RPM as Exclusion: Did the U.S. Supreme Court Stumble Upon the Missing Theory of Harm?
20 Pages Posted: 18 Jul 2008
Date Written: July 16, 2008
Until the 2008 U.S. Supreme Court decision in Leegin, resale price maintenance (RPM) had been per se illegal in the US for nearly 100 years. It continues to be illegal in Canada under Sec. 61 of the Competition Act. Despite this record, economic analyses of RPM have generally found it a benign method for inducing retailer marketing effort. Arguments for its harm have been based on its potential value in protecting collusion among manufacturers or among intrabrand retailers - a theory with few if any known examples. In Leegin, however, the U.S. Supreme Court suggested that RPM might be an exclusionary means to induce retailers not to carry competing products. Recent conceptions of exclusion as monopolization of distribution, retailing, or other complement or input market, are applied to RPM to see if and when it is likely to be a means for exclusion rather than for facilitating collusion. Exclusion appears unlikely; monopolization against RPM would likely have to rely on claims that sales effort is akin to a predatory price. Both complement market monopolization and quasi-predation theories differ from arguments that RPM enforces implicit contracts with retailers to deny access to rivals.
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