Advertising and Related Restraints

By John Asker & Heski Bar-Isaac

The ecommerce sector is observing substantial use of vertical restraints on advertising and other restraints that seem likely to interfere with the ease with which consumers can find prices. Authorities and commentators have begun to consider such practices and have treated them as equivalent to resale price maintenance. We present an example where this equivalence holds; however, we argue that the conditions required are unrealistic and the underlying economics quite different. In general, MAP and similar restraints allow manufacturers to accommodate diversity (in consumer preferences or retailer costs) and may be pro- or anti-competitive.