Minimum resale prices: Is a ban justified ?
Abstract
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.