Wednesday, April 25, 2007

Dennis Carlton on Resale Price Maintenance

U of Chicago economist Dennis Carlton, who is now Deputy Assistant Attorney General for Economic Analysis, Antitrust Division of the US DOJ weigned in on the matter of whether RPM should be subject to a rule of reason or per se standard:

"The number of situations in which resale price maintenance can be used as a device to harm all consumers is rather limited—certainly it is understood that RPM can be used to facilitate a dealer or manufacturer cartel. But those situations do not describe the actual uses of RPM very well.

By and large, the evidence shows that resale price maintenance is typically used in ways that one would not characterize as anticompetitive. Therefore, RPM should be judged under a rule of reason standard.

The simple obersvation I make in my textbook is that we don't typically tell a manufacturer how to produce his product, so why should we tell him how to distribute it."

I agree. That's from an interview with professor Carlton, read it here. Professor Carlton's textbook, of course, is a classic and standard reference for all economists working in the field of industrial organization. You can get it here.

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