Legal Treatment of Vertical Restraints: Some Lessons from the Ongoing International Debates Regarding Resale Price Maintenance
52 Pages Posted: 2 Nov 2012
Date Written: October 25, 2012
This research paper — a companion piece to Professor Patrick Rey’s recent report for the FNE regarding the economics of vertical restraints — considers how the important policy implications of Rey’s analysis might be translated into effective enforcement standards. As U.S. Supreme Court Justice Stephen Breyer has concluded, economic theory “can, and should, inform [competition] law;” nevertheless, the law, as an administrative system, “cannot, and should not, precisely replicate economist’s (sometimes conflicting) views.” Thus, it must search for administrable rules that, on balance, maximize consumer welfare. To that end, this paper examines the ongoing debate over the legal treatment of one particular type of vertical restraint, resale price maintenance (RPM), with the hope that any insights derived can be applied more broadly.
This paper begins with a discussion of decision theory and how that process might inform the debate on legal standards. It then turns to RPM and provides a brief summary of the anticompetitive risks and asserted procompetitive rationales associated with the practice, along with the limited empirical research on those subjects, followed by a discussion of RPM in the United States and the impact of Leegin at the federal and state levels, where considerable uncertainty still remains more than five years after the demise of Dr. Miles. It then surveys the current standards in the E.U., Canada, Australia and New Zealand, the latter two of which, in contrast to Canada, have retained per se treatment of RPM. The paper then considers additional proposed RPM standards — including various proposals for “structured” rule of reason analyses — and how those frameworks might allow for the legitimate, procompetitive benefits of RPM to be realized in an administratively feasible manner that also protects against anticompetitive abuses. Finally, it concludes with a brief consideration of the Chilean market and whether the particularities of that market counsel in favor or against certain standards.
Keywords: Resale Price Maintenance, Vertical Restraints, Chile
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