Resale price maintenance post legging: a model of RPM incentives

The prominent Babies R Us decision (McDonough et al., v. Toys R US, Inc., 2009) was the first to explore the economic consequences of resale price maintenance after the Supreme Court’s Leegin Decision. Previously, litigation concerned the presence or absence of an agreement; but that changed with the new jurisprudence which instead emphasized the restraint’s direct anti-competitive effects. While the district court’s decision in the Babies R Us case rested on the factual circumstances of the case, it did not have before it an economic model through which those facts could be integrated. This paper offers such a mode, the predicates of which are drawn from the case. The conclusions that are drawn from the model are fully consistent with the court’s decision