Price Maintenance Research Articles

Online RPM and MFN Under Antitrust Law and Economics

The legal framing of a firm’s pricing strategy can determine whether it constitutes online resale price maintenance (RPM) or online most favored nation (MFN). Together, cases that involve online RPM and MFN can be viewed as a natural experiment of how antitrust economics and law may adapt to an online world. Thus far, legal theories that have been inconsistent with economic theories have dictated enforcement across jurisdictions, which has led to confusion that thwarts potentially efficient business practices. This paper distinguishes issues of online RPM from traditional RPM and online RPM from online MFN. We apply the economics learning to RPM and analyze the antitrust cases of online RPM and MFN to date in the United States, Europe, and Australia. Finally, we offer policy recommendations that reduce the confusion in current legal doctrine.

Resale Price Maintenance: An Economic Analysis of its Anticompetitive Potential

A decade ago, Leegin overruled Dr. Miles and subjected RPM to rule-of-reason treatment, under which the potential for anticompetitive conduct should be analyzed (rather than automatically assumed to be present). In its Leegin decision, the Supreme Court identified four ways in which RPM could be used to retard competition and consequently reduce consumer welfare: The first two involve the well-known concerns that RPM could be used to support either a manufacturer cartel or a dealer cartel; the last two involve unilateral conduct designed to foreclose entry or hinder smaller rivals. In this paper, we analyze these potentially harmful uses of RPM. We conclude that RPM does not pose a substantial anticompetitive threat.

Online RPM and MFN Under Antitrust Law and Economics

Depending on the legal framing, behavior that might in some circumstances resemble online resale price maintenance (RPM) agreements in other circumstances may instead resemble online most favored nation (MFN) agreements. Together, the cases that involve online RPM and MFN can be viewed as a natural experiment of how antitrust economics and law can adapt to an online world. Thus far, enforcement across jurisdictions has been based on economic theories that do not always match up with legal doctrine. Doctrinal confusion can thwart business practices that may be efficient.This paper makes a number of contributions. We distinguish issues of online RPM from traditional RPM and online RPM from online MFN. Then, we apply the economic learning on RPM and analyze the antitrust cases of online RPM and MFN to date across the United States, Europe and Australia. The last part of this paper offers policy recommendations that reduce the confusion in current legal doctrine.

Design of Proportional Integral Controllers for Speed Control of Three Phase Induction Motor Based on Direct-Axis Coordinate Using Indirect Field Oriented Control

The use of three phase induction motor as the electric drive is very popular because of its cheaper price, robust construction and free maintenance, but it has the disadvantage to be not linear so it is hard to be controlled. Some developed methods are expected to obtain a better control. This paper proposes a design of speed control for three phase induction motor using Proportional Integral controller based on Indirect Field Oriented Control. By using these controls can help to get a better output response, evidenced by very short time to achieve speed reference, to reduce overshoot and to achieve shorter settling time condition. The simulation result speed control at a speed reference of 300 Rpm using Proportional Integral controller has a faster response 0.18s to reach a speed reference and to reach faster the settling time of 0.78s rather respect to the Indirect Field Oriented Control without any speed control; furthermore it can eliminate the overshoot.

Price-Related Cartels under the Chinese Anti-monopoly Law Regime: The Need to Clarify Four Substantive and Procedural Issues

This article reviews the development of anti-monopoly enforcement against price-related cartels since the entry into force of the Anti-monopoly Law in 2008 and critically illustrates various inconsistencies and deficiencies in its enforcement with reference to the competition law and the enforcement experience of foreign jurisdictions, i.e., the EU and US. It proceeds to argue that compared with the flexibility of decisions made on a case-by-case basis brought by Court judgments, legal certainty and predictability offered by the administrative guidelines and regulations may be a more urgent requisite for Chinese anti-monopoly enforcement against price-related cartels at this stage. A substantial part of this article is devoted to exploring four aspects which need to be clarified through the issuing of administrative regulations or guidelines, namely: (1) the boundary between the application of the Anti-monopoly Law (AML) and the Price Law to horizontal price fixing; (2) the standardized approach (the ‘object’ or ‘effect’ test) towards horizontal price fixing; (3) the gap of burden of proof between public enforcement and private litigation towards minimum and fixed RPM; and (4) the basic competition law techniques in assessing anticompetitive effects. This article further demonstrates that these clarifications may be conducive to shaping a more consistent internal approach towards public and private enforcement against price-related cartels, and constructing a solid ground for exploring unsettled substantive issues concerning minimum and fixed resale price maintenance (RPM).

Book Review: Resale Price Maintenance and Vertical Territorial Restrictions: Theory and Practice in EU Competition Law and US Antitrust Law (New Horizons in Competition Law and Economics), by B

Book Review: <i>Resale Price Maintenance and Vertical Territorial Restrictions: Theory and Practice in EU Competition Law and US Antitrust Law (New Horizons in Competition Law and Economics</i>), by B

Roger Blair and the Goals of Antitrust

This article examines Roger Blair’s remarkable scholarship concerning the goals of the antitrust laws. Blair has been a consistent advocate of a “general welfare” as opposed to a “consumer welfare” standard for antitrust, but he has also repeatedly observed that the choice of a test makes a difference in only a few cases. His scholarship also uncovered important inconsistencies in antitrust analysis. One is its treatment of bilateral monopoly, in which antitrust often condemns practice that are welfare increasing to the extent that they reflect the presence of countervailing power in bilateral monopoly markets. For example, buyers’ cartels in response to seller market power are unlawful per se even though many are welfare improvements over the existing situation. Consistent with his premise, Blair advocates a strong efficiency defense in merger cases, and shows that the Albrecht rule condemning maximum resale price maintenance is indefensible on both general welfare and consumer welfare grounds.

Resale Price Maintenance by Japanese Newspapers

In Japan, newspapers enjoy a special exemption from antimonopoly prohibitions against resale price maintenance (supp liers’ stipulations that bar downstream firms from price discounting ), but are each require d to set uniform prices throughout Japan. In fact, the newspapers have rarely changed their subscription prices in recent years, and the three leading national dailies, together accounting for about half the total industry circulation, and thirteen other papers accounting for another one eighth of industry circulation, all have set exactly the same price (3,925 yen per month). The remaining local papers all set lower prices. The authorized resale price maintenance, a nd prohibition against prices that vary geographically, have allowed collusive price increases that I here estimate to be around 500 yen per month, entailing economic waste of about 300-billion yen ($3-billion) per year but adding only around 16-billion yen per year to newspaper profit. The increased profit margin on subscriptions is much offset by reduced sale of ads.

Interlocking relationships and quantity rationing

As shown by Rey and Vergé (2010), resale price maintenance can be used to maximize industry profit when competing manufacturers sell their brands through the same competing retailers. The present article shows how quantity rationing non-linear tariffs can be used to achieve the same outcome.

The Antitrust Implications of Minimum Advertised Pricing: The Case of the U.S. Music Industry

In May 2003, without admitting wrongdoing, music distributors and retailers settled with private plaintiffs and the Attorneys General of 43 States a civil suit regarding a conspiracy to inflate or support prices of prerecorded music products through an industry-wide strengthening of the music distributors Minimum Advertised Price (MAP) policies. The settlement leaves as an open question the proper economic and legal standard (rule of reason versus per se) to be adopted in such cases.MAP had both horizontal and vertical implications and may have facilitated a horizontal conspiracy between the music distributors. The MAP policies were alleged to be equivalent in effect to Retail Price Maintenance (RPM). The Federal Trade Commission (FTC) claimed that prices increased by approximately $2 per CD and that consumers paid an extra $480 million. The effectiveness of the MAP program in raising prices was due to the all-encompassing nature of the advertising restrictions, the industry-wide implementation of MAP programs, the payment and significance of the advertising subsidy, and the severe penalties imposed for a MAP violation. This paper illuminates the antitrust implications of MAP policies through consideration of related practices in the United States market for music CDs. When viewed from this vantage point, MAP appears to be as pernicious as RPM.

Resale Price Maintenance in Poland - Further Steps to its Liberalization or Stuck in a Status Quo?

Due to the recognition of their positive market effects, the evolving approach to minimum or fixed resale price maintenance (RPM) creates, in many countries, the requirement of analyzing their true economic outcomes. In the light of newest judgments delivered by the Polish Supreme Court, the purpose of this article is to analyze if it is still justified to qualify RPM as a multilateral practice that restricts competition ‘by object’ under Polish law.

Vertical Restraints

This article advances several reasons why EU competition policy on vertical restraints has been a failure. First, the distinction between price and nonprice restraints is inconsistent, since the economic effects of both practices are similar. Second, EU competition law creates a number of inefficiencies that cause a negative impact on social welfare; an example is the ban on absolute territorial protection that does not allow a full protection from free-riding. Third, it is doubtful that the inefficiencies of EU competition law can be justified by the market integration goal, since the rules may turn out to be ineffective in reaching this objective. Fourth, EU competition law on vertical restraints has created negative side effects: it has put an end to experimentation and innovation of competition rules at the member-state level and induced private interests groups to spend a lot of effort in lobbying national regulators. The example of resale price maintenance for books serves as an illustration of the latter problem. Several of the above pitfalls have been indicated by Richard Markovits in his treatise on U.S. antitrust law and EU competition law. These criticisms are supported in this paper and further expanded by a discussion of additional errors that have made the EU competition rules on vertical restraints a policy failure.

Manufacturer suggested retail prices, loss aversion and competition

We study a model of vertical relations with imperfect retail competition in which a fraction of the consumers display reference-dependent demand with respect to the manufacturer’s suggested retail price. We demonstrate that in equilibrium the suggestion will either be undercut or complied with by the retailers, but never surpassed: undercutting occurs if competition is fierce, the impact from consumers affected by reference-dependent preferences is significant, and high price suggestions are credible; compliance occurs otherwise. We provide comparisons, and discuss implications, for consumer surplus for the scenarios with suggested retail prices, without vertical restraints and with resale price maintenance.

Resale Price Maintenance Without Services

A valid defense of the use of resale price maintenance (RPM) in court now must explain how the RPM induces more services (or other non-pricing dimensions customers value). Often, however, services either do not play a significant role, or their significance is subject to debate. This happened in the 2013 China's RPM case of Rainbow v. Johnson & Johnson (JJ J&J sold medical equipment to China's hospitals through various distributors but how significant was the distributors' services is debatable. We argue that J&J's RPM, even if it never elicited more services from its distributors, can be pro-competitive. We explain why the RPM did help J&J compete with other brands. We formalize our explanation in a model based on Winter (1993). The model has one upstream and two downstream firms. Unlike Winter (1993), the downstream firms only choose their prices but nothing else. Without services, there exist equilibria under which one downstream firm would under-price when the upstream firm offers a uniform wholesale price together with a lump-sum transfer. The upstream firm can curb such an under-pricing incentive by imposing a minimum RPM. In a numerical example, we show that the use of RPM without services can increase the welfare of both the whole supply chain and the consumers.

Environmental Water Price Based on Water Environment Capacity and Ecological Water Consumption: A Case Study of Hefei

With the development and reform of water price policy, the most common view is that the total cost of water price can reflect the tradable traits of water resources, which can enhance the water use efficiency and achieve water resources sustainable utilization. Besides in actual pricing operation, from the angle of protection cost, water price characterizes the cost of controlling pollution and protecting water environment. Based on the two factors of water environment capacity and ecological water consumption embodied by the environment water price, this paper puts forward an effective environmental water price calculation model based on three elements of sewage treatment fee, ecological water price and water quality maintenance fee. And this paper takes the data of Hefei as an example, calculates reasonable environmental price, comparing which with the existing price, and finds the main existing problem which needs to be solved urgently in management.

Resale Price Maintenance in Poland – Further Steps to Its Liberalization or Stuck in a Status Quo?

Due to the recognition of their positive market effects, the evolving approach to minimum or fixed resale price maintenance (RPM) creates, in many countries, the requirement of analyzing their true economic outcomes. In the light of newest judgments delivered by the Polish Supreme Court, the purpose of this article is to analyze if it is still justified to qualify RPM as a multilateral practice that restricts competition ‘by object’ under Polish law.

California Fair Trade: Antitrust and the Politics of “Fairness” in U.S. Competition Policy

In the decades before World War II, U.S. antitrust law was anything but settled. Considerable pressure for antitrust revision came from the states. A perhaps unlikely leader, Edna Gleason, organized California's retail pharmacists and coordinated trade networks to monitor and enforce Resale Price Maintenance (RPM) contracts, a system of price-fixing, then known as “fair trade.” Progressive jurists, including Louis Brandeis and institutional economist E. R. A. Seligman, supported RPM as a protection to independent proprietors. The breakdown of legal and economic consensus regarding what constituted “unfair competition” allowed businesspeople to act as intermediaries between heterodox economic thought and contested antitrust law, ultimately tailoring federal policy to accommodate state regulations.

Apple's Agency Model and the Role of Resale Price Maintenance

The agency model is a business format used by online digital platform providers (such as Apple and Google) in which retail pricing decisions are delegated to upstream content providers subject to a fixed revenue-sharing rule. In a non-cooperative setting with competition both upstream and downstream, we show that the agency model can lead to higher or lower retail prices depending on the firms' revenue-sharing splits and the relative substitution between goods and between platforms. Even if industry-wide adoption of the agency model would lead to higher profits for all firms, there may be equilibria in which it is not universally adopted. Most-favored-nation clauses (used by Apple in the controversial e-books case) can be used in such settings to increase retail prices and induce adoption.

Australia: First Authorisation of Resale Price Maintenance?

Australia: First Authorisation of Resale Price Maintenance?

Designing a Low Cost Endoskeletal below Knee Prostheses with the Implementation of Appropriate Technology

The endoskeletal below knee prostheses was commercially available in Indonesia. More advanced products also available in the market but they come with expensive price and high maintenance cost. This paper presents a design concept of an affordable endoskeletal below knee prostheses for daily living with functional ankle joint. The design was developed through the application of appropriate technology approach from the total ergonomics framework which consists of 7 characteristics; technically feasible, ergonomic, energy saving, economical, socioculturally acceptable, environmental friendly, and trendy. The result is an endoskeletal below knee prostheses with multiaxis joint system and energy store-return components installed on its modular ankle joint.