Pablo Figueroa, Andres Font Galarza, Frank Maier-Rigaud, Nov 14, 2013
Resale or retail price maintenance refers to an agreement between an upstream and a downstream firm in a vertical value chain concerning the retail level price. RPM refers either to a maximum, a minimum, or a fixed price that retailers agree to charge their customers.
At first sight it may seem counterintuitive for a manufacturer to enter into an agreement that seemingly only aims at guaranteeing the retailer a certain margin that cannot be competed away and that the manufacturer may potentially have forfeited. Indeed, RPM arrangements can not only be counter-intuitive but also anticompetitive, particularly when they function as the tip of the iceberg of a hub-and-spoke horizontal collusion system.
In light of the controversial legal debate on how to characterize RPM from a competition point of view, section II briefly describes the evolution of EU policy and the current legal situation concerning. Section III contains an overview of the main efficiency justifications advanced in the economic literature, focusing on horizontal and vertical externalities but also on the particularities of the so-called Veblen goods. Section IV draws on both previous sections in discussing nuances that can already be identified in the Commission’s most recent guidelines and that may be indicative of a coming more economic approach also regarding RPM. In light of the economic literature and the efficiency justifications …