Thomas Cheng on the Death of Colgate (U Penn J of Business L)

"Announcing the Death ofColgate"
Thomas Cheng
University of Pennsylvania Journal of Business Law
Vol. 20, Issue 1
Spring 2018

Abstract: This Article examines the agreement requirement in resale price maintenance (“RPM”) cases and the longstanding exception to the ban on RPM under the Colgate doctrine. It argues for the abolition of the doctrine for a number of reasons. First, there are no persuasive theoretical justifications for requiring an agreement in RPM cases as the most relevant purpose served by an agreement requirement under antitrust law does not apply to RPM. Second, there is no logically coherent and theoretically sound theory of agreement under the doctrine, which means that there is no principled way to apply the agreement concept in RPM cases. Third, there is no sound economic basis for requiring an agreement in RPM cases as none of the main theories of harm and pro-competitive justifications of RPM is premised on an agreement. Finally, it is argued that the Colgate doctrine has provided a highly unsatisfactory safe harbor for businesses to implement RPM due to costs and manpower involved in complying with the jurisprudence under Colgate. This Article also argues that dealer termination requires a different treatment from that accorded by Monsanto and Business Electronics after Leegin and proposes a framework for determining the legality of dealer termination independent of the existence of an RPM scheme.