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Resale Price Maintenance 1997 Resale Price Maintenance 1997 The OECD Competition Committee debated the use of resale price maintenance for publications and cultural products in February 1997. This document includes an executive summary, an analytical note by Mr. Gary Hewitt of the OECD and written submissions from Australia, Canada, Finland, the European Commission, France, Germany, Hungary, Ireland, Italy, Japan, Korea, Norway, Sweden, the United States and BIAC, as well as an aide- memoire of the discussion. Resale price maintenance (RPM) specifies the final price that retailers charge consumers. This roundtable focused on the use of RPM for books, newspapers and similar cultural products. RPM, like other vertical restraints, may help resolve problems of co-ordination between upstream and downstream firms and thus may increase their combined profits. Issues in the economics of RPM include eliminating double mark-ups and preventing free-riding and “cream skimming”, while guarding against horizontal collusion and prevention of entry. In the legal treatment of RPM for books and cultural products, views of competition authorities and cultural authorities may conflict. At the time of this roundtable (1997), RPM was generally prohibited in almost all OECD countries, but in many an exemption permitted some form of RPM for books, newspapers and some cultural products (and in some, for medicaments). And some countries have a procedure for authorising RPM case by case. Predatory Foreclosure (2005) Resale Below Cost (2004) Predatory Pricing (1999) Competition Policy and Vertical Restraints: Franchising Arrangements (1994) Unclassified OCDE/GD(97)229 RESALE PRICE MAINTENANCE ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT Paris 60534 Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format Copyright OECD, 1997 Applications for permission to reproduce or translate all or part of this material should be made to: Head of Publications Service, OECD, 2 rue André-Pascal, 75775 Paris Cedex 16, France. Copyright OCDE, 1997 Les demandes de reproduction ou de traduction totales ou partielles doivent être adressées à : M. le Chef du Service des Publications, OCDE, 2 rue André Pascal, 75775 Paris Cedex 16, France 2 FOREWORD This document comprises proceedings in the original languages of a Roundtable on Resale Price Maintenance which was held by the Committee on Competition Law and Policy in February 1997. It is published as a general distribution document under the responsibility of the Secretary General of the OECD to bring information on this topic to the attention of a wider audience. This compilation is one of several published in a series names “Competition Policy Roundtables”. PRÉFACE Ce document rassemble la documentation dans la langue d’origine dans laquelle elle a été soumise, relative à une table ronde sur les prix de revente imposés qui s’est tenue en février 1997 dans le cadre de la réunion du Comité du droit et de la politique de la concurrence. Il est mis en diffusion générale sous la responsabilité du Secrétaire général de l’OCDE afin de porter à la connaissance d’un large public, les éléments d’information qui ont été réunis à cette occasion. Cette compilation fait partie de la série intitulée “les tables rondes sur la politique de la concurrence”. Visit our Internet Site -- Consultez notre site Internet http://www.oecd.org/daf/ccp 3 OTHER TITLES SERIES ROUNDTABLES ON COMPETITION POLICY 1. Competition Policy and Environment (Roundtable in May 1995, published in 1996) OCDE/GD(96)22 2. Failing Firm Defence (Roundtable in May 1995, published in 1996) OCDE/GD(96)23 3. Competition Policy and Film Distribution (Roundtable in November 1995, published in 1996) OCDE/GD(96)60 4. Competition Policy and Efficiency Claims in Horizontal Agreements (Roundtable in November 1995, published in 1996) OCDE/GD(96)65 5. The Essential Facilities Concept (Roundtable in February 1996, published in 1996) OCDE/GD(96)113 6. Competition in Telecommunications (Roundtable in November 1995, published in 1996) OCDE/GD(96)114 7. The Reform of International Satellite Organisations (Roundtable in November 1995, published in 1996) OCDE/GD(96)123 8. Abuse of Dominance and Monopolisation (Roundtable in February 1996, published in 1996) OCDE/GD(96)131 9. Application of Competition Policy to High Tech Markets (Roundtable in April 1996, published in 1997) OCDE/GD(97)44 10. General Cartel Bans: Criteria for Exemption for Small and Medium-Sized Enterprises (Roundtable in April 1996, published in 1997) OCDE/GD(97)53 11. Competition Issues related to Sports (Roundtable in October 1996, published in 1997 OCDE/GD(97)128 12. Application of Competition Policy to the Electricity Sector (Roundtable in October 1996, published in 1997) OCDE/GD(97)132 13. Judicial Enforcement of Competition Law Mise en Oeuvre Judiciaire du Droit de la Concurrence (Roundtable in October 1996, published in 1997) OCDE/GD(97)200 4 TABLE OF CONTENTS BACKGROUND NOTE.....................................................................................................................7 NOTE DE REFERENCE..................................................................................................................13 NATIONAL CONTRIBUTIONS Australia ............................................................................................................................19 Canada...............................................................................................................................33 Espagne .............................................................................................................................41 Finland...............................................................................................................................49 France ...............................................................................................................................59 Germany ............................................................................................................................65 Hungary .............................................................................................................................71 Ireland ...............................................................................................................................73 Italy ...............................................................................................................................79 Japan ...............................................................................................................................83 Norway ..............................................................................................................................89 Sweden ..............................................................................................................................97 United States....................................................................................................................101 European Commission .....................................................................................................109 Commission européenne ..................................................................................................115 CONTRIBUTIONS FROM BIAC I. Briefing Paper by Calvin S. GOLDMAN, Q.C. and Crystal Witterick Partners Davies, Ward & Beck.................................................................................................123 II. Outline on Retail Price Maintenance in the Netherlands and Germany by M.P.J.A. MUIJSER, Director of the Dutch Member of IVE...................................127 AIDE-MEMOIRE OF THE DISCUSSION.....................................................................................129 AIDE-MEMOIRE DE LA DISCUSSION.......................................................................................149 5 6 BACKGROUND NOTE Introduction The purpose of this note is to give some background information focusing on the arguments for and against the practice of allowing resale price maintenance (RPM) for books, newspapers and similar cultural products. (RPM specifies the final price that retailers charges consumers. Variants of this restriction include specifying only a price ceiling or a price floor. Practices that encourage the maintenance of resale prices but that do permit price competition, e.g., non-binding “recommendations” for a retail price or a price floor, and recommended prices advertised by the upstream firm, are generally not considered to be RPM.) Economic Arguments1 RPM, like other types of vertical restraints, may help solve problems of co-ordination between upstream and downstream firms and increase the combined profits available to those firms.2 Co-ordination problems may exist, for example, over pricing and the provision of retail services. In the case of prices, if both the upstream3 and downstream4 firm have market power and do not co-ordinate their pricing, there is the possibility that each firm's pricing decision will result in a final price that is "too high", i.e., higher than the profit maximising price for the vertical chain as a whole.5 In the case of services,6 there is the possibility that each downstream firm's decisions about the provision of services will be sub-optimal for the vertical chain as a whole.7 These arguments are developed in more detail below. Eliminating double mark-up problems When both the upstream and downstream firms have discretion over price - that is when both have some horizontal market
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