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Abstract

Part I of this Essay sets out why the legal framework in the EU amplifies what are, in reality, relatively small differences in thinking about resale price maintenance ("RPM"). This amplification is primarily due to the fact that the legal system asks economists, in the name of legal certainty, to draw a false dichotomy between those agreement and practices that are harmful and those that are beneficial. For practices like naked price-fixing, it is relatively easy for economists to agree on an answer. It is harder, however, for practices like RPM, which can give rise to serious anticompetitive harm, but can also prove to be indispensable for important and valuable benefits to consumers. Part II therefore provides a summary of the economic literature on RPM and emphasizes the need for further empirical research in this area. Within the current legal framework, there is not yet sufficient evidence to justify moving RPM out of the EU’s “presumed illegality” or “object” box and into a case-by-case assessment of “effect” box. It is clear, however, that this approach will sometimes presume that some RPM arrangements are illegal when in fact they either do not restrict competition or, if they do, they are nevertheless justified by generating consumer benefits. Accordingly, we would have significant reservations about a legal framework that goes beyond “presumed illegality,” for example making RPM de facto illegal or even per se illegal, as in the United States before Leegin. On the basis of these beliefs, Part III suggests several small steps that can be taken towards assessing RPM within a “presumed illegality” framework without sacrificing too much of the legal certainty that is realized under the current approach. First, we argue that it is important to ensure that any presumption of illegality is truly rebuttable, and provide some thoughts as to how this might work. This includes the requirement that the authority should set out at least one plausible “theory of harm” that is consistent with known facts. Second, we suggest that a series of screens might usefully be adopted for considering whether there is likely to be a credible theory of harm in any particular case of RPM, and for prioritizing cases on this basis. Third we recognize that a prioritization approach may not be as effective in a system such as the United States, where competition law is primarily enforced via cases brought by private litigants. There may, nevertheless, be some potential to use screens of this sort to help define a legal standard. Under this approach, failure of the screens would demonstrate that there is no credible theory of harm associated with a particular case of RPM and the presumption of illegality could be rebutted. This approach would be similar to the screens that are commonly applied in the EU in article 102 TFEU ("Treaty on the Functioning of the European Union”) (article 82 EC (“Treaty Establishing the European Community”)) abuse-of-dominance cases.

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