Guidance

Resale price maintenance: advice for retailers

Updated 29 June 2020

What is resale price maintenance?

Resale price maintenance (RPM) is where a supplier requires a retailer not to resell the supplier’s products below a specified price. RPM can be imposed directly or indirectly, for example through restricting the prices retailers can advertise products at.

Recommended resale prices (RRP) are not RPM if the retailer can still resell at whatever price it wants to.

However, RPM can occur if RRPs are combined with threats or incentives such that RPM is being imposed indirectly.

What is resale price maintenance (RPM)?

How RPM harms consumers

It’s important that consumers benefit from competition and can shop around to get the best price or service for themselves.

This is particularly important when consumers’ budgets are tight, and costs are increasing.

Resale price maintenance:

• prevents resellers advertising goods or services below a certain price.

• means that customers are denied the chance to shop around and compare prices to save money.

• can lead to higher prices for customers.

Case study

Our previous investigations in the bathroom and light fitting sectors led to an estimated 17% fall in prices.

Read more: Dar Lighting fined £1.5 million for illegally preventing online price discounts

Supplying products to a limited number of retailers

Sometimes a supplier may choose to provide their products only to a limited number of retailers that meet specific criteria.

Suppliers can choose to do this for a number of reasons, for example to protect their brand image.

This is called a selective distribution agreement (SDA).

SDAs are a legitimate form of distribution arrangement and do not usually lead to competition concerns unless they are used to facilitate anti-competitive conduct. They do not usually lead to competition concerns in their own right.

It is essential though that suppliers take care to ensure SDAs are not misused to break competition law and, in particular, that they are not used as part of a strategy for imposing RPM, for example by implying they allow a supplier to dictate prices.

If in doubt, businesses should take legal advice and follow it carefully.

Indirect RPM

RPM can be indirect.

You may still be involved in an unlawful RPM agreement where a supplier:

• imposes restrictions on how far you can discount its product

• prevents or limits your ability to advertise lower prices online (so-called ‘minimum advertised price policies’)

• has linked a resale price for the product to what other retailers are selling it for

Where the product is sold does not matter. RPM can apply to sales online and sales in shops.

Avoid breaking the law

To avoid breaking competition law:

• don’t agree with your suppliers to fixed or minimum retail prices

• don’t put pressure on the supplier and other retailers to adhere to recommended resale prices

• don’t misuse tools which are normally legal, like RRPs or SDAs. to help fix retail prices

If we have concerns with RPM practices, the CMA may open a formal investigation, or we may send you a warning or advisory letter.

Never ignore these. You risk an increase in fines if you are later caught breaking the law.

Case study

We fined GAK, a reseller of digital keyboards and guitars, £278,945 for entering into an agreement with Yamaha not to discount online prices for specific products. This fine was increased by 15% as GAK had previously received an advisory letter from the CMA highlighting our concerns it was potentially engaging in RPM.

Read more: Reseller GAK fined for illegally agreeing not to discount online

Advice for retailers involved in an RPM agreement

Being worried about losing a supplier’s business is not a defence.

RPM agreements are usually unlawful because they prevent you from offering lower prices and setting your prices independently to attract more customers.

If you have been involved in RPM with your supplier, you may both be found to be breaking competition law.

Report something to the CMA

If you have concerns about RPM or other anti-competitive behaviour you can report it to the CMA.

If you have been involved yourself, you may even benefit from lenient treatment by coming forward to the CMA. Read more about applying for leniency for information about leniency benefits, eligibility and conditions.

Please note: this guide does not constitute legal advice and should not be relied upon as such.