A Consumer Behavioral Approach to Resale Price Maintenance

Posted by Social Science Research Network

A Consumer Behavioral Approach to Resale Price Maintenance

 By Thomas K. Cheng  (The University of Hong Kong – Faculty of Law)

This Article re-examines the various pro-competitive justifications and theories of harm for resale price maintenance (“RPM”), one of the most controversial practices in antitrust law. It argues that the existing literature overlooks three important issues regarding RPM, namely, the kind of retail service invoked in a justification, the kind of retailer at issue, and the prevailing model of consumer behavior. All three issues have important implications for the plausibility and validity of the various justifications and theories of harm for RPM. It argues that most of the existing literature presumes the inter-brand primacy model of consumer behavior. Once this model is not applicable, much of the prevailing analysis breaks down and the legality of RPM needs to be reconsidered. In particular, this Article demonstrates that many of the accepted justifications for RPM are of doubtful validity or are only valid under limited circumstances. This lends support to a more hostile view of RPM.

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