LAW & ECONOMICS: MINIMUM RESALE PRICES - LEEGIN DECISION (U.S. SUPREME COURT) - ECONOMIC FOUNDATIONS - PROCOMPETITIVE EXPLANATIONS - VALIDITY OF THE ANTICOMPETITIVE EXPLANATIONS - EMPIRICAL EVIDENCE - CURRENT STATE OF ECONOMIC KNOWLEDGE - RULE OF REASON BASED ON MARKET SHARE THRESHOLDS - LEGALITY OR ILLEGALITY PRESUMPTIONS

Minimum resale prices: Is a ban justified?

The systematic hostility towards minimum resale prices in most jurisdictions - at least until the recent Leegin Decision by the U.S. Supreme Court - lacks solid economic foundations. Economic theory identified mechanisms through which minimum resale prices might be procompetitive or anticompetitive. The procompetitive explanations seem at least plausible in many sectors, and the validity of the anticompetitive ones depends on whether some rather strong conditions are met. The scant empirical evidence is mixed as well. In the light of the current state of economic knowledge, a structured rule of reason based on market share thresholds and allowing for legality or illegality presumptions to be rebutted appears to be more appropriate than an all-out ban.

1. In most jurisdictions, imposing minimum resale price has long been, or still is considered one of the most serious antitrust offences. In the United States, at least until the recent Supreme Court Leegin ruling, minimum resale price maintenance (hereafter, “minimum RPM”) was subject to a per se prohibition1. In the European Union, minimum RPM is viewed as a “hard core” restriction and is as such per se unlawful. 2. There have been some signs however that this hostility may be easing. The most spectacular one is the abovementioned U.S. Supreme Court ruling, which replaces the per se prohibition with a rule of reason. In the European Union, decisions by competition authorities, even when they condemn minimum RPM and claim that it seriously harms consumers, occasionally acknowledge that

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David Spector, Minimum resale prices: Is a ban justified?, September 2007, Concurrences Review N° 3-2007, Art. N° 13802, pp. 28-32

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