Analyzing the Anti-Competitive Assumption behind Resale Price Maintenance: Indian Experience & International Lessons

Abstract

Resale price maintenance (hereinafter RPM) is a vertical price fixing mechanism wherein the producer/manufactures enter into an agreement with the retailers/distributors for setting a particular price above or below which the product/service in the market cannot be traded in. It is a price ceiling/floor strategy adopted where “the upstream firm dictates pricing policies at subsequent stages of the distribution process. Such agreements are looked at with suspicion and doubt by regulators because they have direct impact on consumer welfare as they affect the prices at which the product will be sold and at the same time create a barrier of entry thereby affecting competition in the market. RPM is a complex issue as it can have varied effects on the overall competition in the market. The complexity of the issue can be gauged by the fact that different jurisdictions treat RPM agreements differently. While the USA has evolved from a per se approach to rule of reason, several jurisdictions including but not limited to European Union, Australia and China continue to regard RPM as (per se) illegal. The aim of this paper is to evaluate the evolution of RPM jurisprudence in India. The paper attempts to understand the concept of RPM, study the approach taken by the Competition Commission of India (hereinafter CCI) in landmark cases dealing with RPM. The paper draws a comparison with the jurisprudence of the US Supreme Court on RPM as it stands now and attempts to understand the rationale behind RPM and why firms enter into such agreements. It evaluates whether the recent direction taken by the CCI towards evaluating RPM Agreements in the Automobile Sector, is a step in the right direction and what lessons the CCI could incorporate in its approach for future.

Keywords: Resale Price Maintenance, Competition law, Antitrust, Indian competition law, CCI