Retail Price Agreements

The term “price fixing” has a strong negative connotation, and rightly so. However, it is often misappropriated by policy makers, the media and lawyers with respect to manufacturer-imposed minimum price restrictions, which can actually benefit businesses and consumers. However, a supplier may issue non-binding RRPs for its products or set maximum prices from which its retailers or distributors cannot resell the products, provided that the EIA or the maximum price is not a fixed or minimal resale price due to pressure or incentive. Frequent use for MSRP can be seen in the sale of automobiles in the United States. Prior to the release of the manufacturer`s proposed retail prices, there were no fixed prices for vehicles and car dealers were able to impose arbitrary mark-ups, often with prices tailored to what the seller deemed willing to pay for a particular vehicle. For example, where one of the parties is a dominant retailer or producer, it is concerned that the resale price maintenance contract is being used to prohibit competition. When several manufacturers apply the practice or the retailer persists in the agreement, courts and agencies often suspect that the resale price maintenance agreement supports a cartel of manufacturers or distributors. In some supply chains, where a producer sells to a wholesaler and the distributor in turn sells to a reseller, the use of PRS is used to refer to the proposed resale price. In this case, the list price is used to arbitrate the selling price proposed by the manufacturer. Because the rule of reason applies, minimum rpm agreements may continue to be illegal.

Indeed, in Leegin, the Court identified at least two grounds for illegality of a purely vertical minimum RPM agreement. First, “a dominant retailer… may require a resale price setting to prevent cost-cutting distribution innovations. A producer might think that he or she has little choice but to respond to the retailer`s demands for vertical pricing if the manufacturer feels it needs access to the retailer`s distribution network. Second: “[a] manufacturer with market power… use resale prices to encourage retailers not to sell products from small competitors or new entrants. In today`s economy, manufacturers (and suppliers) often enter into resale price maintenance contracts with distributors and retailers. These are agreements that set the minimum price at which a reseller can sell the producer`s product. This is a vertical pricing. Q: My provider offers a co-op promotion program, but I cannot participate if I apply for a price below the minimum price advertised by the supplier. I don`t think it`s fair.

An economic analysis of price fixing is relatively simple. In search of higher profits, conspirators agree to set prices above levels achieved in a competitive environment, thereby reducing competition and reducing production. This harms both consumers and the overall economic well-being, there are no consumer benefits or social benefits through price agreements. It is not uncommon for a retailer (retailer A) to complain to a supplier (supplier B) about the low prices charged by a competing retailer (retailer C) with the intention or hope that the supplier will pressure Retailer C to increase its prices or sanction in any way C.