As to whether the antitrust laws exist to foster price competition — yes, of course, but not price competition ALONE. They exist to protect consumer welfare, which may be improved by various forms of competition which are generally best left up to the unilateral decisions of manufacturers to determine. Of course, if that proposition is wrong it should show up in the empirical studies showing that RPM harms consumers.

The bottom line empirically is that virtually nobody who has read the literature agrees that RPM “always or almost always harms consumers” — which is the standard for application of the per se rule.

I’m not so convinced the title of the statute can do as much work as you would like it to here. In particular, I don’t think that Congressional action in 1975, which merely put an end to special ability of states to make RPM per se LEGAL, was designed to mandate a particular welfare standard for these practices.

Rather, the most plausible interpretation (the FTC/DOJ brief makes a similar argument around p. 22) is that Congress did not intend to deprive courts of the ability to interpret the Sherman Act’s language in a manner consistent with growing economic knowledge about the actual effects of these restraints in the marketplace.

Those market realities demonstrate that where RPM increases price, it is generally increases output as well. So it is a bit misleading to cite only the price effect. However, the combined output/price effect is consistent with promotional services theories of RPM. It would be quite a stretch, I think, to argue that Congress’ actions in 1975 mandated a particular mix of price and non-price competition or to prohibit manufacturers from solving incentive incompatibility problems designed to induce output increasing (and usually consumer welfare enhancing) activities.

I was surprised to learn from the blog Truth on the Market—always a good read—that Federal Trade Commission member Pamela Jones Harbour sent an “open letter” to the Supreme Court last week urging the justices to rule against the petitioner in…

1. I think the empirical evidence here is rather overwhelming in favor of a rule of reason approach. I had suspected that I would be reading arguments in favor of the per se rule that read something more like: “yes, the evidence is not in our favor but it is too inconclusive to change the rule yet because ….” Of course, this argument would not be persuasive because the modern per se approach tells us that we condemn under the per se rule if and only if we know the restraint always or almost always has anticompetitive effects. Instead, the argument is being made that the literature affirmatively demonstrates that RPM meets this standard. This surprises me. Maybe it shouldnt. But that is not how I, and many others, read this literature.

2. The FTC/ DOJ Amicus brief, which was written well before my appointment and thus I had nothing to do with, I think covers the issues and summarizes the economic literature quite nicely (as does, of course, the Economists’ Brief).

3. One point that I wish received more attention in the discussion of vertical restraints more generally is that the “discount dealer” free-riding explanation is not the only explanation for the use of vertical restraints. Incentive problems regarding promotion exist between manufacturers and dealers even without any inter-dealer externalities and RPM is one method of solving them. See, e.g. Klein and Murphy. Many of the pro-per se crowd cite to this paper for exposing some shortcomings in the discount free-riding story, but greatly misundertand the economics in that paper and with respect to “free-riding” in the absence of discount dealer problems more generally.