RESALE PRICE MAINTENANCE AND ANTITRUST POLICY

Abstract

Some scholars would legalize all purely vertical resale price maintenance (RPM). They acknowledge that RPM can harm consumers when it facilitates horizontal collusion among manufacturers or dealers. But when RPM is purely vertical (i.e., when it is imposed by a manufacturer acting independently), they argue that it must be procompetitive. Recent theoretical research has shown, however, that purely vertical RPM can reduce economic efficiency. This result occurs when the higher prices and dealer services induced by RPM benefit marginal consumers but substantially reduce the welfare of intramarginal consumers, who would have preferred the product without the services at a lower price. Since these circumstances are empirically plausible, a rule of per se legality may not be appropriate. At the same time, evaluating RPM under the rule of reason might not be workable. Anticompetitive instances of the type described could be difficult to prove. These research findings, therefore, are most consistent with a rule of per se illegality for RPM, with exceptions for situations in which RPM is most likely to be pro‐competitive (e.g., new entry).