Retail price recommendations (RPR) refer to non-binding suggestions from a manufacturer on how a retailer should price the manufacturer’s goods to final consumers. This is a widely used practice that is typically permitted under competition policy laws. However, when these suggestions become a binding agreement under which the retailer commits not to price the manufacturer’s goods below a specified level, such practice is re-labelled as resale price maintenance (RPM) and is per se illegal. Current regulatory frameworks regarding RPM as an illegal practice are being challenged on two fronts. First, the existing economic literature is inconclusive with respect to the social costs and benefits attached to RPR and RPM. Second, recent regulatory experience in the United States has set a precedent by applying the rule of reason in favor of RPM practices. This precedent has generated a transatlantic discussion on the reasonability of the per se illegality of RPM practices.

The main objective of this project is to analyze under which conditions suggested RPR can implicitly be used as RPM agreements to facilitate collusion in a specific industry: the Swiss ED drugs market. The project will permit the evaluation of the per se illegality of RPM practices by providing evidence on the cost and benefits to firms and consumers subject to those practices. It aims to contribute to the existing economic and regulatory debate on RPR and RPM practices on three main fronts. First, it provides an analytical framework specific to the Swiss ED drugs market but flexible enough to be valid in alternative contexts. Second, it contributes to the scarce empirical evidence on a topic of great interest for regulatory purposes. Third, it provides concrete elements for the discussion of the illegality of RPM practices from a European perspective.

Project duration

01.08.2009 - 30.04.2011

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Departments

Economics of Innovation and Industrial Dynamics · Digital Economy