Resale price maintenance
How can resale price maintenance affect businesses and fair competition?
Resale price maintenance (RPM) occurs when suppliers restrict resellers from setting their own prices. This practice is generally unlawful under Irish competition law and can lead to significant penalties. Businesses should understand the risks and legal implications of RPM, including the distinction between recommended retail prices and illegal pricing agreements. If involved in RPM, contact the CCPC or seek independent legal advice.
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, usually decided by the supplier. RPM restricts competition and is usually unlawful under section 4 of the Competition Act 2002, as amended (2002 Act).
Why is resale price maintenance harmful?
RPM keeps prices artificially high, limiting consumer choice and preventing businesses from competing effectively.
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.
What does RPM look like?
The most common forms of RPM arrangements are where a supplier:
- Sets a specific price, or a minimum retail price, at which a product must be resold
- Sets a specific price, or a minimum margin, at which a product must be resold
- Grants incentives, such as rebates or bonuses, dependent on resale of the product at a specified/minimum price or margin
- Imposes restrictions on how much a reseller can discount the price of the product
- Prevents or limits a reseller’s ability to advertise lower prices online for a product
What if you’re pressured into RPM?
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. If you are being pressured into RPM, you should contact the CCPC.
Are recommended resale prices allowed?
Suppliers may suggest recommended resale prices or recommended retail prices (RRPs), which are not considered RPM if resellers are free to set their own prices. RRPs must be clearly marked as recommendations. If a supplier enforces a minimum price, it becomes RPM and is illegal.
What should you do if involved in RPM?
Businesses should review pricing practices to avoid illegal agreements. If you suspect your business is involved in RPM:
- Contact the CCPC via the make a competition complaint form.
- Seek independent legal advice.
- Consider applying for leniency under the CCPC’s leniency policy.
The CCPC has introduced a leniency policy which encourages self-reporting of certain 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.
