Sunday, January 04, 2009

Resale price maintenance in a recession

I came across this study from Japan, Demand Uncertainty and Resale Price Maintenance, which argues that RPM in conditions of uncertain demand will be "profitable for the manufacturer and not damaging to the retailers."

I am embarrassed to admit that I had not before now given any thought to how RPM might have different effects under current conditions than it did a year or so ago at the time of the Leegin decision that changed the law on RPM. The position taken by the paper may well be true in Japan where, the author tells us, retailers have the right of full return on unsold merchandise. That is not generally the case in the US (other than for books and perhaps a few other categories).

Which raises some questions (and I'm not going to pretend I have answers). If I were a retailer, I think I'd be reluctant, in the current retail environment, to buy merchandise covered by RPM policies unless I were given return guarantees, for fear of being stuck with unmoveable inventory as other retailers cut price on competitive products. Are manufacturers giving return guarantees in such cases? If not, are they offering other solutions (perhaps sale periods when price-cutting is allowed, or inventory financing allowances)?

This is a good time for a reminder that the FTC will be offering workshops on RPM -- more info on that here.

No comments: