Elgar original reference
Edited by Ariel Ezrachi
Chapter 17: Resale price maintenance in comparative perspective
Resale price maintenance, also known as vertical price fixing, is a very well-known and much discussed type of restrictive practice. It is generally understood to mean a practice according to which the supplier, normally a manufacturer, sets a fixed price to be charged by the retailers when reselling the goods or sets a fixed minimum or maximum price. Closely connected is the practice of issuing recommended, non-binding resale prices. The practice is as a rule used with trademarked (branded) products. The reasons for the supplier or manufacturer to fix the price may vary. Manufacturers might have an interest in resale price maintenance as this extra margin can encourage retailers to provide customers with additional services surrounding the product thereby increasing interbrand competition. On the other hand resale price maintenance might also increase the intrabrand competition with regard to non-price elements. From the perspective of retailers who provide additional services surrounding the product, resale price maintenance can discourage free riding by consumers enjoying these services but then buying the product from a cheaper source not providing this additional service. Moreover, resale price maintenance might increase the likelihood that retailers stock the product even in the case of uncertainty about the demand. Resale price maintenance in these cases ensures that retailers do not have to fear declining prices.
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