RPM and the Rule of Reason: Ready or Not, Here We Come?

DOI10.1177/0003603X1005500108
AuthorLaurel A. Price,Pamela Jones Harbour
Date01 March 2010
Published date01 March 2010
Subject MatterArticle
RPM and the rule of reason:
Ready or not, here we come?
BY PAMELA JONES HARBOUR*
AND LAUREL A. PRICE**
We argue that a structured rule of reason, anchored by a rebuttable
presumption of illegality, is the appropriate legal standard for analyzing
resale price maintenance (RPM) agreements between manufacturers
and retailers. A presumption in favor of consumers is especially
necessary in light of the transformative possibilities of e-commerce.
Internet-based retailing innovations are likely to promote price-
reducing distribution efficiencies. The spread of RPM to the Internet,
however, is likely to retard such innovation and suppress efficiencies.
We also argue that RPM analysis focused solely on interbrand
competition will be insufficient, misleading, and biased in favor of
manufacturers. Consumers undeniably benefit from competition
among rival distributors of consumer goods. The inter/intrabrand
distinction is significant only in single-brand distribution channels. In
any event, innovation competition is more important to economic
progress than both inter- and intrabrand competition.
THE ANTITRUST BULLETIN:Vol. 55, No. 1/Spring 2010 :225
* Partner, Fulbright & Jawarski LLP; Former Commisioner, Federal
Trade Commission.
** Staff Attorney, Anticompetitive Practices Division, Bureau of
Competition, Federal Trade Commision; Former Attorney Adviser to
Commisioner Harbour.
AUTHORS’ NOTE: The views expressed in this article are solely ours; they do not
represent the policy or position of the Federal Trade Commission any of its other
Commissioners, or any other persons or organziations. We acknowledge Tara Isa
Koslov, Attorney Advisor to Commissioner Harbour, for her substantive comments
and editorial assistance.
© 2010 by Federal Legal Publications, Inc.
Just as the consensus is strong that the per se
rule for RPM was misplaced, so too there is a
strong consensus that RPM poses greater
threats to competition than do most nonprice
restraints, perhaps significantly greater.1
I. INTRODUCTION
The Sherman Act—the first, and most important, of our federal
antitrust laws—is almost 120 years old, but the legal and practical
problems that resale price maintenance (RPM)2pose for consumers,
merchants, and manufacturers are even older.
Resale price maintenance in the form of cooperation between manufac-
turers and their distributors for the elimination of price competition
among the latter began to take definite form with the development of
large scale national advertising of identified goods during the last half of
the nineteenth century. . . . Beginning with the early [eighteen-]eighties,
various methods of price maintenance have been developed, and at dif-
ferent times have come before the courts with the general result . . . that
they have ultimately been declared illegal.3
226 :THE ANTITRUST BULLETIN:Vol. 55, No. 1/Spring 2010
1PHILLIP E. AREEDA & HERBERT HOVENKAMP, FUNDAMENTALS OF
ANTITRUST LAW §16.04d, at 16-72.16 (3rd ed. Supp. 2009).
2Minimum resale price maintenance (RPM) refers to an agreement,
typically between a manufacturer or wholesaler and retailers, under which
the retailers are obligated to sell that manufacturer’s products to consumers
only at or above the prices specified by the manufacturer. Thomas K.
McCraw, Competition and “Fair Trade”: History and Theory, 16 RES. ECON.
HISTORY 185, 186 (1996). Maximum RPM is a similar agreement specifying a
price above which retailers cannot resell the manufacturer’s product. State
Oil Co. v. Khan, 522 U.S. 3 (1997) (maximum RPM to be judged under the
rule of reason). Unless otherwise indicated in this article, RPM refers only to
minimum resale price maintenance.
3FEDERAL TRADE COMMISSION, REPORT ON RESALE PRICE MAINTENANCE, PART
1, H.R. DOC. NO. 546, Part 1, at 98–99 (1929) (citing Claudius Temple Murchison,
Resale Price Maintenance, 82 COL. U. STUD. POL. SCI., Vol. 2, at 98 (1919)). This FTC
report was Part I of a two-part study of RPM; Part II was issued in 1931.

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