Resale price maintenance: what you need to know
What is resale price maintenance?
Resale price maintenance (RPM) is an agreement between a supplier and a reseller, preventing the reseller from setting its own prices. The agreement may specify a minimum resale price or a specified minimum margin, decided by the supplier.
RPM is usually unlawful and is a breach of section 4 of the Competition Act 2002, as amended (2002 Act). If resellers are not able to sell at a lower price, should they wish to, it restricts businesses from competing properly.
You may be concerned that if you do not agree to maintaining minimum prices set by your supplier that they may stop doing business with you. However, you should be aware that even if you agree to RPM reluctantly or as a result of threats, you may still be in breach of the law.
What’s the harm?
When businesses engage in RPM, consumers lose out because prices are kept artificially high and they cannot shop around for better value. RPM also prevents businesses from competing and can often lead to a cartel arrangement, that is, fixing prices between them directly.
Part 2D of the 2002 Act allows the Competition and Consumer Protection Commission (CCPC) to fine businesses for competition law breaches, including RPM. Fines may be up to €10 million or 10% of total worldwide turnover, whichever is greater.
The CCPC has introduced a leniency policy which encourages self-reporting of competition law breaches in return for leniency. This allows applications for leniency, from any party involved in an agreement relating to RPM who is first to come forward with information. Part 2 of the CCPC’s leniency policy relates to RPM.
Are recommended resale prices allowed?
Suppliers are free to recommend prices for resellers. This is known as a recommended resale price, or recommended retail price (RRP). This is not RPM as a reseller may resell products at a price of their own choosing, whether higher or lower. A recommended price should, however, be clearly marked as such. Where a supplier tries to force a reseller to sell no lower than the recommended price, that is RPM.
What can you do?
Suppliers and resellers should review their practices around pricing to ensure that they do not enter illegal agreements. If you believe that your business is, or has been, involved in an RPM arrangement you should contact the CCPC as soon as possible. You may also wish to seek independent legal advice and/or consider an application to the CCPC’s administrative leniency.
You should also contact the CCPC if you have information about other businesses in your industry that may be engaged in RPM.
You can contact the CCPC via our make a competition complaint webform or call 01 402 5500.
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