Search

This article combines 530 digitized Franchise Disclosure Documents and standard contracts with employer-identified job ads from Burning Glass Technologies to establish stylized facts about franchising labor markets and their relation to the vertical restraints and contractual provisions that limit the autonomy of franchisees vis a vis their franchisors. We report novel findings about the application of vertical restraints like Resale Price Maintenance, Exclusive Dealing, and No-poaching Restrictions, among many others, to a low wage workforce. A legal regime that favors the franchising business model incentivizes franchisees to profit at the expense of workers and to limit egalitarian tendencies operating in the workplace. [ABSTRACT FROM AUTHOR]

This paper proposes a competition theory to explain the role of automobile dealers' investment in a vertical contract with manufacturers. Dealer contracts specify manufacturer-suggested retail prices and elements of dealer quality. Dealer quality investments require minimum financial capital where manufacturers impose these limits on dealers. The required dealer investment screens for qualified dealers and incentivizes the desired dealer quality. The prediction is that promotional services, prices, and gross returns are greater for high-quality brands than that for standard-quality brands. To test the theory, we collected data on auto dealers in China in June 2015 for an empirical analysis. Our findings support these predictions: Dealer investment (registered capital) is positively correlated with brand average product prices. In addition, the registered capital is higher when the aggregate demand is greater since high demand increases returns, which induces dealers to increase their investment. [ABSTRACT FROM AUTHOR]

Mergers between previously contending firms are a permanent challenge for policymaking as they potentially harm competition. The core incentive to merge is the prospect of higher joint profits of the previously independent firms after the merger. We discuss and compare the core assumptions of Horn and Wolinsky (1988) and von Ungern-Sternberg (1996) that lead to contrary results regarding the attractiveness of horizontal mergers of downstream firms in a 1:2 setting leading to a monopolized 1:1 setting. While the latter finds a merger beneficial for the downstream firms, it harms their joint profit, according to Horn & Wolinsky. We theoretically apply both models to the two settings. We also present extensive sample calculations that quantitatively confirm the two papers' core insights. Discussing and contextualizing the results, we provide a comprehensive overview of horizontal mergers in the downstream part of vertical structures with bargaining over linear input prices. Due to continuing relevance of horizontal mergers for competition policy and, in particular, in light of the consolidation phase in tech start-ups, the topic is of enduring relevance in policymaking. [ABSTRACT FROM AUTHOR]

Applying a simple model to a data set created from 530 franchise contracts, this article shows that the loosening of antitrust restrictions on vertical restraints—competition restrictions in agreements between firms at different levels of the production and distribution process—allows trademarked brands to control wages and working conditions across the boundaries of the firm, at legally separate franchised establishments. Some vertical restraints reduce the bargaining power of franchisees, causing them to exert extraordinarily high effort levels. Other vertical restraints limit franchisee discretion and focus their efforts on labor cost and labor discipline for their profit margins. By monitoring the franchisees who monitor workers, franchisors control wages at franchised establishments without incurring the legal responsibilities and liabilities of traditional employment. To properly regulate franchising and other similar contracting arrangements, antitrust and labor law should be brought together rather than considered in isolation.

Annotation on the Judgment of the Court (Third Chamber) of 29 June 2023 in Case C-211/22 Super Bock Bebidas SA and Others v Autoridade da Concorrência In its judgment of 29 June 2023, following six questions referred for a preliminary ruling, the Court of Justice of the EU provided clarity in dealing with a vertical case involving resale price maintenance (RPM).1 A topic that had already undergone considerable evolution in existing case law, from a phenomenon that was considered as restrictive by object, following among others the Binon case, to a much more nuanced view in which the Court noted that the agreements should be assessed in their appropriate legal and economic context where the restrictive effect should be established first. [ABSTRACT FROM AUTHOR]

While consensus positions continue to emerge regarding what to accept as restrictions by object in horizontal arrangements, little consideration has been given to verticals – presumably because enforcers lost interest several decades ago. But the winds might be changing, and the fact remains that case law has identified a group of vertical restrictions as detrimental to the free market as horizontal hardcore arrangements. In this article, an attempt to capture what to accept as vertical object restrictions will be made, providing guidance for enforcers' renewed interest in the matter. [ABSTRACT FROM AUTHOR]

In the following sections, we indicate the main differences in the EU and the Authority's approaches towards investigation of vertical arrangements as it will certainly be interesting to monitor the final outcome of the Dell case and see whether the OCCP will make a shift from its current enforcement policy. Keywords: vertical restraints; 'by object" restriction; "by effect" restriction; economic assessment; market sharing EN vertical restraints 'by object" restriction "by effect" restriction economic assessment market sharing 261 265 5 10/07/22 20220701 NES 220701 In early August 2022, the President of the Office of Competition and Consumer Protection ( I Prezes Urzedu Ochrony Konkurencji i Konsumentów i , OCCP or the Authority) released press information that it initiated antitrust proceedings against Dell, one of the key manufactures of IT infrastructure products. Poland • The Office of Competition and Consumer Protection Investigates Vertical Restraints in the IT Sector - Does the EU Approach Prevail?. [Extracted from the article]

Policies that restrict outsiders are common. Some justifications include protecting insiders from high price and leaving more of the concerned products to insiders. Sometimes these policies fail to work because outsiders can get around the restrictions. In a model in which a policy of restricting outsiders is anticipated, we find that if the policy works, it only sometimes lowers the price. When the price does decrease, the product quality decreases too. Not every insider would benefit equally; those insiders who likely suffer are identified. While restricting outsiders may or may not reduce insiders' consumer surplus, outsiders and the producer are always worse off. They therefore would find ways to get around the restrictions. Evaluating these policies must (a) take into account the possibility that they might not work at all, (b) check their effects beyond just price if they do work. [ABSTRACT FROM AUTHOR]

This comment discusses the case AT.4028 of 17 December 2018, where the European Commission imposed a fine of 39.8 million Euro on clothing company Guess for several restrictive provisions in agreements with its distributors in the EEA, including restrictions of online search advertising and online sales. The case demonstrates that e-commerce leads to disintermediation within the supply chain, which in turn leads to tensions between the manufacturer of branded products and authorized distributors operating in a selective distribution system. The case does not provide, however, much practical guidance on how to align online and offline channels into one distribution system supporting a prestigious image of branded products. Therefore, an example of a distribution system integrating online and offline sales from the practice of the Australian Competition and Consumer Commission is presented.

Samsung - Price Coordination The increased focus of the ACM on vertical restraints has resulted in the Decision regarding coordination of prices by Samsung in respect of the retail pricing of its television sets. For example, retailers provided Samsung with screenshots of a competitor's prices or informed Samsung that their competitors had not (yet) adjusted their prices. The ACM describes the behaviour used by Samsung to influence retail pricing of its television sets as follows: First, Samsung monitored price levels of the television sets using so-called spider software. Keywords: Samsung; RPM; retail price maintenance; vertical price coordination; vertical restraints; price recommendations EN Samsung RPM retail price maintenance vertical price coordination vertical restraints price recommendations 411 415 5 12/28/21 20211001 NES 211001 The Dutch Authority for Consumers and Markets (ACM) has imposed a fine on Samsung Electronics of €39,875,800 for coordination of retail prices of Samsung televisions. [Extracted from the article]

Since mid-seventies, the underinvestment in specific assets and the «hold-up» problem have been remaining a critical issue in new institutional economics. Till the very end of the twentieth-century theoretical analysis of «hold-up» problem was dedicated to consideration only of so-called «selfish» relation-specific investments which created an ex-post surplus for the investor. That means a seller invests in reducing his costs and a buyer invests to increase his benefits from the procured good or service. Another type of relation-specific investments called «cooperative» investments (or cross investments) attracted nearly no attention in the theory even though such investments were widespread in practice. By definition introduced by Che and Hausch in 1999, a distinctive feature of cooperative relation-specific investments is that they have a positive impact on the outside option of a trading partner, i.e., the outcome of terminating the contract at the ex-ante stage). An alternative approach to the classification of relation-specific investments (Dzagourova and Agamirova, 2014) relies on the direction of these effects in the external trade (i.e., trade with alternative partners). There is a widespread belief that theoretical analysis played a crucial role in the evolution of vertical restraints (VRs) regulation. In order to check whether this statement is “history friendly” or not the article compares the dates of the key US antitrust cases concerning the VRs and the new economic theories through the lens of incentives for cooperative specific investments. It helps to show that the intention to maintain these incentives was the important factor caused the courts’ decisions, which in turn inspired the subsequent developments of economic theory. Considering the vertical restrictions as an instrument of risk sharing especially when the partners’ specific investments are cooperative may open the new possibilities for further improvement of the regulatory framework governing the vertical agreements. Therefore, according to (Menard, 2018, p. 4) this paper combines issues related to the micro-analytical level and macro-level at the same time.

Applying a simple model to a data set created from 530 franchise contracts, this article shows that the loosening of antitrust restrictions on vertical restraints—competition restrictions in agreements between firms at different levels of the production and distribution process—allows trademarked brands to control wages and working conditions across the boundaries of the firm, at legally separate franchised establishments. Some vertical restraints reduce the bargaining power of franchisees, causing them to exert extraordinarily high effort levels. Other vertical restraints limit franchisee discretion and focus their efforts on labor cost and labor discipline for their profit margins. By monitoring the franchisees who monitor workers, franchisors control wages at franchised establishments without incurring the legal responsibilities and liabilities of traditional employment. To properly regulate franchising and other similar contracting arrangements, antitrust and labor law should be brought together rather than considered in isolation.

It has been shown that manufacturers can employ vertical practices and restraints to prevent entry in markets where upstream entrants require downstream accommodation. I show that if downstream product investment is important and encouraged by the restraint, foreclosing entry this way may not be credible. Additionally, publicly mandated vertical restraints and termination restrictions could prevent foreclosure, but if these restrictions reduce downstream product investment, they could have the opposite effect and decrease entry. [ABSTRACT FROM AUTHOR]

In recent years, practitioners, commentators and competition authorities have been facing the question of whether online platforms fit the mould of a typical agent under EU competition law. The stakes are high. If online platforms could be qualified as agents, the obligations imposed on them in relation to the contracts concluded and/or negotiated on behalf of their principal(s) may fall outside Article 101 (1) TFEU. This article wishes to contribute to the debate in two ways. First, it offers an assessment of whether, under existing EU competition law, online platforms can be qualified as agents. Second, it provides a conceptual framework to determine whether the existing rules are fit for purpose. After a brief overview of the relevant case-law, the article finds that, as a matter of current law, online platforms can fall under the definition of agents. However, the article considers that the existing rules should be updated to reflect the disruptive changes brought by the online platforms revolution. The existing rules were conceived at a time when value was created and transferred following the traditional value chain (or pipeline) model. Value flew in a linear way from producers to consumers. Companies are nowadays increasingly shifting from the value chain model to a more complex business model, i.e. the platform model. The platform model re-shaped ordinary competitive dynamics. Under the platform model, value is created through a complex array of interactions among producers, a number of principals, consumers and online platforms. The output is a package of products and services. Online platforms compete with each other, with other market players and sometimes even with their principals. The article finds that these new challenges are not adequately addressed by the EU Guidelines on Vertical Restraints, that should be reviewed accordingly to catch up with the online platforms revolution.

The US theory and courts' practice contributed to better understanding of effects of vertical restraints to overall and consumers' welfare. The Chicago school was the first to explain beneficial effects of vertical agreements, arguing for more lenient application of competition rules. Prof. Bork explained that restrictive clauses in vertical agreements serve producers to secure provision of pre- and after-sale services by his distributors, thus eliminating the free-rider problem and increasing the product's quality and consumers' satisfaction. Following the Chicago school views, the US Supreme Court abrogated the per se prohibition of vertical restraints in GTE Sylvania and Leegincases. Further studies carried out by the Post-Chicagoans indicated that vertical restraints cannot be treated equally. In most cases the resale price maintenance clause is not economically justified, since the goal of maintaining the quality of pre- and af­ter-sale services can be achieved by contracting less restrictive clauses in vertical agreements. Regarding competition effects of vertical restraints in aftermarkets, the Post-Chicagoans asserted that several factors cumulatively create an opportunity for a producer to leverage his market power existing on the market for primary product to the after-sale market. This view was confirmed by the US Supreme Court in the Kodak case.

The seven volumes of The Antitrust Revolution published between 1989 and 2019 include dozens of excellent articles that describe topical antitrust cases and the circumstances that motivated them. Taken together, the volumes provide invaluable insights into the course of antitrust enforcement over more than three decades and the factors that influenced the direction of change. This essay follows the course described in the pages of The Antitrust Revolution for two major components of antitrust enforcement: mergers and vertical restraints. The cases demonstrate that economic analysis profoundly impacted merger decisions, although the trajectory has been anything but linear. The revolution was more dramatic for the treatment of vertical price and nonprice restraints of trade. Courts relied on economic principles to upset decades of legal precedent for these arrangements. [ABSTRACT FROM AUTHOR]

In recent years, practitioners, commentators and competition authorities have been facing the question of whether online platforms fit the mould of a typical agent under EU competition law. The stakes are high. If online platforms could be qualified as agents, obligations imposed on them in relation to the contracts concluded and/or negotiated on behalf of their principal(s) might fall outside Article 101 (1) TFEU. This article wishes to contribute to the debate in two ways. First, it offers an assessment on whether, under existing EU competition law, online platforms can be qualified as agents. Second, it provides a conceptual framework to determine whether the existing rules are fit for purpose. After a brief overview of the relevant case-law, the article finds that, as a matter of current law, online platforms can fall under the definition of agents. However, existing rules should be updated to reflect the disruptive changes brought by the online platform revolution, since they were conceived at a time when value was created and transferred following the traditional value chain (or pipeline) model: value flew in a linear way from producers to consumers. Yet, companies are nowadays increasingly shifting from the value chain model to a more complex business model, i.e. the platform model, which has re-shaped ordinary competitive dynamics. Under the platform model, value is created through a complex array of interactions among producers, principals, consumers and online platforms. The output is a package of products and services. Online platforms compete with each other, with other market players and sometimes even with their principals. In our view, these new challenges are not adequately addressed by the EU Guidelines on Vertical Restraints, which should be reviewed accordingly to catch up with the online platform revolution. [ABSTRACT FROM AUTHOR]

The Law on Trade was adopted in Russian Federation in 2009. Its main aim was to protect suppliers because suppliers have significantly less bargaining power than retailers (the weak position of suppliers in the bargaining power due to the difficulty of switching to alternative buyers, i.e., outside options (Dzagurova, Agamirova, 2014). The process of adoption of the law and its further application was accompanied by discussions among economists (Avdasheva, 2012; Radaev, 2009, 2010, 2011a, 2011b, 2011c, 2012; Novikov, 2009). On 15 July 2016, the new version of law “On the Principles of State Regulation of Trade in the Russian Federation” from 28.12.2009 has been enacted. This article analyzes the impact of change in regulation norms on the parties engaged in vertical interaction. In particular, the new law limits the premiums that suppliers pay to retailers for the sale of certain amount of goods and services from 10% to 5%. Besides that, it became a common practice to include promotion, logistics, preparation, processing and packaging in rewards. Also, changes involved extended payment terms reduction. However, new regulation norms can create serious problems for small suppliers whose rights had to be protected. In particular, it happens because of the absence of a classification of such vertical restraints that take into account the motives of the parties involved.

This article considers the important relationship between law and economics in the field of competition law. The article shows how economics has become a dominant discipline in the field and the difficulties this development has given, and is likely to give, rise to in practice. In doing so, the article considers the heavy reliance which lawyers in particular have come to place on economics. The article offers a number of illustrations taken from different areas of competition law and policy in order to support the analysis and arguments therein. The article offers a perspective on what the exact relationship between law and economics should be and what role lawyers should play in order to facilitate a smooth transition from theory to practice and ultimately ensure that competition law is developed and applied correctly and in a way that matches the realities of markets and the business world. [ABSTRACT FROM AUTHOR]

Building on research in supply chain management (SCM) that aids in the workings of society, the authors illustrate how SCM research can advance public policy and law. Using competition policy and antitrust law as an example, they consider how developments in SCM thought and practice augment economic understanding of vertical restraints involving minimum resale price maintenance (RPM). Developments affecting the organization of supply chains, firm‐level strategies for the management of retail distribution, and the interactions of supply chain participants are investigated. The findings advance knowledge of the primary procompetitive and anticompetitive theories of RPM found in competition policy and antitrust law. They also illustrate the potential of SCM to expand its reach and impact through studies that address the interplay of SCM and public policy and law. [ABSTRACT FROM AUTHOR]

Comparison the way of vertical restraints regulation in the United States, the European Union and the Russian Federation is the subject to certain difficulties arising from their belonging to different types of legal system. The United States legal system belongs to the family of common law, while in the European Union and the Russian Federation operates a family of civil law. Historically, the countries that were colonies of Great Britain (the US, Canada, India, Australia) steel continue the tradition of the Anglo-Saxon legal system. The civil law system dominates in Continental Europe and, consequently, in those countries that were formerly colonies of France, Denmark, Germany, Spain and Portugal. Separately to this list should include Russia and Japan. Common and civil law systems differ significantly. The common law system is characterized by a decisive role of precedents. This fact explains that in the United States the judge acts as arbiter. In contrast, the European Union civil law concept implies the existence of detailed system of rules and principles, clearly defining the regulation process for every specific area of law enforcement. Thus, every legal system determines its own peculiarities practice of vertical restraints regulation. Considering the differences of vertical restraints regulation the attention should paid not only the type of the country legal system, but also the interaction between the economic theory and the antitrust law, because the theoretical analysis played a crucial role in the regulation norms evolution.

The present paper continues the discussion of the theme raised in our preceding paper published in the second issue of JIS this year. The paper contained the analysis of vertical restraints (VR) set out in (Rey and Tirole, 1986) and (Hansen and Motta, 2015). We proposed an alternative approach, namely, the interpretation of VR as a tool for increasing the attractiveness of the lotteries associated with implementation of cooperative specific investments (in the above-mentioned articles the risks associated with market shocks were discussed). The cooperative specific investments are more risky than the selfish specific investments. First of all, it concerns the possible termination of the contract after a specific investment will be carried out (at ex post stage). The VR voluntarily adopted by the firm play a significant role in strengthening the incentives for cooperative investments of the firm’s partners as they decrease the risk coupled with these investments. Firstly, VR can reduce the riskiness of lotteries associated with investment in specific assets by the redistribution of control in favor of the investing parties. Secondly, VR can be considered as an element of the firm’s signaling activity aimed to convince the investing partners in the firm’s readiness to continue cooperation at the ex post stage. Thirdly, the VR, such as exclusive contracts, ensure receiving by the investing partners at least partial compensation (for termination of such contracts). And only fourthly, VR limit the possible redistribution of quasi-rent between the firm and its partners.

Vertical restraints such as exclusive territories may be considered as an alternative to the compensation paid to retailers for taking the risks associated with market shocks. For the first time this approach has been put forward in (Rey and Tirole, 1986). In (Hansen and Motta, 2015) this concept has been further developed, but these authors have come a diametrically opposite result to what Rey & Tirole had reported. The goal of both papers was to compare exclusive territories and retailers’ competition from the point of view of the supplier. In (Rey and Tirole, 1986) the competition was the preferred solution, in (Hansen and Motta, 2015) - the exclusive territories. The explanation of this discrepancy proposed in (Hansen and Motta, 2015) doesn't look convincing enough. The paper proposes a new explanation based on the analysis of the attractiveness of the considered lotteries for the retailers. In (Rey and Tirole, 1986) they were ready to pay for the lottery, but in (Hansen and Motta, 2015) - pretend to get a compensation. Accordingly, in the first case the supplier prefers to allow competition between dealers, in the second - to provide exclusive territories in order to reduce the compensation to be paid to the dealer for participating in the lottery. The paper discusses that the better solution is to consider not the risks associated with market shocks, but the retailers’ risks associated with the so called «cooperative specific investments» (manufacturer can prefer another partner on ex post stage). Trying to support the retailers’ incentives to make cooperative investments, supplier voluntarily redistributes control in favor of retailers.

The problem of underinvestment in specific assets is a key issue in new institutional economics, especially in case of cooperative relation specific investments. It can be solved due to vertical restraints, as an alternative way of vertical integration to transfer control to partner, who makes relation specific investments. The type of relationspecific investments called «cooperative» investments (or cross investments) was nearly absent in economic analysis up to the very end of the twentieth century despite of the fact that such investments are widespread. It led to the absence of analysis relation specific investments in official regulation documents. At the same time, different types of relation specific investments can be characterized by different degree of riskiness and need special regulations of vertical agreements. In the paper author makes an attempt to analyze the European methodology of assessment vertical restraints under rule of reason focusing on the type of relation specific investments. It makes possible to improve analysis of vertical restraint in Russian antitrust.

This paper examines how changes in major elements of the U.S. federal crop insurance program affect the structure of the agricultural insurance industry. We model interactions between farmers, insurance agents and insurance companies. Marginal changes in government policy (premium subsidy rate, A&O subsidy rate, and loading factor) affect the insurance premium rate, agent compensation rates, agent effort levels, and market demand for crop insurance. Farmers prefer a marginal increase in the premium subsidy rate, but the insurance companies' most preferred policy is a marginal increase in the A&O subsidy rate. We also evaluate the consequences of changes in crop prices.

This article investigates the effects of upstream regulation that aims to create niches and attract new type of entrants on the competitive environment of downstream markets. Using unique cross-country data of Nordic mobile telecommunications markets, we show that upstream regulation leads to (i) increases in both number and aggregate market share of service-based providers in the downstream market, (ii) an increase in the number of service-based providers, thus increasing their aggregate market share, but no opposite direction of results and (iii) a lower retail price level, proxied by average revenue per user. Our findings imply that upstream regulation may be able to achieve better outcomes when the policy objectives are to revitalize mature network industries and to enhance consumer welfare. [ABSTRACT FROM AUTHOR]

Given the impressive growth of Internet shopping, one may wonder how the antitrust rules on selective distribution systems might fit in the context of online sales. Indeed, the online sales phenomenon has attracted significant attention in recent years in several Member States, mainly by the question on the extent to which restrictions limiting the ability of retailers to sell via online marketplaces are compatible with competition rules. No wonder the Coty Prestige judgment is so much-awaited. The ruling is expected to shape the future of EU e-commerce affecting online markets, the luxury industry and Internet platforms. [ABSTRACT FROM AUTHOR]

Economics has reshaped antitrust enforcement over the last quarter century. Its impact has been most dramatic in merger analysis, with the shift toward unilateral effects theories and away from market concentration-related theories of collusion. Progress on both the theoretical and empirical fronts has also changed enforcement priors and competitive analyses concerning vertical restraints and monopolization. Economists also have made valuable assessments of the effectiveness of antitrust enforcement, though more work in this area is needed. [ABSTRACT FROM AUTHOR]

Footnote 19 of the landmark U.S. antitrust decision in Continental T.V. v. GTE Sylvania, Inc. 433 U.S. 36 (1977) declares that 'Interbrand competition ... is the primary concern of antitrust law.' We trace the antecedents and influence of this declaration, argue that it is inappropriate, and conclude that it should be abandoned. [ABSTRACT FROM AUTHOR]

We briefly review the relevant economic theories and legal treatment of vertical restraints, and especially focus on the 1977 landmark case of Sylvania and its possible influence on China's antitrust enforcement on vertical restraints. China's competition policy, and particularly its antimonopoly law, does not explicitly instruct with respect to the enforcement approach (per se versus rule of reason) toward vertical restraints. But from an overview of China's recent antitrust cases, we find that there is a division in the approaches taken by public versus private enforcement: Even though the administrative enforcement is more inclined to the application of per se prohibitions (or the application of the EU-style prohibition-plus-exemption approach), it seems that a rule of reason is the (increasingly) prevailing approach that is taken by the courts. [ABSTRACT FROM AUTHOR]

The starting point of this paper is a January 1977 judgment of the Indian Supreme Court, which applied the rule of reason to vertical restraints and anticipated many of the arguments of the Sylvania judgment. After summarizing the background of the Indian case, I set out the main points of similarity and difference between the two judgments, and finally assess the somewhat erratic influence of post- Sylvania antitrust thinking on Indian competition law and jurisprudence. [ABSTRACT FROM AUTHOR]

We compare the wholesale model and the agency model that characterise a vertical relation in a bilateral duopoly framework. Results suggest that the agency model may be regarded as an example of retailer power resale price maintenance and provide an economic view of why restraints of this kind should be evaluated under the rule of reason. While competition is more likely to be undercut under the agency model, relative to the wholesale model, the agency model benefits consumers by offering relatively lower retail prices and greater demand. [ABSTRACT FROM AUTHOR]

Copyright of Research Papers of the Wroclaw University of Economics / Prace Naukowe Uniwersytetu Ekonomicznego we Wroclawiu is the property of Uniwersytet Ekonomiczny we Wroclawiu and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper empirically analyzes how the use of vertical price restraints has impacted retail prices in the market for e-books. In 2010, five of the six largest publishers simultaneously adopted the agency model of book sales, allowing them to directly set retail prices. This led the Department of Justice to file suit against the publishers in 2012, the settlement of which prevents the publishers from interfering with retailers' ability to set e-book prices. Using a unique dataset of daily e-book prices for a large sample of books across major online retailers, we exploit cross-publisher variation in the timing of the return to the wholesale model to estimate its effect on retail prices. We find that e-book prices for titles that were previously sold using the agency model decreased by 18 percent at Amazon and 8 percent at Barnes & Noble. Our results are robust to different specifications, placebo tests, and synthetic control groups. Our findings illustrate a case where upstream firms prefer to set higher retail prices than retailers and help to clarify conflicting theoretical predictions on agency versus wholesale models. [ABSTRACT FROM AUTHOR]

When the U.S. Supreme Court overturned its century-old precedent that treated resale price maintenance (RPM) as a per se violation of the antitrust laws, it signaled approval for the vertical restraint's widespread use. But the increased use of RPM occurred under a pre-existing rule that permitted RPM as long as no formal agreement over price was reached. This paper documents not only the increased use of RPM post Leegin but also the importance of avoiding the appearance of agreements to control resale prices. The paper then discusses how plaintiffs, previously enamored of claims of RPM, are now recasting vertical RPM arrangements as ancillary to horizontal agreements among distributors that are made effective though enforcement by producers. [ABSTRACT FROM AUTHOR]