Minimum Resale Price Maintenance
Minimum resale price maintenance is the practice of requiring a product to be sold by a retailer at a fixed minimum price.
Oakley was fined in 2006 for requiring all retailers of Oakley sunglasses to sell them at a minimum price. So when customers asked for a discount, the retailers routinely refused, knowing that otherwise Oakley would refuse to supply to them. Often manufacturers claim that their brand will be devalued if discounts are allowed. This is not a defence. In fact, there is no defence. This conduct is absolutely prohibited.
It is okay to recommend a minimum price for resale as long as there is no punishment or threat of punishment if retailers sell at a price below that recommended price. The word “recommended” must, in the case of a recommended price, appear on the product itself.
Price does not only mean the final selling price but includes discounts, rebates and margins for calculating prices.
The Lesson
- Never require your customers to on-sell your product at a fixed minimum price.
- If you are recommending a retail price ensure there is no negative consequence for customers which sell below your recommended price.
- If you wish to recommend price, make sure the product in question has the words “recommended price” printed on it.
- If you are a reseller, don’t agree to on-sell at a minimum price. If you are threatened with delisting or any other sanction, get legal advice regarding a complaint to the competition authorities.
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