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Minimum Electronic Resale Pricing Analysis

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A retailer sought damages in state court due to a manufacturer’s establishment of minimum electronic resale prices. BRG expert Henry Kahwaty analyzed two aspects of the plaintiff’s allegations on behalf of the defendant manufacturer. First, he analyzed whether the manufacturer had an economic rationale to impose minimum resale prices for electronic or web-based transactions based on efficiency considerations. Dr. Kahwaty concluded that the manufacturer did have an economic efficiency rationale for its resale policy due to the important role brick-and-mortar retailers play in promoting the manufacturer’s products. In particular, he determined that consumer experience with the manufacturer’s products was important for generating demand because it enabled consumers to judge the products’ quality. Web-based retailers that do not provide physical showroom services can undercut full-service retailers because they do not have to bear the significant costs involved with maintaining retail locations. In order to promote the provision of downstream retail services, the manufacturer needed to preserve the ability of full-service retailers to price at a level sufficient to support these services.

Second, Dr. Kahwaty analyzed the damages claim submitted by the plaintiff retailer. He determined that methodological and functional mistakes in the plaintiff’s damages model significantly overstated the damages figures reported by the plaintiff’s expert and that, when fixed, the model offered by the plaintiff’s expert found negligible damages.

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