Resale Price Maintenance

Resale price maintenance raises not only economic problems but also legal ones. Indeed, much of the material on the subject is legal in origin. These legal aspects are, of course, important in showing the nature of the arguments—economic and other—involved, but their importance is mainly with respect to the technique of maintaining the system. For the immediate purpose one can assume that the economic aspects of resale price maintenance are the same, irrespective of the actual technique of enforcement and therefore the legal aspects, as such, can be ignored here.It may be pointed out, however, that the methods used to enforce compliance with the system are various. In Great Britain, for example, the trade association with contracts for its members and dealers is common. These may be enforced by legal action or economic action such as refusal to sell. In other cases it may be handled by contracts between the manufacturer and the jobber and then jobber and dealer. The actual technique used is usually dependent upon what the law permits; accordingly it varies from jurisdiction to jurisdiction. Of course, the effectiveness of the scheme depends upon enforcement. Paradoxically enough, the better the system is maintained, the greater are the gains to any one dealer in evading it. Thus success tempts the very forces which if not checked will break it.