RPM Under EU Competition Law: Some Considerations from a Business and Economic Perspective

CPI Antitrust Chronicle, November 2013 (1) [Winner of the 2014 Concurrences Antitrust Awards]

12 Pages Posted: 16 Nov 2013 Last revised: 30 Apr 2014

See all articles by Andres Font Galarza

Andres Font Galarza

Gibson, Dunn & Crutcher LLP

Frank P. Maier-Rigaud

ABC economics; IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods

Pablo Figueroa

Gibson, Dunn & Crutcher LLP

Date Written: November 15, 2013

Abstract

Resale or retail price maintenance (“RPM”) refers to an agreement between an upstream and a downstream firm in a vertical value chain concerning the retail level price. RPM refers either to a maximum, a minimum, or a fixed price that retailers agree to charge their customers. At first sight it may seem counterintuitive for a manufacturer to enter into an agreement that seemingly only aims at guaranteeing the retailer a certain margin that cannot be competed away and that the manufacturer may potentially have forfeited. Indeed, RPM arrangements can not only be counter-intuitive but also anticompetitive, particularly when they function as the tip of the iceberg of a hub-and-spoke horizontal collusion system.

In light of the controversial legal debate on how to characterize RPM from a competition point of view, section II briefly describes the evolution of EU policy and the current legal situation concerning. Section III contains an overview of the main efficiency justifications advanced in the economic literature, focusing on horizontal and vertical externalities but also on the particularities of the so-called Veblen goods. Section IV draws on both previous sections in discussing nuances that can already be identified in the Commission’s most recent guidelines and that may be indicative of a coming more economic approach also regarding RPM. In light of the economic literature and the efficiency justifications acknowledged in the guidelines, the concluding section hints at the possibility that the times of RPM as hardcore restraint may soon be over and that, meanwhile, the time may be ripe, under certain circumstances, for a successful efficiency defense of certain RPM practices under Article 101(3) TFEU.

Keywords: RPM, resale price maintenance, retail price maintenance, vertical restraints, vertical externalities, horizontal externalities, per se abuse, hardcore restraint, by object, Article 101(3)

JEL Classification: L42, K21

Suggested Citation

Font Galarza, Andres and Maier-Rigaud, Frank P. and Figueroa, Pablo, RPM Under EU Competition Law: Some Considerations from a Business and Economic Perspective (November 15, 2013). CPI Antitrust Chronicle, November 2013 (1) [Winner of the 2014 Concurrences Antitrust Awards], Available at SSRN: https://ssrn.com/abstract=2355255

Andres Font Galarza

Gibson, Dunn & Crutcher LLP ( email )

1050 Connecticut Avenue, NW
Washington, DC 20036
United States

Frank P. Maier-Rigaud (Contact Author)

ABC economics ( email )

Berlin, 10115
Germany
10115 (Fax)

HOME PAGE: http://www.ABCecon.com

IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods ( email )

Socle de la Grande Arche
1 Parvis de la Défense
Paris, La Défense Cedex, 92044
France

Pablo Figueroa

Gibson, Dunn & Crutcher LLP ( email )

1050 Connecticut Avenue, NW
Washington, DC 20036
United States

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