Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Friday, July 25, 2008

Resale Price Maintenance and the Rule of Reason

Posted by D. Daniel Sokol

Howard Marvel (Ohio State - Economics) discusses Resale Price Maintenance and the Rule of Reason.

ABSTRACT: A presumption that RPM is anticompetitive unless rebutted by a showing of efficiencies will not move the needle far from per se illegality, given the difficulties of conclusively proving efficiencies. In contrast, a default rule requiring proof of anticompetitive impact will also be tough to overcome, mostly because such anticompetitive outcomes appear to be rare. A rule between these polar defaults will be difficult to implement, as comparison periods with and without RPM are unlikely to be available. Indeed, when firms have agreed to drop RPM, the results for interbrand competition have ranged from troubling to disastrous. Without such comparisons, efficiency explanations for RPM run a significant risk of being dismissed as pretextual. If the problem of sorting uses of RPM according to their economic effects is tough, shortcuts can result in very inefficient outcomes. For example, we will see below that the states have continued to espouse an economically inappropriate price effects test.  At the end of this article, I provide suggestions for dealing with the transition period between illegality and the emergence of an agreed-upon rule of reason framework.

http://lawprofessors.typepad.com/antitrustprof_blog/2008/07/resale-price-ma.html

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