Abstract
The misconception that it is only necessary to fight price maintenance in order to guarantee the supply at favourable prices to consumers of the desired branded goods is widespread among the public and, surprisingly, also among students of economics.
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Notes
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Cf. also the detailed article of Kenning and Wobker (2012).
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Cf. the article by Mocken (2012).
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Simon (2012) warns urgently against the admissibility of RPM by reference to the Loi Galland passed in France: “This is a statute from 1996 whose real purpose was to prohibit major supermarket chains from selling below cost price. Instead the statute operated like price maintenance in the form of minimum prices where suppliers defined high selling prices and granted year-end discounts that were not allowed to influence the retail price. The result of this was a decline in both inter-brand and intra-brand competition. The prices that customers had to pay after the Loi Galland were almost 10 % higher in 2002 (1 January 1997 = 100) than in Germany and at least 3 % higher than the average in the remainder of the Eurozone. After it was realized that this statute had negative effects on consumer welfare, it was amended in 2005. Prices fell by four per cent within a period of 14 months.”In fact, there is no plausible explanation for the chain of effects ‘admissible price restraints ≫ higher price ≫ diminution of consumer welfare’. Because the Loi Galland had a serious defect: it intervened with a further restraint (it imposed a prohibition of less-than-cost price on all participants) in the value chains and, as a result, it stifled effective competition instead of giving back participants their individual freedom of action. If the statute had instead allowed different forms of vertical price coordination, then, with (sufficiently) effective competition, lasting market results would have been seen that would be described as optimum from the point of view of consumer welfare. Should price increases occur as a result of effective competition—as reasoned in detail in the present article—there would be no doubt as to their economic justification from a welfare point of view (translated from German).
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Ahlert, D., Schefer, B. (2013). The Myth that Welfare is Promoted by Prohibiting Vertical Price and Brand Maintenance. In: Vertical Price Coordination and Brand Care. SpringerBriefs in Business. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-35570-7_2
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