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Current Issues in Business Economics: Leegin vs PSKS (price fixing issue) - Assignment Example

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PSKS incorporation, respondent, Leegin got into a minimum price agreement with its retailers, which needed the retailers to charge a set minimum price of leegin products (Roberts et al.,…
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Current Issues in Business Economics: Leegin vs PSKS (price fixing issue)
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Current Issues in Business Economics: Leegin vs PSKS (price fixing issue) In the facts of the case Leegin Creative leather products Incorporation, petitioner, v. PSKS incorporation, respondent, Leegin got into a minimum price agreement with its retailers, which needed the retailers to charge a set minimum price of leegin products (Roberts et al., 2007). According to Leegin Incorporation, this was bound to promote competition between the retailers in product promotion and customer service. However, Leegin later discovered that one of the retailers, PSKS, was selling its products at a discounted price (Roberts et al., 2007). This prompted Leegin to drop the retailer for selling its products below the minimum price as agreed. However, PSKS sued Leegin for infringement of Section 1 of the Sherman Act by indulging in anticompetitive price fixing. The primary question presented in this case was whether it is per se unlawful under the Sherman Act Section 1 for a producer to set a minimum Resale Price Maintenance (RPM) (Roberts et al., 2007).
The primary economic and antitrust issues present in the case revolve around RPM and how such agreements can either be against or for competition. According to Garrett et al. (2008), Resale Price Maintenance refers to a pricing arrangement where a producer organization searches to influence the pricing of its products by the retailer organizations (Keneth & David, 2008).
In this case, the important issues to be considered are the incentives that a producer would establish to unilaterally institute RPM, the pro-competitive and anti-competitive effects of RPM, the practical insinuations of applying the rule of reason to RPM cases and the likelihood of circumstances that may lead to RPM abuse. These issues can be accessed through the market power of the producer, the number of retailers, the degree to which the retailer is active downstream and the cost of offering the retailing services.
References
Garrett D.M, Burtis M., Howell V. (2008). Economics of Antitrust: An economic analysis of Resale Price Maintanance. Economic Review.
Kenneth G. E., David E. M. (2008). The Economics of Resale Price Maintenance, in ABA Section of Antitrust Law, Issues in Competition Law and Policy.
Roberts et al. (2007). Leegin Creative Leather Prods. Inc. v. PSKS, Inc., 127 S. Ct. 2705, 2727 (recognizing that vertical minimum price fixing has both pro and anti-competitive consequences). Read More
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