Author(s)

Jinling Bao

Corresponding Author

Jinling Bao

Abstract

The effect of resale price maintenance on competition has always been a controversial issue. Its effect of promoting competition can be summarized as following points. Resale price maintenance is beneficial to the provision of professional services, and to the market entry of new enterprises. It can also help to prove the high quality of products and reduce the “free riding” phenomenon. The resale price maintenance can also hamper competition from following perspectives. It facilitates collusion among distributors and producers; it facilitates monopolists to maintain the market power, and prevents competitors from entering the market. Resale price maintenance can also lead to the loss of consumer welfare. Now in the world, there are two kinds of standards which can regulate the vertical price restraint, namely the per se rule (the principle of illegality) and the principle of rationality. The case of Ruibang v. Johnson & Johnson was concluded in August 2013. The principle of rationality was adopted in that case. To judge whether a vertical price restraint is legitimate or not, the court should consider market share, nature of agreement, degree of market entry barriers and the comprehensive economic effect. Due to the lack of mature theories and practical experiences, it is necessary to improve the system design for relevant regulation in the future.

Keywords

Resale price maintenance, illegal per se, competition effect