Thursday, June 11, 2009
Posted by D. Daniel Sokol
Patrick Rey (Toulouse - Econ) and Thibaud Vergé (CREST-LEI) explain Resale Price Maintenance and Interlocking Relationships.
ABSTRACT: An often expressed idea to motivate the per se illegality of RPM is that it can limit interbrand as well as intrabrand competition. This paper analyzes this argument in a context where manufacturers and retailers enter into interlocking relationships. It is shown that, even as part of purely bilateral vertical contracts, RPM indeed limits the exercise of both inter- and intra-brand competition and can generate industry-wide monopoly pricing. The final impact on prices depends on the extent of potential competition at either level as well as on the manufacturers’ and retailers’ influence in determining the terms of the contracts. Our analysis sheds a new light on ongoing legal developments and is supported by recent empirical studies.