Free Riding: An Overstated, and Unconvincing, Explanation for Resale Price Maintenance
Free Riding: An Overstated, and Unconvincing, Explanation for Resale Price Maintenance
This paper begins with an analysis of Leegin followed by an examination of the free rider theory, which concludes that the free rider explanation for vertical restraints has been greatly overused; the expansive variants of the theory, in particular, are flawed on their own terms. It argues for a more positive or neutral perspective of free riding as positive externalities. So viewed, free riding should not be considered a problem that must be countered (with RPM) whenever it exists. Under this view, free riding is probably infrequently harmful and therefore minimum RPM seldom provides the competitive benefits proponents of RPM claim for it. The paper briefly discusses the potential anticompetitive effects of minimum RPM. It then considers the policy implications of Leegin and argues for a quick-look rule of reason standard for minimum resale price maintenance in the wake of Leegin.
Keywords: free rider theory, Supreme Court, Leegin, vertical restraints
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