5/22/08
Resale Price Maintenance
Luc Peeperkorn
DG Competition
European Commission
Paris – May 2008
The slides and speech reflect the author’
author’ s view and do not necessarily
reflect the view of DG Competition or the European Commission
Current rules in EU
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BER 2790/1999 and Guidelines on Vertical
Restraints: an effects-based approach
towards vertical agreements
Necessary to assess effects both for Art
81(1) – burden of proof on the authority –
as for Art 81(3) – burden of proof on
company
Safe harbour as long as market share
does not exceed 30%: net positive
balance presumed – burden of proof on
authority in case it wants to withdraw the
block exemption
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5/22/08
Current rules in EU towards RPM
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RPM is a hardcore restriction and
therewith cannot benefit from block
exemption
Art 4(a) BER 2790 makes it clear
that this holds for fixed and
minimum resale prices, but not for
maximum and recommended resale
prices, which are covered by the BER
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Hardcore approach towards RPM
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What are the consequences of including a
hardcore restriction in an agreement:
•
•
•
•
Agreement outside BER
Art 81(1): presumption of negative effects
Art 81(3): negative presumption
However, Art 81(3) not excluded: in case
convincing evidence for likely positive effects,
then the authority is forced to show the likely
negative effects
• See Guidelines VR §46-48 and Guidelines Art
81(3) §17-27 and §40-47
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Difference hardcore and per se
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Per se: form determines the outcome: as soon as
RPM is established, no further analysis possible
Leegin:
Leegin: lower courts refused to accept expert
testimony on pro-competitive effects
Hardcore: Art 81(3) in principle possible: applies
to all agreements that fulfil the 4 conditions
The two (negative) presumptions in relation to
the anti- respectively pro-competitive effects lead
to a rule of reason approach where the order of
bringing forward evidence and showing effects is
reversed: first the positive effects need to be
shown by the firm, before the negative effects
are shown by the authority
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Leegin in the EU
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Expert testimony on pro-competitive effects
would have to be taken into account, even
though there is the presumption that it is unlikely
that RPM will have positive effects, that a fair
share will be passed on to consumers and/or that
the restraint is indispensable
US Supreme Court: “…courts
“…courts can devise the
litigation structure … devise rules over time for
offering proof, or even presumptions where
justified, to make the rule of reason a fair and
efficient way to prohibit anticompetitive restraints
and to promote procompetitive ones”
ones”
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But the economists say ….
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Tirole:
Tirole: “Theoretically, the only defensible
position on vertical restraints seems to be
the rule of reason. Most vertical restraints
can increase or decrease welfare,
depending on the environment. Legality or
illegality per se thus seems unwarranted”
unwarranted”
Appropriate as theoretical/general point of
departure but VRs differ in their capability
and likelihood to have positive as well as
negative effects
Theoretical and empirical literature does
not distinguish sufficiently between VRs
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RPM and the negative effects
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Not: market foreclosure
However:
• facilitation of collusion (both up- and
down-stream)
• elimination of intra-brand price
competition: direct effect is price
increase
• loss of pressure on the supplier’
supplier’s margin
• loss of dynamism and innovation from
in particular discounters
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RPM and the positive effects
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Serious doubts about the effectiveness of
and the likelihood that RPM leads to any of
the following positive effects
More inter-brand competition: more
service & promotion by retailers in case of
free riding problem
More sales effort by retailers also in case
no free riding problem exists
Incentive for retailers to keep more stocks
Stimulate entry of new brand/supplier in
case of specific free rider problem in
relation to market development costs
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Conclusion
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Current rules, which seem to work well in
general, are still unchanged and applicable
Hardcore approach more flexible than per se
RPM related efficiency arguments seem not very
convincing. Caution to allow restriction of price
competition between distributors and to deny
consumers the direct benefit of a price decrease
Review process of BER 2790, which expires in
May 2010, has just started: it will be an open
process with consultation of all concerned, where
also the treatment of RPM will be hotly debated
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