Minimum Resale Price Maintenance: Some Empirical Evidence from Maryland
14 January 2010
By Dr. Elizabeth M. Bailey with former NERA economist Dr. Gregory K. Leonard
The Supreme Court's controversial decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc. held that a manufacturer setting minimum resale prices should be evaluated under a rule of reason standard, overturning an almost 100-year-old per se standard. A rule of reason standard is consistent with economic theory, which demonstrates that minimum resale price maintenance (RPM) can be either pro- or anti-competitive depending on the circumstances. Since the Leegin decision, the US Congress and some states have considered legislation as a means to circumvent Leegin. The State of Maryland, for example, enacted a statute in response to Leegin that characterizes a manufacturer's setting of a minimum price below which a retailer cannot sell as "an unreasonable restraint of trade," thereby restoring the per se standard. This paper considers the effect of the Maryland legislation on retail video game prices in that state. The authors find little evidence that the Maryland statute had any effect on video game prices, which suggests that minimum RPM does not always restrain price competition.
