Software Resale Price Maintenance and Competition Law

The legal treatment of resale price maintenance (RPM) in the United States had a major switch in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007)(Leegin). Rule of reason analysis was applied to certain category of RPM practice. While RPM in the European Union is prohibited as a hardcore restriction of competition. Seen from the effects of RPM, it is aimed at controlling price and distribution, legal rules against RPM are highly sector-specified, namely, they are designed for markets that featured of price and distribution competition. There are many other markets that price restraint is not always an important element for competition. Such a market is the software market, where although distribution is an inherent part of market competition, the decisive competitive advantage is an innovative product. Price restraint is less likely to contribute to the process of innovation. On the contrary, RPM is likely to be used as a way of foreclosing intro-brand competition in the distribution procedure. After reviewing the theory of RPM and competition in the software market, this article concludes that RPM is less likely to be considered pro-competitive in the software market and therefore rule of reason analysis cannot be applied in these circumstances, per se rule fits software RPM