Brand-specificity of pre-sale services and inter-brand competition with resale price maintenance

We analyze the competitive effects of resale price maintenance (RPM) in circumstances in which multiple manufacturers use RPM and distributors have incentives to free-ride on other distributors' pre-sale services, which can be specific to a manufacturer's brand to some extent. In the antitrust literature and practices, RPM solving the free-rider problem is perceived mostly as pro-competitive, while multiple manufacturers' RPM is perceived as anti-competitive based on their collusive incentives. In our circumstances, distributors' services may differentiate manufacturers' brands ex post, as is desired by manufacturers. Thus, despite solving the free-rider problem, multiple manufacturers' RPM may harm consumers by softening inter-brand price competition.