Resale Price Maintenance Agreements Research Articles

Empirical Effects of Resale Price Maintenance: Evidence from Fixed Book Price Policies in Europe

Abstract This paper investigates the effects of Resale Price Maintenance (RPM) agreements in Europe by studying a legally permitted form of RPM in the book market. In particular, we study the effects of such agreements on prices and sales, finding that countries which have Fixed Book Prices policies witness higher book sales, relative to countries without such a policy, with no noticeable effect on the average price of books. We suggest that the mechanism for these findings is that FBP policies promote non-price competition and a diverse network of retailers, increasing quantity, whereas a change in bargaining power reduces double marginalisation, offsetting upward pricing pressure from RPM. While these results are limited to the book sector and are based on a limited number of countries changing policy, they nonetheless highlight that RPM agreements have the ability to confer positive competition effects and absolute prohibition of such agreements may not always be warranted.

Uporedna ekonomsko-pravna analiza vertikalnih restriktivnih sporazuma sa fokusom na određivanje cena u daljoj prodaji

The paper article contains a comparative analysis of the legal treatment of resale price maintenance (RPM) agreements. The comparative analysis is based on the US antitrust, EU competition, and Republic of Serbia competition laws. These agreements still cause numerous discussions among authors without a unique position about their practical application. The paper article also considers and presents the basic market effects these agreements could cause in practice. Based on comparative analysis and consideration of different approaches in their treatment, the conclusion is that a new flexible approach is needed to measure the effects of RPM agreements on the market in general, market participants, and consumers. Accordingly, the authors recommend improving competition law in the Republic of Serbia.

The challenges of anti-competitive practices and consumer protection in Nigeria

This article critically examines the concepts and the challenges of price mechanisms, anti-competitive practices and consumer protection in Nigeria, and considers ways of promoting and protecting the interests of consumers in respect of products and services. The article evaluates and defines the concept of price mechanisms, and the concept of the consumer who needs to be protected. It discusses anticompetitive practices, such as monopolies, mergers and acquisitions, and restrictive trade practices, resale price maintenance agreements, misleading advertising, false sales and market values. It considers the protection of consumers and the legal frameworks applicable to the subject. In conclusion, the article recommends appropriate measures and a proactive, pragmatic approach to tackling the menace of false market sales and restrictive trade practices by calling on stakeholders and the government to regulate monopolies, mergers and uncompetitive business practices which are detrimental to the interests of the consumer. It calls for controls and restrictions on unfair trade practices and appropriate sanctions so that those who persistently prejudice consumers in this way are brought to book.

Resale Price Maintenance: Implications of Marketing Trends for the Colgate Doctrine and the Leegin Factors

Resale price maintenance (RPM) is a channel pricing strategy that restricts the price below which a reseller may sell a manufacturer’s product. More than $300 billion in U.S. sales are affected annually by RPM agreements. Adopting a marketing perspective and analyzing trends in distribution arrangements and marketing channel systems, the authors offer predictions regarding the antitrust treatment of RPM following the Supreme Court’s decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2007). This research furthers the understanding of the role of the prior Colgate doctrine in establishing the existence of an RPM agreement and the impact of the new Leegin factors for assessing the competitive effects of RPM. Implications for stakeholders affected by RPM and related unilateral price policies are discussed.

China’s Dual Enforcement System regarding Resale Price Maintenance Agreements

RPM can be both beneficial and harmful to competition in various circumstances. RPM has been scrutinized with the subject of private litigation in the US, the EU and China regarding whether RPM is per se illegal or subject to the rule of reason. China's dual-mode regulatory scheme provokes more challenges and further complicates foreign companies' global expansion strategies. Following a review of the US and EU approaches to RPM, the article examines the landmark case of Ruibang v. J&J, which provides clarity and in-depth guidance on the unique Chinese system. It is argued that these administrative and legal uncertainties may not be addressed until a new judicial interpretation is provided by the Supreme People's Court.

Resale Price Maintenance: A Review and Call for Research

Resale price maintenance (RPM) is a channel pricing strategy that establishes the price below which a product cannot be resold. The Supreme Court’s decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2007) overruled a nearly 100-year old rule against RPM agreements. Together with evolving changes in business, the decision has focused increased attention on this marketing practice and prompted calls for contemporary research on its use and effects. The authors organize historical understanding, review past empirical research, advance new perspectives and propositions for research, discuss marketing literature with potential to enhance future understanding of RPM, and offer an agenda for interested researchers.

Hub-and-Spoke Conspiracies: The Vertical Expression of a Horizontal Desire?

An increasing number of horizontal agreements involve both competitors and their common suppliers (or retailers). As vertical agreements, indirect horizontal agreements can help reduce coordination failures, but they also have the capacity to dampen competition. The negative welfare effect of these agreements generally dominates when undertakings try and raise prices.Competition authorities generally distinguish alleged infringements between competitors active on the same relevant market (horizontal information exchanges or agreements) and those between undertakings and their suppliers or their customers (vertical agreements). A rising number of infringements mix elements of vertical and horizontal concerted practices, because they are horizontal in nature, but involve competitors and their suppliers (or retailers). They are referred to as hub-and-spoke exchanges (or A-B-C exchanges), where the spokes are active on the same product market and interact indirectly through the hub.From an economics perspective, there is not always an indisputable motive to classify hub-and-spoke agreements as mainly vertical with an horizontal effect, or mainly horizontal with the involvement of a supplier. In the European Union, the legal standards for horizontal and vertical infringements differ significantly. While the Commission’s Guidelines on Vertical Restraints characterize vertical minimum resale price maintenance agreements as hardcore restrictions, relying on the presumption that such agreements have an anticompetitive effect, the legal test for indirect horizontal concerted practices developed by the UK Courts is more demanding. It requires that competition authorities prove that the spokes and the hub transmit the information with an anticompetitive intent.

Frederic M. Scherer on vertical agreements: staking out the middle ground on resale price maintenance°

This paper describes the influence of Frederic M. Scherer in the field of Industrial Organization. The emphasis is on Scherer’s research with regard to vertical agreements between a manufacturer and its downstream vendors, with particular focus on Scherer’s writings about resale price maintenance (RPM). Scherer’s views on RPM agreements are contrasted with the Chicago school’s liberality and the Warren Court’s stringency, showing how Scherer staked out a middle ground. The paper also assesses the influence of Scherer in moving US antitrust policy from its historic stance of treating RPM as per se illegal to its current treatment under the rule of reason.

Porter's generic strategies as applied toward e‐tailers post‐Leegin

PurposeThe purpose of this paper is to evaluate the applicability of Porter's model of generic strategies as applied toward online retailers following the United States Supreme Court's decision in Leegin, which appears to signal greater tolerance for minimum vertical price maintenance agreements.Design/methodology/approachThe paper is based on a review of the literature and examines cases relating to minimum resale price maintenance agreements. Relying heavily on Porter's framework, it explores the strategic implications of the recent decision in Leegin for on‐line retailers, many of whom rely on a cost leadership competitive advantage.FindingsSince the increased likelihood that vertical minimum price maintenance agreements will be permitted, thereby lowering the barriers to entry, online retailers may be deterred from utilizing low costs to under‐price traditional retailers. As a result, the Leegin holding has devalued the feasibility of pursuing a cost leadership strategy, and e‐tailers may need to adopt alternative or integrative strategies for securing a competitive advantage.Originality/valueThe paper incorporates literature pertaining to Porter's model of generic strategies, online pricing strategies, as well as recent court cases.

Leegin Creative Leather Products, Inc. v. PSKS, Inc.: The Strange Career of the Law of Resale Price Maintenance

The article tells the long, fascinating and sometimes hardly credible story of the law of resale price maintenance (RPM). The 1911 Dr. Miles decision, overruled by Leegin, was one of the oldest and most important in the history of antitrust in that it extended the coverage of the Sherman Act from competitor (horizontal) to buyer-seller (vertical) agreements, holding manufacturer-dealer RPM agreements illegal per se. Eight years later the Court in effect overruled Dr. Miles in the Colgate case (at the urging of defendant's counsel, former Justice Charles Evan Hughes, the author of Dr. Miles) by making a non-existent distinction between express and tacit agreements. It then effectively overruled Colgate in turn by ignoring the supposed distinction. In 1937 Congress negated Dr. Miles by authorizing the states to pass fair trade legislation permitting RPM, but in 1975 repealed the authorization, restoring Dr. Miles to full health. Two years later, Dr. Miles was again effectively overruled by the Court's adoption in the seminal Sylvania decision of the Chicago school of economics' skeptical view of antitrust and per se rules. It was further undermined, if possible, by the Court's revival of the Colgate doctrine and by making the necessary agreement hard to prove. The seemingly shocking Leegin decision, therefore, in fact merely made the overruling explicit. Justice Breyer, joined by Justices Stevens, Souter, and Ginsberg, vigorously dissented, apparently relying more on stare decisis than on the merits of Dr. Miles, a reliance much weakened by the Court's prior overruling of two cases on closely related issues. The paper also briefly discusses the very limited present day relevance and usefulness of the traditional per se/rule of reason distinction, and debunks the Court's conventional assertion that it adopts a per se rule only after long experience with the restraint. The history of the law of RPM illustrates, at its end and at its beginning that ideology can have more to do than economics or logic with the making of antitrust law, paralleling its role in constitutional law. Leegin also makes clear that the newly reconstituted Court remains committed to the Chicago school view of antitrust and has a flexible approach to stare decisis.

Sasquatch, the Abominable Snowman, Free Riders and other Elusive Beings

Recent arguments by some legal scholars and attempts by the Antitrust Department of the US. Justice Department to overturn the 74-year old per se prohibition of vertical price restrictions have invoked the argument that resale price maintenance agreements (RPMs) control "free riders". This article reviews the legal history of the per se rule and examines the alleged procompetitive benefits of eliminating free riders through the use of RPM agreements by identifying the situations in which free riding is likely to occur, the circumstances in which it can be controlled by an RPM, and the social costs of using RPMs. It is concluded that true free riding is a relatively rare phenomenon and the benefit from moving to a rule of reason is insufficient to offset the social and economic costs of abandoning the per se rule.