The Antitrust Laws of the United States of America: A Study of Competition Enforced by Law

By A. D. Neale | Go to book overview

CHAPTER XI
RESALE-PRICE MAINTENANCE

1. Definition of resale-price maintenance: arguments for and against the practice

Resale-price maintenance is the practice whereby those who supply goods to traders lay down the prices to be charged on resale and take action to see that these prices are complied with. The typical example is that of the manufacturer of branded goods who prescribes and seeks to enforce the prices at which his goods shall be sold in retail shops.

Resale-price maintenance is a curiosity among restrictive practices in that the manufacturers who operate it and the traders who take part in it and support it often have quite different interests to promote. Moreover, the market in price-maintained goods often has elements of a competitive situation mixed up with restrictive features in such a way that the resulting effect on the public interest is particularly difficult to determine.

Retail trade is subject no less than other branches of commerce to the type of pressures which lead businessmen to desire to mitigate or suppress vigorous price-competition. When manufacturers are already willing or can be persuaded to require that their goods be sold in all shops at a common price, the result may approximate to that of a horizontal price-fixing agreement among the retailers, who may favour resale-price maintenance for this reason. (A horizontal agreement among retailers without the support of suppliers would rarely be effective because of the absence of any sanction against backsliders.)

Resale-price maintenance, however, differs in significant ways from horizontal price-fixing. For one thing it normally applies only to branded goods. But very few shops sell branded goods exclusively; and it can be argued that the absence of price-competition between traders in particular branded lines does not mean in theory or in fact that there will be no price-competition between them over their trade as a whole. Price-competition might be intensified in other lines. Secondly, there are often competing branded lines all of which are price-maintained; a particular brand of toothpaste may be sold at the same price at all shops, but at the same time all shops will carry other

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