Competition Law and Economics
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Competition Law and Economics

Developments, Policies and Enforcement Trends in the US and Korea

Edited by Jay P. Choi, Wonhyuk Lim and Sang-Hyop Lee

In this exciting new book, an international team of experts compare market structures, in both global and Korean contexts, particularly focusing on the impact of foreign competition on market concentration and ways to improve market structure. It thoroughly investigates core competition problems, including international abuses of dominance, mergers and collusion, and vertical restraints. Contributions move beyond explaining the laws and practices of enforcement agencies, offering readers an insight into the trend of an ever-increasing interdependence among national economies, complemented by analyses of recent developments in the US and Canada.
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Chapter 10: Retail price coordination in Korean department stores: the specific purchase contract

Woohyun Chang

Abstract

This chapter reviews potential anticompetitive effects of price coordination based on the specific purchase contract (SPC), popular in the Korean department store market. SPC enables the producer to set the retail price, while the retailer sets a part of the producer’s cost by setting the sales fee proportional to the sales of the good. SPC price coordination can be as anticompetitive as resale price maintenance (RPM). The author provides a mathematical model, with two retailers and one producer, to demonstrate that the harm to social welfare can be even greater under SPC. There is a potential welfare benefit in studying and reviewing the anticompetitive nature of these business practices, because SPC-based price coordination is a business practice shared in common not only by department stores in Korea, but also in Japan and the rapidly growing department stores in China.

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