I’ll be testifying tomorrow at the Federal Trade Commission hearings on Resale Price Maintenance. My panel will focus on rule of reason analysis of RPM Post-Leegin. There is a bit of awkwardness testifying about different modes of rule of reason analysis with legislation that would restore the Dr. Miles per se rule pending, but it strikes me as a valuable exercise nonetheless. The early afternoon panel looks very interesting and focuses on the legal and business history of RPM. I do not have a written statement for my prepared remarks, but you can see my slides here.
UPDATE: In response to Thom’s query in the comments, I thought the panel went pretty well. It was fun, anyway. The panel split time discussion the merits of the pending legislation that would restore the per se rule and whether some “inherently suspect” truncated liability approach placing the burden on defendants to justify their use of minimum RPM was appropriate. Five of the eight panelists were in favor of the per se rule with three dissenting for various reasons, including my own view that economic learning in the form of theoretical and empirical knowledge about vertical restraints and RPM more specifically simply did not satisfy the standard that the restraint always or almost always reduces output or harms competition. Much of the discussion of the underlying economics, in my view, revealed a general suspicion not just of RPM but of the promotional services it is designed to induce. In other words, a few panelists argued that even if RPM did facilitate the supply of promotional services by resolving incentive conflicts (I’m not sure how well the proponents of the per se rule understand the Klein & Murphy model), we should be skeptical of any sort of promotion that manufacturers have to pay for. Taken seriously, that view would be fairly dangerous and easily expanded to per se rules for exclusive territories, advertising, slotting contracts, and other forms of promotion. All in all, it was a fun panel and a lively discussion. I largely stuck to the same mantra: the theory and evidence does not support application of the per se rule, and to the extent that one believes that we know even less than the literature suggests or does not trust the results in the literature, that is not an argument in favor of per se treatment.
