Resale Price Maintenance, Antitrust Regulation

Resale Price Maintenance("RPM") means dealers at the different stages in transaction chains agree on arrangements that one shall comply with fixed prices pre-aligned by the seller when it resell the same products to a third party,and/or the third party resell the products in accordance with certain fixed prices;otherwise liquidated damages or other civil sanctions,e.g.ceasing supply,shall be imposed consequently.Restriction on RPM originated from the case Dr.Miles Medical Co.in 1911.As a form of vertical restrictions,there are a large quantity of cases related to RPM in exist.The impact on competition is always a focus of arguments among economists and legal scholars.The provisions on RPM in Anti-monopoly laws varied from time to time based on conclusions from academic research.Abundant articles, legislation materials and judicial precedents provide study bases and objectives on how to regulate RPM in the anti-monopoly law of China.The complexity of RPM is shown in two respects.First of all,RPM,as a kind of vertical restriction,delivers uncertainty to competition effect.It can spur distributions to provider better services and explore new markets,but also can restrict inter-brand competition so that affect inter-band competition.Secondly,although RPM usually is interpreted from the aspect of vertical relationship,it can provide a cloak to horizontal conspiracy between manufacturers and dealers.The restriction on conspiracy is always extremely rigorous.Therefore,when a case mixed by vertical and horizontal relationships,the difficulty of restriction is lifted accordingly.This article analyzes inner logic from vertical and horizontal perspectives by hackling RPM theories and cases and points out deficiencies of the existing theories. To restrict RPM,there usually are two levels.The first is general restraints to RPM, which require the performer of RPM has dominant market position,because only the enterprises dominating the market can hurt competition.The second is to tackling problems triggered by RMP by imposing corresponding restraints.The major contents of the article specifically including the following: The first Section introduces the concept and classification and clarifies the fundamental questions of research.The performer of RPM is undertaking defined by most countries,including corporation,association,guild,individual,governments and so on.Although a parent company and its subsidiary are independent from each other in terms of legal liability,the business decision of subsidiary is fully subject to parent company.It has no economic independence,and therefore RPM between them does not constitute RPM in anti-monopoly law.With regard to the objective of RPM,some scholars think it consists of products and services.However,services are undividable and resale of services cannot realize in practice,and hence they shall be excluded.The second section analyzes the logic of RPM from the perspective of vertical restraints.Vertical restraints are interim form of inter-substitute between markets and enterprises.Generally speaking,manufacturers utilize vertical restraints in view of elimination of dual-pricing effect,free-riding of services and credibility,risk-sharing under market uncertainty and motivation under the situation of information imperfect. RPM,as one of vertical restraints,may own the same reasonableness as above.In history,the scholars of Chicago School brought out a conclusion that RPM could refrain opportunism and prevent free-riding,so as to motivate distributors to provide services.The theory became the major base of application of rule of reason.However, it cannot present comprehensive explanation in relation to simple merchandise and distinguishing efficiency of distributors etc.In addition,tt is deemed that RPM has positive effect on preventing dual pricing. But in the middle of 19 century,Galbraith hypothesis and the proof thereafter indicate that even if there is no restriction from RPM,dual pricing can be refrained to a certain degree.Thus,RPM's reasonableness cannot be verified by preventing dual pricing.In fact,based on the analysis of this portion,we can see that RPM's impact on competition hardly can thoroughly elaborated by one theory from one aspect. Furthermore,it has both negative and positive effects.Hence what goal is the using RPM of an enterprise in a market cannot be simply concluded from theories.The third section analyzes the logic of RPM from the perspective of horizontal restraints.Usually we understand RPM from the angle of vertical restraints,but RPM actually may cover agreements in connection with horizontal restraints.The article therefore construes the fundamental theory of horizontal restraints.Early Harvard School thought horizontal restraints can be implemented successfully.While Chicago School found the uncertainty between competitors' conspiracy and thought market competition can destroy conspiracy.The development of Neo-industry Organization proves again that conspiracy can exist for in a long run under a certain market structure.A special market structure may allow conspiracy to exist in RPM.It is found that competitors' cartel is implemented through RPM in real cases and market structure is related to occurrence of conspiracy.The fourth section discusses general rules of RPM.With regard to how to allege the lawbreaking of RPM,the traditional view thinks RPM restrict the free right of transaction of distributors.However,given the development of contract law, cotemporary关系契约理论has broken through the traditional analysis angles. RPM's illegality is due to the breach of competition orders.As of the basic analysis methods of RPM,per se rule and rule of reason have respective advantages.Rule of reason can better distinguish the reasonable factors and restraint aspects of RPM case by case.But it occupies more judicial resources and hardly can provide stable anticipation to market players.To the contrary,per se rule is easy to use,but it probably bans reasonable RPM as well and does not increase social welfare.Therefore,given the analysis of the logic of vertical and horizontal restraints, the article thinks we shall generally prohibit RPM,but make exception to special cases.General restriction requires adjusting market structure and returning to renovated SCP paradigm.It actually deny per se rule to be applied to RPM.SCP paradigm is the basis of ascertaining competition injury by enterprises.Without the basis,the self-adjustment of a market can get rid of negative effect,rather than having anti-monopoly law to involve.Meanwhile,a certain market structure is a condition of conspiracy for horizontal effect of RPM.Thus,the requirements of market structure may allow most RPM practices which do good to markets to exists.As to whether RPM restricts need subjective requirements,I am negative on that. Because the outcome of price restriction is easily observed in vertical relationship; while in horizontal relationship,stressing subjective requirements will weaken restricts.So even there is no subjective intention,it can be restricted from the competition effect.The fifth provides typolization restriction on RPM.On the ground of general restricts,the portion mainly discusses how to further distinguish RPM cases.First as to whether differentiate price and non-price restricts,the article thinks there is no economic theory and in practice it is hard to operate.So there is no need to distinguish them.Secondly,as to maximum RPM and minimum RPM,though Alberta,we can find out that maximum RPM can prevent dual pricing and benefit consumers.But minimum RPM is easily converted into price conspiracy and is more inclined to temper the efforts of cost-cutting by distributors.There are more reasons to restrict it. Last,as to agency sale,as the title of goods has not been transferred and the risks remain with the manufacturer,therefore it shall not been treated as RPM.In practice, the core issue is to distinguish whether the ownership of goods has been transferred.Regarding the exceptions of RPM restriction,luxury products' brand images are closely linked with price.Consumption of those goods is to show off.RMP may help products to maintain unified price and deliver positive effect to product sale.Publication was ever treated as exception in Germany and Japan for the reason of culture protection.However,RPM in publication mainly heighten the prices of publication and rarely enhance freedom of speech.After Japan cancels RPM in that area,there is no negative impact.RPM usually is not compulsory.That is why it is different from an agreement of price maintenance.Sharp is a typical case regarding RPM.Through the analysis of this case,the article clear up all the controversies of recommended retail price and summarizes the positive and negative effects.The sixth section first summarizes the legislation of RPM in mainland China.In despite of regulations on RPM,as mainland China adopts market economy relatively late,the ambiguous regulations do not provide specific restricts on RPM.We have to learn from other countries in terms of legislation of RPM of anti-monopoly. Japan went through a process from full constraint,permission on specified merchandise to general constraint.EU takes rigorous attitudes towards RPM in order to form a unified market.Requirements of an exemption are quite hard.Our law system originated from continental laws with administration-oriented political system, like Germany,Japan and Taiwai.Therefore we can also adopt the similar model, namely,general prohibition supplemented by special exceptions.