European Competition Law: Should resale price maintenance be per se illegal?


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Competition Law
What is RPM?
Pros and Cons

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European Competition Law: Should resale price maintenance be per se illegal?

  1. 1. George P. Kyprianides LLB, LLM with Distinction University of Reading 1
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  3. 3.      Overview: Thin slice of the Cake. What is RPM? + Distinction: Maximum +Recommended VS Minimum and fixed RPM. When did the issue become „hot‟ ? Pros and Cons. What is the current law is? Regulation 4 (a) of Regulation (EU) No330/2010.   Diagram highlighting the incorrect perception. My argument. 3
  4. 4.     Agreement Manufacturer and retailer Regarding price (limits) Sold to final consumers. Distinction: Min + Fixed RPM = hardcore restrictions Max + recommended= effect. Paragraph 47 of Guildelines of Vertical Restraint. 4
  5. 5. I. II. III. IV. V. VI. VII. Leegin Creative Leather Products, Inc v PSKS, Inc., 127 S. Ct. 2705 (2007). Why was it controversial? Rule of Reason: USA vs. EU. EU: more "economic approach” should a rule of reason apply ? Article 101(1) Article 101(3): Individual Exemptions, Vertical Exemption Regulations, Horizontal Exemption Regulations. Ultimately the Commission decided in its new vertical block exemption against the abolition of the presumption of illegality. Hence did not change the statu quo. VIII. Regulation 4 (a) of Regulation (EU) No330/2010 WHY? “If you know the why for living you can endure almost anyhow.” Nicci 5
  6. 6.          Pros: 1)Protects retail margin and aligns incentives of suppliers and retailers. 2) Product “quality certification”. 3)Reduce free riding opportunities. 4) Encourage retailers to invest in newly launched products. Cons: 1) Supports collusion on the supplier/retailers level or at least to soften completion among them. 2) Commitment Problem which can lead to monopoly earnings. 3) Dampens the system through networks of interlocking RPM arguments.  6
  7. 7.  No particularly strong empirical evidence concerning RPM. Lafontaine and Slade 2008: Self imposed RPM have  Office of Fair Trading:  an overall positive impact while exogenously imposed RPM have a negative one. But caution against drawing conclusion. Empirical Evidence would be priceless. intervened against RPM various times…RPM‟s anticompetitive benefits did not outweigh its efficiency benefits. However, “Net Book Agreement” the OFT commissioned research on the impact of the removal of RPM in books. 7
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  9. 9.     Did the Commission lost an opportunity in 2009? No, I believe for the time being the Commission wisely retained RPM in the presumption of illegality box- no solid empirical evidence to prove whether the pros outweigh the cons. Leegin: reminder pro-competitive effects Thus next step for EU competition law should be to construct empirical evidence and move towards a gradual+ non radical change.  HOW ? 9
  10. 10. 1) Widen the gap between „per se illegality‟ and „object‟ box so that it is crystal clear for the parties that there is potential to rebut „presumption of illegality‟ in the EU. -more serious consideration should be paid here.  2) Accept a trial period. Since Comm has already soften its approach towards RPM + para. 19 of the Commission‟s draft Guidelines about vertical restraints acknowledges the positive effects that RPM can have –   10
  11. 11. Legal Uncertainty, Compexity, Increase Regulation cost, financial crisis. Solution:  A) the Comm could use market share as a screen in prioritizing the cases. By implication it would deal with the cases that have a large market share and have more likely anticompetitive effects.  B) Remove RPM from the hardcore restraints in the De Minimus Notice, at least for a trial period.   If these steps work : act as the „base‟ for future. If NOT, at least we can reassure our hesitations and we put the debate to rest. 11
  12. 12.        Thin slice of the cake Scrutinized what RPM is + the difference between max Vs min and fixed. We have observed when did the issue became “hot” after Leegin 2007. Stated the Current Law in this area and emphasized article 4 (a) of Regulation (EU) No 330/2010 : Fixing the retail price is strictly prohibited. Corrected the wrong perception and offered some new recommendations. Seen where the scale lean? And “Unlocked the Lock”. 12
  13. 13. Thank you very much!!! Best wishes for your Christmas Holidays!!!) 13
  14. 14.      Appreciability doctrine. Comparison with Article 102. Burden of Proof on the Commission? George P. Kyprianides 14