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date: 08 December 2019

Abstract and Keywords

Manufacturers use resale price maintenance even when there is no free-riding as a way to compensate retailers efficiently for promotional services (such as stocking, shelf space, and point-of-sale selling efforts) that induce incremental manufacturer sales. Retailers must be separately compensated by manufacturers for supplying these promotional services when the services have large interbrand and small interretailer demand effects, and hence retailers have significant discretion regarding which manufacturer’s products they distribute and promote. Retailer price discounting, especially by online retailers, has the potential to disrupt the manufacturer’s purchase of effective retail distribution by reducing retailer compensation and consequently the promotional services retailers devote to the sale of the manufacturer’s products. Implications of this analysis for the design of efficient retail distribution that includes online retailing are described under current US and EU antitrust law conditions.

Keywords: resale price maintenance, free-riding, online retailing, US antitrust law, EU antitrust law

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