Antitrust & Competition Policy Blog

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

Monday, January 18, 2010

Minimum Resale Price Maintenance: Some Empirical Evidence from Maryland

Posted by D. Daniel Sokol

Elizabeth M. Bailey and Gregory K. Leonard (both NERA) explain Minimum Resale Price Maintenance: Some Empirical Evidence from Maryland.

ABSTRACT: The Supreme Court’s decision in Leegin was, and continues to be, controversial. In early 2009, the Federal Trade Commission held a series of workshops to assess situations in which RPM will be pro-competitive, anti-competitive, or competitively neutral. In addition, the United States Congress and some states have considered legislation as a means to circumvent Leegin. The State of Maryland, for example, enacted a statute in response to Leegin that characterizes a manufacturer’s setting of a minimum price below which a retailer cannot sell as "an unreasonable restraint of trade," thereby restoring the per se standard.

From an economist’s perspective, the Maryland statute, which went into effect on 1 October 2009, provides a natural experiment that can be used to analyze the effect of RPM on retail prices. We consider the effect of the legislation on video game prices in Maryland. Video games are a product for which manufacturers have historically been known to set minimum prices. RPM for video games may make good business sense, and be pro-competitive, as presale demonstration services (i.e., opportunities for potential consumers to try out video games in-store) are likely to be important drivers of consumer demand. Our empirical analysis is the first—and only—study of which we are aware in the new post Le

egin world. As we discuss below, we find virtually no change in retail prices before and after the legislation went into effect.

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