Antitrust Vertical Myopia: The Allure of High Prices

Resale price maintenance (“RPM”), the practice whereby a manufacturer sets pricing rules for retailers, artificially inflates prices and, thus, allegedly runs afoul of antitrust laws. The practice emerged in the last quarter of the nineteenth century with the rise of advertising and has been one of the most controversial antitrust topics ever since. Manufacturers allege they do this because, for certain branded goods, high prices improve sales, while discounts harm the appeal of brands and adversely affect sales. Courts and scholars have always been aware of this argument, yet kept focusing on other explanations for the practice. This Article examines popular RPM theories, explains why manufacturers frequently use RPM to protect the appeal of their products as status goods, and argues that no per se rule for RPM is warranted.