Leegin and Procompetitive Resale Price Maintenance

The Antitrust Bulletin, Vol. 55, No. 2, 2010

42 Pages Posted: 15 Jul 2011  

Kenneth G. Elzinga

University of Virginia - Department of Economics

David E. Mills

University of Virginia - Department of Economics

Date Written: February 10, 2010

Abstract

The recent Supreme Court opinion in Leegin reversed the long-standing precedent of Dr. Miles Medical. Resale price maintenance (RPM) is no longer condemned per se but instead is treated under the rule of reason. This ruling allows an inquiry as to the economic rationale and competitive consequences of a manufacturer’s RPM policy. This article reviews Leegin’s challenged pricing strategy and the business environment in which it arose. Leegin’s conduct is interpreted in light of the relevant economic literature about RPM. We conclude that Leegin’s price policy fits none of the accepted economic theories of how RPM could be anticompetitive, but instead exemplifies a theory that predicts procompetitive effects. The most compelling explanation for Leegin’s conduct is that it sought to induce efficient retail services to support Leegin’s product line and to increase interbrand competition between the company and its many competitors.

Keywords: Resale Price Maintenance, Vertical Restraints

JEL Classification: L42

Suggested Citation

Elzinga, Kenneth G. and Mills, David E., Leegin and Procompetitive Resale Price Maintenance (February 10, 2010). The Antitrust Bulletin, Vol. 55, No. 2, 2010. Available at SSRN: https://ssrn.com/abstract=1885001

Kenneth G. Elzinga (Contact Author)

University of Virginia - Department of Economics ( email )

PO Box 400182
Charlottesville, VA 22904-4182
United States

David E. Mills

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States

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