Three Cases in Search of a Theory: Resale Price Maintenance in the UK

"Vertical agreements in general, and resale price maintenance (RPM) in particular, can be used both in a pro-competitive way by improving efficiencies and facilitating entry into new markets, and in an anticompetitive way by blocking new entrants, restoring monopoly profits, dampening competition or facilitating collusion. One element stands out when assessing this crucial trade-off in determining the likely impact on competition, and finally on consumers, of vertical restraints in general: the importance of the market context. The presence of effective upstream competition helps the pro- competitive and efficiency effects of vertical restraints. On the other hand, anticompetitive effects are more likely when upstream competition is weak and there are barriers to entry at either the producer or distributor level. For collusive

anticompetitive effects to be a threat it is necessary that suppliers or retailers form a tight oligopoly such that RPM is applied by all or many of them."