Competition Policy and Antitrust Law: Implications of Developments in Supply Chain Management

Abstract

Building on research in supply chain management (SCM) that aids in the workings of society, the authors illustrate how SCM research can advance public policy and law. Using competition policy and antitrust law as an example, they consider how developments in SCM thought and practice augment economic understanding of vertical restraints involving minimum resale price maintenance (RPM). Developments affecting the organization of supply chains; firm-level strategies for the management of retail distribution; and the interactions of supply chain participants are investigated. The findings advance knowledge of the primary procompetitive and anticompetitive theories of RPM found in competition policy and antitrust law. They also illustrate the potential of SCM to expand its reach and impact through studies that address the interplay of SCM and public policy and law.

Full text

Competition policy and antitrust law: implications of developments
in supply chain management
Greg Gundlach, Robert Frankel, & Riley Krotz
Article information: Greg Gundlach, Robert Frankel, & Riley Krotz (2019), “Competition
policy and antitrust law: implications of developments in supply chain management” Journal of
Supply Chain Management, Vol. 55, Issue 2.
Abstract
Building on research in supply chain management (SCM) that aids in the workings of society,
the authors illustrate how SCM research can advance public policy and law. Using competition
policy and antitrust law as an example, they consider how developments in SCM thought and
practice augment economic understanding of vertical restraints involving minimum resale price
maintenance (RPM). Developments affecting the organization of supply chains; firm-level
strategies for the management of retail distribution; and the interactions of supply chain
participants are investigated. The findings advance knowledge of the primary procompetitive and
anticompetitive theories of RPM found in competition policy and antitrust law. They also
illustrate the potential of SCM to expand its reach and impact through studies that address the
interplay of SCM and public policy and law.
Keywords: Public policy, law, competition policy, antitrust law, vertical restraints, resale price
maintenance, supply chain organization, management of supply chains, interfirm interactions
Journal of
Supply Chain Management

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Introduction
As a business discipline, the field of supply chain management (hereafter “SCM”) has
emphasized research that aids in the workings of the firm and its supply chain partners.
Documented in the Journal of Supply Chain Management and other outlets in the field, this
scholarship has provided important contributions for advancing the management of supply
chains and related fields. Together, these contributions have significantly advanced business
thought and practice.
In addition to these contributions, some scholars have expressed the view that SCM can
also aid in the workings of society. An increasing body of scholarship now examines how SCM
can benefit society and enhance consumer well-being. Much of this work has focused on
sustainability (Guide & Wassenhove, 2001; Pagell & Wu, 2009; Carter & Easton, 2011; Bell et
al., 2012; Busse & Mollenkopf, 2017). However, other contributions include research on
corporate social responsibility (Xia, Zu & Shi, 2015); food safety, transparency and traceability
(Voss, 2013; Wowak et al., 2016; MacKenzie & Apte, 2017; Liljestrand, 2017; Tsai & Pawar,
2018); healthcare (Abdulsalam et al., 2015; Zepeda, 2015; Papert et al., 2016; Krichanchai &
MacCarthy, 2017; Abdulsalam et al., 2018); and humanitarian logistics (Charles et al., 2016;
Wang et al., 2018).
Building on this body of work, a growing number of researchers have advanced the
added view that, as a part of benefiting society and enhancing consumer well-being, SCM
research can play a role in the development and application of public policy and law (e.g., Gray
et al., 2013; Simpson et al., 2015; Martin, 2017; Pagell, Fugate & Flynn, 2018; Wu & Jia, 2018).
These researchers contend that SCM research holds potential to assist public policymakers, legal
professionals, and others in their efforts to develop and apply public policy and law. This type of

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research is the focus of JSCM’s second Emerging Discourse Incubator (EDI) (Pagell, Fugate &
Flynn, 2018). Research from fields such as political science, economics, and law have
traditionally informed the analyses of public policy and law. However, as the editors point out,
“the analyses are often made without understanding of the systemic implications [of] supply
changes and extended networks” (p. 1). To remedy this gap, JSCM’s aim is to incubate a
discourse with major schools of thought at the intersection of SCM and law, regulation,
government and regulatory agencies.
Beyond benefitting society and enhancing consumer well-being, research at the
intersection of SCM and public policy and law has potential to expand the reach and impact of
SCM. As Pagell, Fugate and Flynn (2018, p. 2) explain, “supply chain issues are no longer
merely business issues, but progressively involve the complex confluence of business, law,
social policy, human rights, politics, and international relations.” These and other scholars
understand that SCM “research has potential to directly inform policymakers to consider a
broader supply chain perspective” (p. 2). They also recognize that “as scholars in SCM, we have
the unique opportunity, and perhaps the responsibility, to educate other decision-makers about
the interaction of SCM and public policy and government regulation” and related areas of
societal interest (p. 2).
Extending the proposition that SCM research can offer important insights for informing
public policy and law, we illustrate how SCM can augment understanding of policy and law
involving competition. Competition policy and antitrust law are vital components of a market
economy and competition is an important aspect of SCM. However, until now policy and laws
addressing competition have not benefited from an SCM perspective or SCM research.

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Consequently, there is considerable opportunity for SCM scholars to contribute to the future
development of this important area of policy and law.
In the sections that follow we overview the nature of competition policy and antitrust
laws that apply to supply chains and SCM. Although competition policy and law are found in
other settings (e.g., European Union Directorate-General for Competition, 2019; Australian
Competition and Consumer Commission) we address U.S policy and law. Considering SCM,
competition policy and laws applicable to agreements between members of a supply chain that
restrict one member’s ability to compete are examined. Known as “vertical restraints” these
agreements encompass a variety of SCM-related practices. Thus, they offer a relevant context
from which to study the intersection of SCM research and public policy and law.
To illustrate the potential of SCM research to inform public policy and law, we show how
SCM research that describes contemporary developments in the organization of supply chains;
firm-level strategies for the management of retail distribution; and the interactions of supply
chain participants augments existing understanding of a common vertical restraint (i.e., resale
price maintenance). This examination reveals important findings from SCM research. These
findings are described and their implications for advancing understanding of U.S. competition
policy and antitrust law involving resale price maintenance are elaborated upon. We conclude
by offering guidance to researchers interested in pursuing the study of public policy and law;
describe a scientific basis for such research; and elaborate on the value of the research for both
SCM and society. To our knowledge this is the first time that the interplay of SCM and
competition policy and antitrust law has been examined in the SCM literature.

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Competition Policy and Antitrust Law
The goal of U.S. competition policy and antitrust law is to promote a competitive
marketplace through protecting the process of competition from business practices that
unreasonably restrain trade (Areeda & Hovenkamp, 2018). Vigorous competition conducted in
an open marketplace benefits society. Competition among business rivals can result in lower
prices, higher quality, more choices, and increased innovation.
A series of Federal laws comprise the framework for U.S. competition policy and
antitrust law (Federal Trade Commission, 2018). See Table 1. At the federal level, these laws
and regulations are enforced through the Antitrust Division of the U.S. Department of Justice and
the Federal Trade Commission (FTC). Disputes are settled in the Federal courts. Depending on
the circumstances, other Federal laws and regulations may apply to competitive practices. State
laws involving competition and antitrust law may also apply.
Given the relevance of economics to questions concerning competition, knowledge and
experts from the field of economics are extensively relied upon by public policymakers,
competition enforcement agencies, and legal professionals for developing policy, enforcing laws,
and resolving disputes involving competition policy and antitrust law (Areeda & Hovenkamp,
2018). Neoclassical economics and particularly price theory-based formulations of supply
informs much of our understanding of competition policy and antitrust law (Sullivan, Grimes &
Sagers, 2016). However, knowledge and expertise from other fields is being increasingly sought
and relied upon to augment economic understanding. This includes knowledge and expertise
from business. The business disciplines, including SCM, apply perspectives, adopt assumptions,
and develop knowledge in ways that can differ from economics. Consequently, these disciplines
offer significant potential to augment understanding of competition policy and antitrust law.

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Vertical restraints
Many areas of competition policy and antitrust law intersect SCM. In addition to
dealings between firms operating at the same level of a supply chain, competition policy and
antitrust law governs dealings between firms operating at different levels of the supply chain
(Federal Trade Commission, 2018). These dealings may involve upstream and downstream
business arrangements. In some instances, they entail agreements that restrict the freedom of one
or both firms to compete. Known as “vertical restraints,” (hereafter “VRs”) these restrictions
encompass a variety of supply chain-related business practices. See Table 2.
VRs involve practices that affect price and nonprice competition (Areeda & Hovenkamp,
2018). Vertical “price” restraints include practices that restrict the ability of another firm at a
different level of the supply chain to compete through price (e.g., minimum and maximum resale
price maintenance). Vertical “nonprice” restraints restrict the ability of another firm at a
different level of a supply chain to compete in nonprice ways (e.g., location clauses, customer
restrictions, etc.). Hybrid restraints combine both price and nonprice restraints.
Analysis of vertical restraints
From the perspective of competition policy and antitrust law, VRs encourage competition
and thereby benefit society where they reduce costs and promote an efficient and effective
supply chain system (Federal Trade Commission, 2018). However, by definition, VRs limit
competition and thereby can harm society where they unreasonably restrain trade. Thus, legal
disputes concerning VRs require analysis of whether they unreasonably limit competition.
Determining the reasonableness of a VR following antitrust law is complex. The process
includes a detailed analysis of their effects in a market and the balancing of any harmful effects
against any beneficial effects. Where a VR is determined on balance to benefit competition,

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consideration is given to whether less restrictive strategies are reasonably available for achieving
the same outcome. This approach, known as the “rule-of-reason,” requires a court to consider
and weigh the relevant circumstances of the dispute to decide whether the VR unreasonably
restrains competition and thereby violates antitrust law (Areeda & Hovenkamp, 2018).
Application of the rule of reason to legal disputes involving VRs encompasses the
antitrust process (Federal Trade Commission, 2018).1 This process requires an understanding of
the law, but also knowledge of the facts and circumstances of an individual case. Consequently,
competition policy and antitrust law professionals rely upon relevant knowledge and established
experts to assist them. Given the relevance of economics to questions involving competition,
experts in competition policy and antitrust law typically draw upon principles of supply and
demand to explain the competitive effects of a VR in a market (Areeda & Hovenkamp, 2018).
Consequently, these experts adopt economic-based conceptions of the market and the basic
phenomena that comprise it. In some instances, these phenomena have been the subject of
important developments in SCM. To the extent these developments alter or augment economic-
based understanding of VRs, they have potential to enhance competition policy and antitrust law.
In the following sections developments in SCM thought and practice, as captured in SCM
research, are described and their ability to enhance understanding of competition policy and
antitrust law is examined. Given the relevance of VRs to SCM, we emphasize developments
with potential to affect understanding of the nature and effects of one of the most common VRs –
1 The antitrust process includes defining the relevant product and geographic market in which the dispute arose (i.e.,
market definition), evaluating the defendant’s ability to harm competition (i.e., market power), understanding the
nature of the conduct at issue (i.e., conduct), determining any beneficial and harmful effects of the conduct (i.e.,
competitive effects), and then balancing these effects to assess if the conduct unreasonably restrains trade in the
affected market (Areeda and Hovenkamp, 2018).

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resale price maintenance. Our analysis finds that SCM possesses considerable potential to
enhance understanding of competition policy and antitrust law.
Resale Price Maintenance
Minimum resale price maintenance (hereafter “RPM”) is a well-known, yet controversial
VR (Matsui, 2011, p. 373). RPM involves agreements between a manufacturer and its resellers
that establish the price below which the manufacturer’s products cannot be resold. Impacting
more than $300 billion in U.S. sales annually, RPM is used in the sale of a wide range of
products and product categories (e.g., electronics, baby products, home improvement products,
clothing accessories, appliances, personal care products, etc.) (Gundlach, Manning & Cannon,
2017). RPM agreements have become more widespread following a 2007 decision of the U.S.
Supreme Court (Leegin Creative Leather Products, Inc. v. PSKS, Inc., 2007).
As a supply chain practice, RPM has received attention by scholars in SCM. Applying
analytic modeling techniques, early SCM research explored how RPM can maximize a supplier’s
profit (Ha, 2001). Building upon this research, latter research examined RPM as a promotional
tool (Bernstein, Song & Zheng, 2009), the effect of power on the use of RPM (Liu et al., 2009;
Xue et al., 2014), and RPM practices in the context of customer heterogeneity and uncertain
preferences (Matusi, 2011). More recently, SCM researchers have examined RPM in
decentralized supply chains (Bazhanov, Levin & Nediak, 2017) and the effects of RPM on
supply chain performance (Kyparisis & Koulamas, 2018).
RPM and competition policy and antitrust law
RPM raises difficult questions for competition policy and antitrust law and these
difficulties arise given RPM “permits one member of the supply chain to limit the normal pricing
behavior of other members of a supply chain” (Coughlan et al., 2001, p. 285). As with VRs,

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these questions have been historically addressed from an economic perspective with only modest
input from other disciplines. The economic approach has yielded considerable insights for
understanding RPM. However, as one FTC Commissioner has concluded (Harbour 2009, p. 10):
“There are economic theories praising RPM and other theories condemning it, but none
of the theories (on either side) are supported by any systematic body of empirical
evidence. At best, we have strongly held beliefs about the effects of RPM, sometimes
bordering almost on religious. But we are missing facts….”
Acknowledging this, public policymakers (Varney, 2009), competition enforcement officials
(Harbour, 2009), and competition advocates (American Antitrust Institute, 2009) have called for
research, to augment in multidisciplinary ways, economic understanding of RPM.
Economic theories of RPM
Different economic perspectives and theories have been applied to explain RPM.
However, neoclassical economics and microeconomic price theory have generated most of these
insights. This includes theories of RPM’s procompetitive and anticompetitive effects.
Procompetitive theories of RPM
Procompetitive theories explain how RPM is employed by manufacturers to mitigate the
occurrence of negative “externalities” in the supply and marketing of their products and thereby
lead to a more optimal allocation of resources in a market. Externalities involve circumstances
where the costs of an exchange impact an otherwise uninvolved third party and thus lead to the
misallocation of resources (Buchanan & Stubblebine, 1962; Areeda & Hovenkamp, 2018). An
example is where business practices cause pollution and impose unwarranted costs on society.
Free rider thesis. The most common theory of RPM’s procompetitive effects is that
RPM is employed by manufacturers to resolve externalities resulting from the occurrence of free
riding in the distribution of their products (Brunell, 2007). Free riding occurs “when one
benefits at no cost from what another has paid for” (Chicago Professional Sports Ltd. V. NBA,

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1995). The type of free riding resolved by RPM involves intrabrand free riding. This happens
where one reseller of a brand free rides off another reseller of the same brand. The archetype
involves “discount” dealers free riding on the promotional investments of “full-service” dealers
and then luring customers away through lower prices. As described by Hovenkamp (1995, p. 97-
98):
…the full service computer dealer may have, among other things, an expensive
showroom, trained personnel demonstrating computers and assembling optimal packages,
seminars for prospective purchasers. The free riding dealer down the street has a cheap
warehouse, untrained minimum wage personnel, and stacks of computers in boxes.
Customers will go to the full service dealer and obtain the information they need to make
a wise choice; then they will go to the free rider to make their purchase at a lower price.
Free riding can reduce demand for a manufacturer’s product if it undermines a
distribution system. This can occur if retailers stop providing promotion that increase sales of
the manufacturer’s product or where they discontinue sales of the product altogether. RPM
safeguards against free riding by setting a uniform resale price below which the manufacturer’s
product may not be sold (Areeda & Hovenkamp, 2018). As explained by Lao (2010, p. 478):
In a nutshell, the classic free rider theory posits that certain product-specific services that
cannot be charged separately to consumers, such as product demonstrations and
information from knowledgeable salespeople, may be essential for the effective
marketing of a product. But, as long as consumers can obtain these services from one
retailer but buy at a discount from another offering no such services, few retailers would
be willing to provide the services, leading to an overall decrease in demand for the
product. By prohibiting discounting, RPM is said to remedy the free rider problem and
induce retailers to compete for sales by providing the desired product-specific services.
If a manufacturer sets the minimum resale price for their product high enough, RPM alters the
incentives of price conscious consumers to shop across retailers for a lower price. Setting a
higher price also encourages retailers to promote the manufacturers product by compensating
them for their efforts. Enforcing the minimum price across all retailers that sell the product

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assuages concerns that if they do invest in promotion, competing retailers will not be able to lure
customers away through lower prices.
Research on RPM reports its use generally (but not exclusively) results in higher prices.2
However, RPM is said to be justified where it alleviates free riding. To the extent customers
value promotional services induced by RPM more than lower prices, RPM enhances competition
and is thereby considered procompetitive (Comanor, 1985; Areeda & Hovenkamp, 2018).
The free riding thesis has been extended to include settings where discount retailers free
ride on reputational investments that certify the quality of products carried by a prestige retailer
(Marvel & McCafferty, 1984; Areeda & Hovenkamp, 2018). These investments include those
that retailers use to convey the quality of their brands (e.g., store furnishings, ambiance, etc.).
Discount retailers are explained to free ride on these investments to the detriment of competition.
The free rider thesis has been used to explain the use of RPM across broad classes of
distribution. This type of free riding is alleged to occur between Internet and brick-and-mortar
retailers (Lao, 2010). Applying the labels “showrooming” and “webrooming” each class of
reseller has accused the other of free riding on investments in promotion of brands they both sell
(Kalyanam & Tsay, 2013; Balakrishnan, Sundaresan & Zhang, 2014; Basak et al., 2017).
Anticompetitive theories of RPM
Anticompetitive theories of RPM explain how RPM is used by manufacturers and
retailers with market power to restrict retail price competition and thereby result in the
misallocation of resources in a market. Market power is the ability of a firm to significantly
influence competition and may be possessed by an individual firm (e.g., monopolist) or
2 For reviews see Hollander (1966), Overstreet (1983), Gundlach, Manning & Cannon (2017).

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collectively among firms (Sullivan, Grimes & Sagers, 2016). Economic conceptions of market
power rely upon calculations of firm concentration in a market (Areeda & Hovenkamp, 2018).
Forestalling competition thesis. The most common theory of RPM’s anticompetitive
effects is the forestalling competition thesis. This theory explains how RPM is either forced
upon a manufacturer by a more powerful retailer (or retailers) to prevent less costly (i.e., more
efficient) retailers from offering lower prices or willfully adopted by the manufacturer to
preserve its wholesale price margin. As Grimes (2010, p. 126) explains:
[w]hether the motivation for RPM comes from retailers who wish to avoid discount
competition or from a manufacturer who wants to maintain a high margin the impact of
RPM is to deny an efficient retailer the potent weapon of a lower price in gaining market
share against rivals. New and efficient retailing methods can be slowed or stymied by
widespread use of RPM. This point has been made over and over again by students of
RPM.
Identified as “the most popular, and historically possibly the most important,
[anticompetitive] explanatory hypothesis for resale price maintenance” the forestalling
competition thesis posits that RPM is a means through which traditional retailers try to prevent
new forms of distribution and retailing from taking hold and competing against them on price
(Overstreet, 1983, p. 13; Grimes, 2010). In anticompetitive terms, the desire to impose RPM
does not originate with a manufacturer attempting to enhance distributional efficiency, but rather
from resellers attempting to do just the opposite. As explained by Overstreet (1983, p. 13-14):
Under this theory, the manufacturer is induced into instituting a resale-pricing scheme
that yields retailers a higher margin than otherwise would be the case. More efficient
retailers, or retailers who otherwise would be induced to compete on a lower price basis,
are prevented from offering prices lower than the maintained price. Resellers who
deviate from the maintained price can then be detected, either by the manufacturer or the
colluding retailers, and subjected to some form of discipline from the manufacturer. The
manufacturer could discontinue selling to the price cutter or adopt some means short of
this if it were satisfied that the offending reseller would be more cooperative in the future.

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Traditional retailers, in search of a way to protect themselves against lower priced
retailers may act individually, or in combination, to coerce a manufacturer to adopt RPM. By
preventing price competition between retailers, RPM can discourage more efficient retailers from
entering a market and/or acquiring sufficient scale through lower prices. RPM can also hinder
the entry and expansion of retail formats based on low prices. Thus, RPM can impede retail
evolution where less efficient retailers are replaced by more efficient retailers and higher-cost
retailers are replaced by lower-cost retailers (Grimes, 2010).
The use of RPM to stifle entry and curtail advancement of Internet retailers has been
cited as a contemporary example of the forestalling competition thesis (Lao, 2010). As Harbour
and Price (2010, p. 232) describe:
In recent years, traditional RPM justifications have been refreshed and reinvigorated for
the modern and rapidly evolving e-commerce era. As consumers already have realized,
Internet retailing offers the potential of tremendous savings, especially when innovative
Internet entrepreneurs choose to share with consumers a portion of their cost reductions
from distribution and other efficiencies. From the perspective of traditional merchants,
however – especially those dependent on physical retailing space – Internet-only retailing
is perceived as a threat to existing business models. Increasingly, aggressive RPM
programs are being viewed as an effective way to thwart innovative Internet retailers who
might seek to upset the status quo by passing savings through to consumers in the form of
discounts.
The theoretical validity of both the forestalling competition thesis of RPM and the free
rider thesis of RPM were acknowledged by the Supreme Court in Leegin (2007). However,
according to the Court, “empirical evidence on the topic is limited” (p. 894). Thus, further
research is needed to fully understand the nature and competitive effects of RPM. In the sections
that follow we examine developments in SCM with potential to enhance understanding of RPM.
Developments in Supply Chain Management
Developments in SCM thought and practice offer potential to augment economic
understanding of RPM in ways that are important to competition policy and antitrust law. As

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summarized in Table 3, these include developments related to the organization of supply chains,
firm-level strategies for the management of retail distribution, and the interactions of supply
chain participants. SCM research that documents these developments is described in this section
and their impact on economic theories of RPM is examined.
Organization of supply chains
To explain the effects of RPM for a market, economic theories adopt opposing views of
supply chain organization. Procompetitive theories, including the free rider thesis, view that the
upstream and downstream sectors of many supply chains are unconcentrated with few barriers to
entry and that relative power in the organization of distribution in these supply chains favors
downstream firms. Held in check by these market forces, procompetitive theories explain that
manufacturers are more likely to use RPM for procompetitive purposes. In contrast,
anticompetitive theories of RPM, including the forestalling competition thesis, adopt a less
confident view of market forces and their role in shaping supply chains and safeguarding against
the abuse of RPM. Thus, anticompetitive theories explain that as a result of consolidation many
supply chains have become structurally concentrated. Possessing market power due to this
concentration and other factors, manufacturers and retailers are more likely to use RPM for
anticompetitive purposes. Given these opposing views, a key question is whether and to what
extent the organization of supply chains tend to align with these differing views of RPM.
Research that examines the evolution of distribution systems (Fein & Jap, 1999);
distribution (Mentzer et al., 2001; Lambert et al., 2004; Corsten & Kumar, 2005; Bowersox,
2007) and supplier-buyer arrangements (Whipple & Frankel, 2000; Anselmi et al., 2002;
Hughes & Ahearne, 2010) document past developments in the organization of supply chains.
Research on power and dependence (Frankel et al., 1996; Zemanek & Frankel, 2001; Anselmi et

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al., 2002; Lambert et al., 2004; Bowersox, 2007; Daugherty, 2011; Kim, Jung & Park, 2015) and
its use in sustainability management (Pullman, Maloni & Carter, 2009; Pagell & Wu, 2009;
Busse, 2016; Hajmohammad & Vachon, 2016; Touboulic, Chicksand & Walker, 2014; Xiao et
al., 2019;) document developments in the nature and role of power in managing supply chains.
Together, this research offers potential to advance understanding of the anticompetitive use of
RPM by documenting the impact of changes in the organization of supply chains and the impact
of shifts in the relative power held by supply chain members.
Assessments of market power derived from firm concentration play a key role in
anticompetitive theories of RPM. Firm concentration is an important source of the market power
required to demonstrate the ability to engage in anticompetitive behavior including the abuse of
RPM (Areeda & Hovenkamp, 2006). As described by the Supreme Court, whether “a dominant
manufacturer or retailer can abuse resale price maintenance for anticompetitive purposes may not
be a serious concern unless the relevant entity has market power” (Leegin, p. 898). The
distribution of power in a supply chain is also an important consideration. Power that favors
downstream members of a supply chain (i.e., retailers) may encourage those members to seek
RPM from their upstream counterparts to forestall competition (Leegin, p. 898).
Impact of consolidation and firm concentration
Past research in SCM (Bowersox et al., 1993; Schmitz et al., 1995; Kaufman, 1999; Fein
& Jap, 1999; Anselmi et al., 2002; Gibson et al., 2009) and related fields (Kumar, 2005;
Hawkes, 2008; Hawkes, 2009; Swinnen & Vandeplas, 2010) document that consolidation and
other factors have transformed the supply chains for many goods, leaving them more
concentrated and shifting the locus of power from upstream to downstream. This research shows
that across time many supply chains have become consolidated and economically concentrated.

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In addition, today a greater number of downstream firms hold power over their upstream
counterparts. In the following sections, these developments and their effects on retailer power,
manufacturer power, and the balance of power among retailers and manufacturers are examined.
Retailer power. According to Fernie et al (2015, p. 10) “fifty years ago, retailing was a
fragmented industry” (Fernie et al., 2015). However, as Corsten and Kumar (2005, p. 80)
concluded over a decade ago “... there is little doubt about the consolidation in the retail sector.”
Today, “there is no denying that the largest retailers are getting bigger and more powerful every
year” (Gielens et al., 2018, p. 124). As explained by Fein and Jap (1999, p. 61), “industry
consolidation is replacing a multitude of small ‘mom and pop’ distributors with a handful of
national, professionally managed, publicly traded corporations.” As of 2005, the top ten largest
U.S. retailers accounted for over 80% of the average manufacturer’s business compared with
approximately 30% two decades prior (Corsten & Kumar, 2005, p. 80). This trend has continued
(Fernie et al., 2015). Large retail firms now dominant many supply chains. These developments
have boosted the market power of retailers and increased their ability to influence competition in
ways that affect price. As Hong and Li (2017, p. 152) explain, “... repeated waves of retail
consolidation underscore the potential importance of retailers as price-setting intermediaries.”
These developments have occurred in both the U.S. and internationally (Fernie et al., 2015). As
a result, the “...exercise of market power by dominant retailers is featuring high on the public
policy agenda” (Gielens et al., 2018, p. 136).
Manufacturer power. At the same time, "[a]s consolidation in retailing has occurred
and big retailers have increased their market presence in recent years, the number of
manufacturer supplying points to retailers has decreased" (Kim, Jung & Park, 2015, p. 101). This
concentration has had the added effect of increasing the market power of manufacturers in

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product categories historically subject to RPM. For example, relying on categories previously
identified by Hollander (1966, p. 80-81) census data supplied by the Supreme Court in the
Leegin case document that the top eight U.S. manufacturers of household cooking appliances
accounted for 68% of the domestic market (measured by value of shipments) in 1963, compared
with 77% in 2002 (Leegin, 2007, p. 922-23). Similarly, the top eight domestic manufacturers of
household laundry appliances accounted for 95% of the U.S. in 1963 (90% in 1958), compared
with 99% in 2002, and the top eight U.S. manufacturers of household refrigerators and freezers
accounted for 91% of the domestic market in 1963, compared with 95% in 2002 (Leegin, 2007,
p. 922-23). Although comparing census data across time is difficult (due to classification
changes) these numbers indicate that the household appliance industry is more concentrated now,
in terms of manufacturers, than in the past (Leegin, 2007, p. 922).
Balance of power. Consolidation and concentration has interacted with other changes
(e.g., technology) to shift the balance of power from manufacturers to retailers (Bowersox et al.,
1993; Schmitz et al., 1995; Anselmi et al., 2002; Hughes & Ahearne, 2010, p. 91). While “only
a few decades ago, large and dominant manufacturers could easily impose prices and other
buying conditions on typically small retailers in a fragmented retailer landscape, ... retailers have
gained bargaining power and have altered the retailer-manufacturer relationship...” (Van der
Maelen et al., 2017, p. 118). As explained by Kim, Jung and Park (2015, p. 101-2):
... retailers are [now] in a better position to interact directly with consumers and observe
market trends. ... For instance, they have in hand sophisticated shopping data and
insights through their point-of-sale system and loyalty program. Manufacturers can
leverage only the shopping data and insights for refining product features and developing
innovative private brand product through collaboration with the retailer. Consequently,
more manufacturers value the information available on the retailer's side, and this gives
more power to retailers...

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Given increased power, rather than being at the “beck and call of all-powerful
manufacturers, retailers can now stick to their guns” and leverage dealings with manufacturers
(Van der Maelen et al., 2017, p. 118). Possession of this power has resulted in “retailers
imposing their rules during commercial exchanges with suppliers” to gain a disproportionate
share of benefits (Maglara et al., 2015, p. 3). Researchers studying power have documented the
buyer influence in contexts ranging from setting prices (Gibson, 2009) to the management of
sustainability (Pullman, Maloni & Carter, 2009; Busse, 2016; Hajmohammad & Vachon, 2016).
As Gibson et al. (2009) observe “... power has shifted to retailers who increasingly drive prices,
dictate products, and wield negotiating clout.” This shift is, according to Huang and Li (2001, p.
527), “one of the most significant phenomena in manufacturing and retailing.”
Concentration in both the manufacturing and retailing sectors has left manufacturers and
retailers in possession of added market power (Kadiyali, Chintagunta & Vilcassim, 2000). In
Leegin (2007), the Supreme Court recognized this fact and its implications for RPM. Writing for
the dissent, Justice Breyer describes:
“[t]hat change [increased retail concentration], other things being equal, may enable (and
motivate) more retailers, accounting for a greater percentage of total retail sales volume,
to seek resale price maintenance, thereby making it more difficult for price-cutting
competitors (perhaps internet retailers) to obtain market share” (Leegin, 2007, p. 922).
In addition, Breyer states “increased concentration among manufacturers increases the likelihood
that producer-originated resale price maintenance will prove more prevalent today than in years
past, and more harmful” (Leegin, 2007, p. 923). Considering these assertions, research that more
particularly examines the structure of channel systems and shifts in the locus of power held by
supply chain participants offers potential to augment economic understanding of the
anticompetitive use of RPM. We offer the following propositions for future research:

18
P1: The more concentrated a supply chain is, the greater the capacity for RPM to be used
for anticompetitive purposes.
P2: The more concentrated the manufacturing sector of a supply chain is, the greater the
ability of manufacturers to use RPM for anticompetitive purposes.
P3: The more relative power held by retailers in a supply chain, the greater the ability of
retailers to influence manufacturers to use RPM for anticompetitive purposes.
Management of supply chains
Economic theories of RPM also draw inferences about the management of supply chains.
The free rider thesis presumes that cross-channel shopping, where consumers shop in one retail
channel for a manufacturer’s product and then purchase the same product in another retail
channel, encourages free riding and therefore should be discouraged through RPM. However, in
the wake of changing patterns in consumer shopping brought about by developments in multi-
channel distribution, research in SCM and related fields report that manufacturers are
reexamining their distribution strategies. Some are continuing to adopt strategies that discourage
customers from shopping across channels. However, others are embracing the cross-channel
shopping of their customers and developing strategies that embrace it. As Bernstein, Song and
Zheng (2009, p. 745) report, “a manufacturer may purposely induce free riding” to increase
profits. Accordingly, an important question regards the impact of these developments on RPM.
Research on multi-channel management (Rangaswamy & Van Bruggen, 2005; Herhausen
et al., 2015), multi-channel distribution (Dutta et al., 1995; Nunes & Cespedes, 2003; Perdikaki
& Swaminathan, 2013), dual distribution (Huang & Swaminathan, 2009; David & Adida, 2015;
Khouja & Zhou, 2016; Chen et al., 2017), omni-channel retailing (Zhang et al., 2010; Murfield
et al., 2017; Wang et al., 2017; Barwitz & Maas, 2018), retail management (Neslin & Shankar,
2009), and consumer-based SCM (Christopher & Gattorna, 2005; Gattorna, 2010; Godsell et al.,
2011; Ericsson, 2011; Hjort et al., 2013; Peinkofer et al., 2015; Stolze et al., 2016) document

19
developments in the management of distribution. Related research on cross-channel shopping
(Kumar & Venkatesan, 2005; Zhang et al., 2010; Hjort et al., 2013), free riding (Bernstein, Song
& Zheng, 2009; Xing & Liu, 2012; He, Xiong & Lin, 2016; Luo, Li & Cheng, 2016) and its
manifestation through showrooming (Balakrishnan, Sundaresan & Zhang, 2014; Basak et al.,
2017) examine the interplay of consumer shopping behavior and distribution strategy. Together,
this research has potential to advance understanding of the use and effects of RPM to address
free riding (i.e., the free rider thesis). Knowledge that consumers are increasingly shopping
across channels enroute to purchasing a manufacturer’s product increases the potential for free
riding and likely the use of RPM by manufacturers to discourage it. At the same time, the
prospect that some manufacturers are embracing the cross-channel shopping of their customers
and finding ways to benefit from it, challenges the foundational premise of the free-rider thesis
that such behavior should be discouraged. In addition, that some manufacturers are developing
new approaches for managing free riding indicates not all manufacturers are choosing RPM.
Legal inquiries of RPM include whether alternatives are reasonably available to a manufacturer
for managing free riding (Areeda & Hovenkamp, 2018).
Impact of multi-channel systems and cross channel shopping
Research in SCM and related fields confirms that in the past customers typically relied on
a single channel of retail distribution when making a purchase (Nunes & Cespedes, 2003;
Rangaswamy & VanBruggen, 2005). Gathering information from multiple retailers or different
distribution channels involved physically moving from store to store or channel to channel —
creating overly high search costs for most consumers (Zhang et al., 2009). Thus, shoppers
tended to stick with one retailer or channel when making their purchases.

20
Past approaches for managing distribution were based on the fact that people typically
shopped for and purchased products within a single retail channel (Moriarty & Moran, 1990;
Nunes & Cespedes, 2003). However, as the Internet and other channels of distribution have
become commonplace, consumers have increasingly engaged in “research shopping” - gathering
information about a product in one retail channel and then purchasing it in another retail channel
(Verhoef et al., 2007; Zimmerman, 2012). Manufacturers have also developed multi-channel
systems of distribution to serve these shoppers (Brynjolfsson, Hu & Rahman, 2013; Bianchi,
Cermak, & Dusek, 2016; Murfield et al. 2017). Following Frazier’s (1999, p. 232) prediction,
multiple channels of distribution are now “the rule rather than the exception.”
Managerial perspectives. In the wake of developments in cross-channel shopping and
multichannel distribution systems, two different perspectives have emerged to guide distribution
strategy. The first is that multiple channels of distribution are harmful to performance given they
can lead to free riding (Sandrine, 2013), cross-channel cannibalization (Pu et al., 2017), and
negative spillover effects across channels (van Birgelen et al., 2006; Cao et al., 2008; Bernstein,
Song & Zheng, 2009; Xing & Liu, 2012; Dan et al., 2012; Xia et al., 2017). These impacts
reflect different forms of channel conflict that can adversely affect performance (Coughlan et al.,
2001; Geyskens et al., 2002; Pu et al., 2017). As Baal and Dach (2005, p. 76) describe:
If distribution modes compete with one another for an exogenous sales potential, an
additional channel would result in increased total distribution costs without adding to
overall sales. Moreover, companies adding a channel may even see sales decline as a
result of channel conflict and decreased service to customers. Thus, a multichannel firm
would be at a disadvantage compared to competitors with fewer channels.
The second perspective is that multi-channel distribution systems can be beneficial to
performance where they are properly managed (Neslin & Shankar, 2009; Avery et al., 2012;
Ishfaq et al., 2016; Pu et al., 2017). This perspective differs from the view that multiple channels

21
encourage free riding and therefore harm firm performance (Bernstein, Song & Zheng, 2009). As
Baal and Dach (2005) observe the benefits of an added channel may not be limited to the sales
generated through the channel since multiple channels may complement each other and increase
total sales. By adding an Internet channel manufacturers can increase sales via market expansion,
brand switching, and relationship deepening (Geyskens et al., 2002; Ishfaq et al., 2016; Pu et al.,
2017). Multiple channels can also reduce distribution and transaction costs. Studies show that
multiple channels of distribution can result in sales growth (Cao & Li, 2015) and perceived risk
reduction, as well as lower cross-channel cannibalization (Herhausen et al., 2015).
Management strategies. Depending on which perspective toward multiple channels of
distribution is adopted, research shopping is either viewed by manufacturers as harmful behavior
to be discouraged or beneficial behavior to be encouraged. Based on this choice, manufacturers
may adopt different views toward the use of RPM in multi-channel settings.
Following the view that research shopping is harmful (i.e., it can lead to free riding and
other forms of cannibalism) manufacturers adopt distributions strategies to discourage it. These
strategies include the use of RPM. Other approaches include exclusive territories, limiting the
number of firms selling in an area (Bernstein, Song & Zheng, 2009), price matching policies, and
exclusive products. In each case, the objective is to discourage consumers from shopping across
retailers when purchasing a manufacturer’s product.
In contrast, following the view that research shopping is beneficial, manufacturers adopt
distributions strategies that do not discourage its occurrence and may even encourage it. These
manufacturers adopt “shopper-centric” distribution strategies to suit their customer’s shopping
pattern and desired “path to purchase” (Kantar Retail, 2010; Parker Avery Group, 2018). One
example is where manufacturers set up high-cost, service-oriented stores that permit consumers

22
to experience their products (e.g., Niketown, Samsung Experience, Sony Electronics), with the
anticipation that many customers will purchase the product at a lower-priced retailer. As
Bernstein, Song and Zheng (2009, p. 746) point out, “in all of these examples, the manufacturers
knowingly allow retailers to free ride on the customer service efforts of their direct store.”
The beneficial view of research shopping takes into consideration the different
circumstances that drive consumer choice (Barwitz & Maas, 2018). These strategies recognize
that while price savings may influence customers (Honka & Chintagunta, 2017), other factors
(e.g., informational needs, value sought, personal relationships, search costs) play an important
role in a customer’s decision to shop across channels (Barwitz & Maas, 2018).
The increasing occurrence of research shopping and the differing perspectives that have
developed to guide distribution strategy pose important implications for procompetitive theories
of RPM. In terms of the free rider thesis, for free riding to occur consumers must shop across
channels enroute to the purchase of a manufacturer’s product. Thus, as multiple channels of
distribution have increased, and consumer research shopping has grown, so have conditions
favorable to free riding. In response, to the extent manufacturers adopt a negative view of these
circumstances, the more likely they will invoke strategies, including RPM, that discourage
customers from shopping across different distribution channels. Alternately, to the extent
manufacturers adopt a positive view of consumer research shopping and rely on strategies of
distribution that maximize its benefits, the less likely they will adopt strategies, like RPM, to
discourage. We offer the following research propositions:
P4: The more customers shop across retail channels for a manufacturer’s product (i.e.,
research shop), the more potential there is for free riding.
P5: The more manufacturers view cross-channel shopping by their customers as harmful
(i.e., leading to free riding), the more likely they will use RPM.

23
P6: The more manufacturers view cross-channel shopping by their customers as
beneficial, the more likely they will use strategies other than RPM.
Interactions in supply chains
Economic theories of RPM draw further inferences about the interactions of supply chain
members. Procompetitive and anticompetitive theories of RPM regard exchange between
manufacturers and retailers as typically conducted through “discrete” transactions (Macneil,
1977). In these dealings, “the parties rely on arms-length bargaining and legal enforcement to
create and sustain each transaction” (Kauffman & Dant, 1992, p. 173). However, as documented
in SCM and related areas of research there has been “a clear evolution away from arm’s length
transactions” toward more relational forms of interaction and exchange in distribution
arrangements (Webster, 1992, p. 10). Today, “the relational perspective (and the recognition of
the benefits to be gained) has impacted and influenced virtually every area of business”
(Daugherty, 2011, p. 17). A key question regards the impact of this development on the use of
RPM and procompetitive and anticompetitive theories of its effects.
Research on exchange (Ardnt, 1979; Webster, 1992), markets (Thorelli, 1986), channel
rationale and exchange (Lambert et al., 2004), distribution (Achrol & Kotler, 1999; Heide &
John, 1990; Corsten & Kumar, 2005), relationship management (Golicic et al., 2003; Giunipero
et al., 2008; Daugherty, 2011), collaboration (Ellram & Cooper, 1990; Mentzer et al., 2000;
Stank et al., 2001; Bowersox et al., 2003; Barratt, 2004; Corsten & Felde, 2005; Acharya &
Goyal, 2006; Daugherty et al., 2006; Stank et al., 2011), and integration (Mentzer et al., 2001;
Bowersox, 2007; Frankel et al., 2008) document developments in the interactions of supply chain
participants. In addition, research on collaboration in specific contexts (Pagell & Wu, 2009;
Eckerd and Girth, 2017; Johnson et al., 2018) document developments in particular areas of
interaction such as sustainability. Together, this research offers potential to augment economic

24
understanding of RPM by informing understanding of RPM “agreements.” An agreement
between a manufacturer and retailer to engage in RPM generates more concern in competition
policy and antitrust law than circumstances where a manufacturer unilaterally announces an
RPM policy in advance and refuses to deal with retailers that fail to comply with the policy
(Areeda & Hovenkamp, 2018). Known as unilateral price policies (hereinafter “UPP”) these
policies are distinguished from an agreement to engage in RPM. Distinguishing a UPP from an
RPM agreement is difficult. Thus, understanding the types of circumstances more likely to yield
an agreement can assist enforcement agencies and courts in making such determinations.
Impact of relational exchange and interfirm relationships
As understanding of supply chains, conceptualized as a network of companies from
suppliers to end-users with the intention of integrating supply and demand via coordinated
company efforts, has taken hold in SCM, so too has relational exchange (Lambert, Garcia-
Dastugue & Croxton, 2005; Mentzer et al., 2001). Market-mediated exchange in which there are
“no relevant technical or organizational interdependencies between the two parties and the two
organizations only require a simple sales-to-purchasing functional interface” (Araujo, Dubois
and Gadde, 1999, p. 500) has given way to arrangements that display more nonmarket
characteristics (Thorelli, 1986). These exchanges “are about a new managerial ethos,” (Achrol
and Kotler, 1999, p. 146) that “corresponds to a shift away from market-based exchange toward
more bilateral governance” (Heide & John, 1990, p. 24). They induce greater collaboration and
closer ties (Bowersox, 1990; Ellram & Cooper, 1990). Their objective is to enhance efficiency
and effectiveness, and in doing so, create value across the supply chain (Fawcett et al., 2011).
Thus, rather than being conducted at arm’s length and in transactional ways, exchange between

25
firms involved in distribution, has become “domesticated” (Ardnt, 1979). This development and
its implications for interfirm interaction is examined in the following sections.
Exchange relationships. According to Vesalainen and Kohtamaki (2005, p. 113)
“relationship integration has grown in importance within the supply chain management literature
since the 1990s.” Since that time, scholars have defined both the discipline and its practice as
clearly relational and encompassing long-lasting exchange relationships (Lambert, 1998; Tanner,
1999; Gulati, 2000; Charvet et al., 2008; Georgi et al., 2010). Reviewing this trend in
distribution arrangements, Corsten and Kumar (2005, p. 80) concluded over a decade ago that,
“... theory and practice has embraced the idea of relationship marketing.” Today, few
stakeholders in SCM dispute that distribution arrangements emphasize collaboration and
relational forms of governance. Collaboration is identified as an important driver of competitive
advantage (Sarmah, Acharya & Goyal, 2006) and a key to managerial initiatives involving
sustainability (Pagell & Wu, 2009). In distribution, “the literature now exhorts firms to develop
collaborative partnerships and to rely on relational governance” (Corsten & Kumar, 2005, p. 80).
Researchers stress that “governance structures between firms in the supply chain .... should be
properly devised to coordinate the processes between firms” (Cheng & Grimm, 2006, p. 13). In
practice, these firms “routinely engage in relationship marketing” (Zhang et al., 2016, p. 1).
To support the relational forms of exchange between supply chain firms, newer
approaches for arranging distribution have also developed (Achrol, 1991; 1997). According to
Achrol (1991) these involve inter-organizational extensions of the classic manufacturing firm
across its vertical (i.e., distribution) market interfaces. Examples include the now common
vertical distribution system. Competition for a role in these systems occur, but given their
relational emphasis, the focus of competition and competitive advantage shifts to rivalry between

26
competing systems (Achrol & Kotler, 1999; Ketchen & Guinipero 2004; Lambert et al., 2004;
Boyer et al., 2005; Ketchen & Hult, 2007). Consequently, distribution strategies in these
systems emphasize outcomes that enhance integration (Golicic et al., 2003; Frankel et al., 2008;
Giunipero et al., 2008) and that increase the system’s ability to compete against other systems.
This results in greater uniformity of perspective and consistency of dealings among firms.
Firm interactions. The evolution toward exchange relationships and distribution
arrangements that support them has affected manufacturer-retailer interaction. In general, these
interactions have become much more collaborative (McCutcheon & Stuart, 2000; Corsten &
Kumar, 2005; Giunipero et al., 2008). As Corsten and Kumar (2005, p. 80) report, “suppliers are
finding it increasingly difficult to develop their marketing strategy in isolation of the particular
retailer’s strategy.” In many distribution arrangements increasing emphasis is being given to the
establishment, development, and maintenance of bilateral relationships (Ganesan, 1994). The
result is that the nature of interaction in these arrangements is less compatible, if not at odds,
with the development and implementation of unilaterally oriented channel pricing strategies (i.e.,
UPPs) and more conducive to the type of collaboration and cooperation associated with an
agreement. To the extent these impacts are found in a given distribution arrangement they are
likely to have an important effect on whether a manufacturer and retailer reach an agreement to
engage in RPM (Gundlach and Krotz, 2019). We offer the following research proposition:
P7: The more manufacturers and retailers adopt relationship-directed approaches for
managing their interfirm interactions, the more likely their arrangements to establish the
minimum price below which retailers can sell their products will involve an RPM
agreement.
P8: The less manufacturers and retailers adopt relationship-directed approaches for
managing their interfirm interactions, the more likely their arrangements to establish the
minimum price below which retailers can sell their products will involve a unilateral
price policy (i.e., UPP).

27
Discussion and Conclusions
Our research illustrates the potential for SCM research to inform the development and
application of public policy and law by augmenting economic understanding of competition
policy and antitrust law involving RPM. We described contemporary developments in the
organization of supply chains; firm-level strategies for the management of retail distribution; and
the interactions of supply chain participants and investigated their implications for the primary
procompetitive and anticompetitive theories of a common vertical restraint -- RPM. Questions
and propositions for future research were proposed. In this section, we offer guidance to SCM
scholars interested in research that informs competition and other areas of policy and law. We
also discuss the scientific basis for SCM research to contribute to competition policy and
antitrust law. We conclude by discussing the value of SCM research directed toward furthering
public policy and law.
Guidance to Researchers
With few exceptions, SCM researchers have yet to examine the interaction of SCM and
public policy and law. However, as illustrated through our research, SCM scholars are uniquely
qualified to do so. Researchers currently investigating how SCM can benefit society and
enhance consumer well-being are particularly well positioned to pursue this research. For
example, researchers examining sustainability; corporate social responsibility; food safety,
transparency and traceability; healthcare; and humanitarian logistics and disaster relief could
readily translate their findings into recommendations for public policy and law. Researchers
working in other areas of SCM could also extend their work to inform public policy and law.
Over time, academic subfields and specialty journals within SCM could be created to address the

28
interplay of SCM and public policy and law. The definition of SCM could also be expanded to
include SCM’s implications for public policy and law.
Going forward SCM scholars interested in competition policy and antitrust law may
pursue various paths. One logical direction is to study vertical price restraints occurring between
firms at different levels of the supply chain. Empirical research that investigates the questions
and propositions proposed here is needed. Additional questions and propositions involving
vertical price restraints could also be studied. In addition, questions and propositions
surrounding vertical nonprice restraints could be developed and examined. Economic
explanations for price and nonprice VRs share related theories (Areeda & Hovenkamp, 2018).
Beyond VRs, a second path includes horizontal restraints and business associations (i.e.,
mergers). Horizontal restraints involve agreements between firms or individuals at the same
level of a supply chain (e.g., manufacturer – manufacturer, retailer – retailer, etc.) that restrict
competition (Areeda & Hovenkamp, 2018). Mergers involve the purchase or acquisition of one
firm by another firm (Areeda & Hovenkamp, 2018). Competitors may engage in horizontal
restraints through agreements that fix prices, arrangements that allocate customers and territories
among competitors, and joint refusals among competitors to deal with other members of a supply
chain. Mergers can involve horizontal combinations of members at the same level of a supply
chain as well as vertical combinations between members at different levels. Both horizontal
restraints and mergers occur within the context of supply chains.
A third path includes other areas of law and policy that intersect with SCM. Examples
include environmental law, consumer law, administrative law, corporate law, product liability
law, labor law, international law, admiralty law, and other areas of commercial law.
Environmental law is concerned with the maintenance and protection of the natural environment

29
(Rodgers & Burleson, 2016). Research on sustainability is well-positioned to contribute to
environmental law. Public policy and law intersect with SCM in a myriad of areas including
privacy, cyber security, city logistics, and international trade (Pagell, Fugate & Flynn, 2018).
Fourth and finally, researchers may also consider studies that examine public policy and
laws in other countries and jurisdictions. For example, the European Union Directorate-General
for Competition (2019) and the Australian Competition and Consumer Commission (2019)
address practices affecting competition. Developments in SCM hold potential to advance
understanding of competition policy and law in these settings. Comparative studies across
different countries and jurisdictions should be considered. SCM researchers with an interest in
public policy and law are encouraged to pursue these and other questions in their research.
Scientific Basis of Research
The scientific basis for SCM research to augment economic understanding of competition
policy and antitrust law derives, in part, from the philosophical concept of “reductionism”
(Pinker, 2002). Reductionism is an approach to understanding the nature of complex
phenomenon. Higher level phenomena can often be more fully understood by studying more
basic phenomena that comprise them. The premise is that by integrating insights derived from
different levels of abstraction, understanding can be advanced (Becker, 2011). Examining
phenomena at different levels of analysis permits the introduction of alternate perspectives,
additional concepts, and added theories. Explanations from one level can also lead to questions
best answered at other levels (Healey & Hodgkinson, 2014). Properly applied reductionism
facilitates “consilience” or the convergence of fields of knowledge (Wilson, 1998).
SCM research spans many different levels of analysis. Most prominent is research that
investigates the nature and workings of a supply chain. However, SCM research also examines

30
phenomena at higher and lower-levels of abstraction. This includes networks and related systems
that encompass one or more supply chains, buyer-supplier arrangements, firm strategy and
performance, managerial (strategic and operational) decision making, and the behavior of
consumers. Other levels of analysis are also found in SCM research. Given these different
levels of abstraction, SCM research possesses significant potential to augment market-level
analyses of competition policy and antitrust law found in economics.
Value of Research
SCM research that furthers public policy and law benefits society and it also has potential
to expand the reach and impact of SCM. Society benefits from advances in our understanding of
the public policy and legal impact of business practices. Research that documents developments
in SCM provides a basis for knowledgeably informing and shaping the content and process of
public policy and laws. Research of this form is useful to legislators and lawmakers tasked with
promulgating policy and law; enforcement agencies and officials charged with enforcement of
policy and law; and attorneys, judges, and forensic experts involved in the application of policy
and law. This research is also useful to non-governmental organizations, social advocacy
groups, and consumer representatives dedicated to furthering the interests of society and
enhancing consumer well-being through influencing public policy and law.
Research in SCM has historically emphasized contributions that aid in the workings of
the firm and its supply chain partners; however, a growing body of research demonstrates that
SCM research can also aid in the workings of society. Extending this research, SCM
stakeholders have expressed the view that SCM research can and should also contribute to public
policy and law (e.g., Simpson et al., 2015; Pagell, Fugate & Flynn, 2018). Research that informs
public policy and law is well-established in disciplines such as economics, marketing, and

31
management where academic subfields and specialized journals are found. Evidence suggests
this type of research and practice is increasingly taking hold in SCM.3
Recognizing the potential of SCM to expand its reach and impact, the intersection of
supply chain management and public policy and government regulation is the focus of JSCM’s
second Emerging Discourse Incubator (Pagell, Fugate & Flynn, 2018). According to the editors,
“the aim is to incubate a discourse with major schools of thought in political economy that have
been largely unexplored in our discipline” (Pagell, Fugate & Flynn, 2018, p. 1). This effort and
others hold potential to significantly further public policy and law and thereby expand the reach
and impact of SCM. To the extent this occurs, both society and SCM stand to benefit.
3 Journals, such as Transportation Research Part A: Policy and Practice, Journal of Public Procurement, and
Journal of Transport Economics and Policy contain contributions that examine the intersection of subfields within
SCM and public policy and law. Scholars and practitioners in SCM are also serving in roles that advocate for public
policy and law to enhance supply chain competitiveness in the domestic and global economy (International Trade
Administration 2018).

32
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Table 1. Key Federal Antitrust Legislation
Legislation
Description
Sherman Antitrust Act (1890)
Prohibits contracts, combinations, and conspiracies that
unreasonably restrain interstate and foreign trade
(Section 1).
Prohibits the monopolization of any part of interstate
commerce (Section 2)
Federal Trade Commission (1914)
Prohibits unfair methods of competition in interstate
commerce
Clayton Act (1914)
Prohibits mergers or acquisitions that are likely to lessen
competition and other business practice that may harm
competition under certain circumstances

51
Table 2. Vertical Restraints
Restraint
Description
Price
Resale price maintenance
(minimum)
Establishes the minimum price below which a product
cannot be resold by a member of a supply chain
Resale price maintenance
(maximum)
Establishes the maximum price above which a product
cannot be resold by a member of a supply chain
Nonprice
Location clauses
Restricts the place from which a member of a supply
chain may sell from
Customer restrictions
Restricts the customers that a member of a supply
chain may sell to
Territorial restrictions
Restricts the territory that a member of a supply chain
may sell in
Exclusive distribution
Assigns an area of exclusive distribution to a single
member of a supply chain
Primary responsibility clauses
Assigns specific areas of responsibility for sales and
service to one member of a supply chain
Tying arrangement
Requires a member of a supply chain to purchase other
products when purchasing a product
Quantity forcing
Requires a member of a supply chain to purchase a
minimum amount of a product

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Table 3. SCM Developments and Research Questions for RPM
Domain
Development
Research Questions
Organization
of supply
chains
Consolidation and other factors
have transformed the
organization of supply chains
resulting in growing levels of
firm concentration and shifts in
power that favor downstream
members
RQ
1
: To what extent has consolidation and firm
concentration in supply chains affected the use of
RPM?
RQ2: To what extent has consolidation and firm
concentration in the manufacturing sector of
supply chains affected manufacturers use of
RPM?
RQ3: To what extent has the shift in the balance
of power away from manufacturers toward
retailers affected retailers influence of
manufacturers to use RPM?
Management
of supply
chains
Changing shopping patterns and
new forms of retail distribution
have led to opposing
perspectives for guiding
management strategy toward
cross-channel shopping by
consumers
RQ
4
: To what extent has the increase in cross
channel shopping (i.e., research shopping) by
consumers affected the occurrence of free riding?
RQ5: To what extent have the different
perspectives for guiding the management of
multiple channels of distribution toward cross
channel shopping affected the use of RPM?
RQ6: To what extent have the different
perspectives for guiding the management of
multiple channels of distribution toward cross
channel shopping affected the use of alternatives
to RPM?
Interactions
in supply
chains
Interactions between supply
chain participants have evolved
away from market-based
transactions conducted at arm’s
length toward relational
exchanges conducted through
ongoing relationships and
interpersonal interactions
RQ
7
: To what extent has the evolution in supply
chain interactions toward relational exchanges
conducted through ongoing relationships and
interpersonal interactions affected the occurrence
of RPM “agreements”?
RQ8: To what extent has the evolution in supply
chain interactions toward relational exchanges
conducted through ongoing relationships and
interpersonal interactions affected the occurrence
of unilateral price policies?