Posted by Rishi Ladwa, Associate
New guidance on restricting online resale prices – what it means for your business
The Competition and Markets Authority (CMA) has recently issued an open letter on restricting online resale prices. Natalie Pring, a solicitor in our Corporate and Commercial team summarises the issues.
What is resale price maintenance?
Resale price maintenance (RPM) occurs where a supplier and retailer agree that the retailer will sell the supplier’s product at or above a particular price. RPM can also be achieved indirectly, for example as a result of restrictions on discounting or where there are threats or financial incentives to sell at a particular price.
In the majority of cases, RPM is illegal because it constitutes vertical price-fixing, preventing retailers from offering lower prices and setting their prices independently to attract more customers.
Understanding of RPM is poor
CMA research shows that businesses struggle to understand RPM. About one-third of the businesses surveyed incorrectly thought it was legal to set the price at which other businesses can resell their product, with another 37% uncertain on the rules.
Only 29% correctly responded that “it is unlawful to set the price at which others can resell your products”.
Tips for suppliers
If you are a supplier:
- you must not dictate the price at which your products are sold, either online or through other sales channels
- policies that set a minimum advertised price for online sales can equate to RPM and are usually illegal
- you must not use threats, financial incentives or take any other action, such as withholding supply or offering less favourable terms, to make retailers stick to recommended resale prices
Tips for retailers
If you are a retailer:
- you are entitled to set the price of the products you sell, whether online or through other sales channels
- suppliers are not usually allowed to dictate the prices at which you advertise their products online
- if you have agreed to sell at fixed or minimum prices with your supplier, you may both be found to be breaking competition law
The message from the CMA
The CMA takes RPM seriously and is focused on tackling anti-competitive practices that diminish the many benefits of e-commerce. It’s important that everyone in your organisation understands what they need to do to stay on the right side of the law.
For more information contact Natalie Pring or another member of our Corporate & Commercial team.
01225 459 982 Email us
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