The Economics of Resale Price Maintenance

ISSUES IN COMPETITION LAW AND POLICY (3-Volume Set), Kenneth G. Elzinga & David E. Mills, eds., ABA Section of Antitrust Law, 2008

22 Pages Posted: 23 Aug 2006 Last revised: 5 Jan 2010

Kenneth G. Elzinga

University of Virginia - Department of Economics

David E. Mills

University of Virginia - Department of Economics

Date Written: December 31, 2009

Abstract

Resale price maintenance involves agreements between manufacturers and downstream distributors that set the downstream price of the product, either at a minimum price or a maximum price. Antitrust law, until recently, condemned these vertical price arrangements as illegal per se. The Supreme Court, recognizing that maximum resale prices may enhance competition and improve consumer welfare, has held that this practice is now to be assessed under the rule of reason for its actual competitive effects.

Agreements on minimum prices, however, continue to be subject to the per se rule. Economic analysis reveals the conditions under which resale price maintenance can enhance consumer welfare and where it can harmconsumerwelfare. Because there are so many circumstances in which resale pricemaintenance promotes interbrand competition, the practice should be assessed in all situations under the rule of reason, the same way in which nonprice vertical contracts are analyzed.

Keywords: Competition, Antitrust, Vertical Contracts, Distribution

Suggested Citation

Elzinga, Kenneth G. and Mills, David E., The Economics of Resale Price Maintenance (December 31, 2009). ISSUES IN COMPETITION LAW AND POLICY (3-Volume Set), Kenneth G. Elzinga & David E. Mills, eds., ABA Section of Antitrust Law, 2008. Available at SSRN: https://ssrn.com/abstract=926072

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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