintenance between manufacturers and retailers. The essay examines the history and controversy of Dr. Miles, acts of Congress to circumvent and then restore Dr. Miles, the controversy over the Leegin case, and likely outcomes in the future.