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
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: Suggested Citation
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