Thursday, April 2, 2009
Posted by D. Daniel Sokol
Pierre Biscourp (ENSAE), Xavier Boutin (INSEE and CREST-LEI), and Thibaud Verge (CREST-LEI) describe The Effects of Retail Regulations on Prices: Evidence from the Loi Galland.
ABSTRACT: In 1997, a new legislation banning below-invoice retail prices came into force in France. Individually negotiated discounts could no longer be passed on to consumers, which is equivalent to allowing industry-wide price floors. The anti-competitive effects of such practices are well-known. The elimination of intra-brand competition is expected to lead to a sharp increase in the retail prices. Using CPI raw data, we find evidence supporting this claim. The modification or revocation of the existing legislation (as it has been done in Ireland in December 2005) would then be expected to reduce retail prices.