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Executive Summary

An FTC policy allowing resale price maintenance could be beneficial in at least two specific circumstances, according to a report released Oct. 11 which evaluates a series of the Commission's vertical price restraint cases. According to the report, prepared by outside consultants working with FTC staff, "The evaluations of the resale price maintenance (RPM) cases would appear to be consistent with the following conclusions: (1) an approach that allows RPM by a new entrant is very likely to be socially beneficial; and (2) a provision in RPM remedial orders that allows dealer selection on the basis of quality is also likely to be beneficial." The report declares that "the evaluation cast doubt on the desirability of retaining the current rule on RPM -- a per se ban with no exception." The evaluation project, begun in 1978, included an examination of RPM cases from five industries; clothing, shoes, audio components, hearing aides and industrial gases, with the intention that the findings could apply outside those industries. RPM is a form of vertical restraint. Noting the review did not reveal an ideal method of handling vertical restraint cases, the report stated: "As a group, these evaluations seem to us to be better at demonstrating the potentially significant shortcomings of the enforcement policies that have been proposed than at providing guidance is deciding which of the various per se or rule of reason options is the optimal policy." In the per se approach, RPM would be considered illegal regardless of potential economic benefits. Under the "rule of reason," an economic analysis would determine whether, on balance, the effects are pro- or anti-competitive.

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