Monday, December 3, 2012

REPOST: Will resale price maintenance return?

In 2007, the Supreme Court removed the blanket prohibition against retail price agreements between manufacturers and retailers. PING (the golf club manufacturer) submitted an amicus brief in the case that detailed how difficult it is to prevent discount retailers from free riding on the custom fitting services of full service retailers. The discount retailers were advising consumers to visit a full-service retailer to request a custom-fitting session, and then bring the specifications for custom-made clubs back to the discounter. PING could control this kind of opportunistic behavior only by dropping dealers, a very costly option. [For an economic analysis of resale price maintenance, see the amicii brief of 24 antitrust economists--full disclosure: I am one of the 24].

Now PING has another option, minimum resale price maintenance. The federal legality of these agreements will now be determined under a rule of reason. However, it is likely that those states more inclined towards regulation, like California and New York, will try to "repeal" the Supreme Court decision with state legislation, setting up a conflict between state and federal antitrust laws.

This just in: some manufacturers are suuing retailers who sell merchandise on eBay at a discount.


  1. Can the custom fit retailers not have a pricing policy that a) compensates them for offering custom fit and b) dis incentivizes purchasing from a discount retailer.
    As an example, let's assume that a custom fit retailer charges you $100 (including the custom fitting) and a discount retailer charges $80 for the clubs.
    Can the custom fit retailer not say the price of custom fitting is $20. But if you buy the clubs as well from the custom fit retailer, those $20 are applied as credit towards your club purchase.
    Am I looking at it too simplistically?

    1. (Anshul Goyal)
      I believe that there is a flaw in your assumption. As far as my understanding goes, even these discount retailers are offering the custom-fit clubs using the specifications given to the consumers by the custom fit retailers but at lower prices. If it is true, this solution will not work as the consumers are getting all the benefits that a custom-fit retailer can provide but at a lower price if they purchase from discount retailers.

    2. I thought again about it and I believe that the plan should work. It can surely solve the problem.