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Ralph A. Winter

This chapter examines the economic foundations of competition policy toward vertical restraints, with a focus on resale price maintenance (RPM). It outlines the theories of RPM as potentially anticompetitive on the basis that such practices support collusion or exclusion at either the upstream supplier stage of a supply chain or, more rarely, the downstream retail stage. Evidence supporting one or more of these theories should be necessary for intervention because, in a wide range of circumstances, RPM is simply a means of altering the mix of price and nonprice competition among downstream retailers. Against the background of economic theory, the author outlines six fallacies that appear in the policy literature in this area, and extends the discussion to other vertical restraints.