A Brief Review and Assessment of the Leegin Decision: Who Wins and Who Loses When Manufacturers are Free to Set Retail Prices?
For decades, it has been a per se violation of U.S. antitrust law for manufacturers or distributors to specify retail selling prices. In the spirit of atomistic, unrestrained competition, retailers were free to set prices without undue interference from upstream channel participants. Attempts by manufacturers or other channel participants to restrict retail price setting initiatives were viewed by regulators as an unwarranted and illegal interference with the market mechanism. Restrictions on price setting initiatives would, it was argued, lessen competition and ultimately raise prices above competitive levels to the detriment of consumers. Recently, under the leadership of newly appointed Chief Justice Roberts, a more “business friendly” Supreme Court has reversed this policy; vertical price fixing is no longer a per se violation of U.S. antitrust law. By a five‐to‐four margin, the Court held in Leegin Creative Leather Products that manufacturers could, under certain circumstances, establish binding retail selling prices. Henceforth, retail price setting restrictions will be subject to a rule of reason evaluation whereby price restrictions will be assessed on a case‐by‐case basis. Proponents of the now‐legal restrictions argue that this will ensure that merchandise sold through retail outlets will receive needed support, free riding will be reduced or eliminated, and new brand introduction will be facilitated. Critics argue that the Court's decision marks a return to the days of fair trading; marginal firms will be protected, so‐called “inframarginal consumers” will be forced to pay for services they do not want or need, and prices for many branded products will rise, all to the detriment of consumer welfare.
Resale Price Maintenance: Implications of Marketing Trends for the Colgate Doctrine and the Leegin Factors
Resale price maintenance (RPM) is a channel pricing strategy that restricts the price below which a reseller may sell a manufacturer’s product. More than $300 billion in U.S. sales are affected annually by RPM agreements. Adopting a marketing perspective and analyzing trends in distribution arrangements and marketing channel systems, the authors offer predictions regarding the antitrust treatment of RPM following the Supreme Court’s decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2007). This research furthers the understanding of the role of the prior Colgate doctrine in establishing the existence of an RPM agreement and the impact of the new Leegin factors for assessing the competitive effects of RPM. Implications for stakeholders affected by RPM and related unilateral price policies are discussed.
Computer Simulation Modeling
Computer simulation as a research methodology is presented as the intersection of modeling, simulation, and computer analysis. Five component parts of simulation models are identified: input variables, output variables, assumptions, algorithms, and parameters. Computer simulation (CSM) has two primary uses for those interested in the study of organizations or who work within them: theory development and policy planning. The advantages and disadvantages of CSM for each of these purposes are examined and recent examples for each are explored.