Legal Definitions - resale-price maintenance

Resale-Price Maintenance refers to an illegal business practice where a manufacturer dictates the specific price at which retailers must sell their products to consumers. This practice eliminates price competition among different retailers selling the same item, which is harmful to consumers because it prevents them from finding the best deal. Under antitrust laws, this is considered a form of price-fixing and is generally prohibited, regardless of the specific circumstances.

However, it's important to distinguish this from legal practices: a manufacturer is allowed to suggest a retail price (often called a Manufacturer's Suggested Retail Price or MSRP), as long as retailers are genuinely free to set their own prices and are not compelled or coerced to follow the suggestion.

Here are some examples to illustrate resale-price maintenance:

• Example 1: Electronics Manufacturer Dictating Prices

  Imagine "FutureTech Inc." manufactures popular smart home devices. They inform all authorized electronics retailers, such as "Gadget World" and "ElectroMart," that they must sell the new "Aura Speaker" for exactly $199.99. FutureTech Inc. threatens to withhold future shipments of popular products from any retailer caught selling the Aura Speaker for less than the specified price.

  This illustrates resale-price maintenance because FutureTech Inc. is actively forcing its retailers to sell the speaker at a uniform, fixed price. This prevents Gadget World and ElectroMart from competing on price for the Aura Speaker, thereby limiting consumer choice and potentially keeping prices artificially high.

• Example 2: Luxury Brand Enforcing Minimums

  "Elegance Apparel," a high-end fashion designer, requires all boutiques carrying its exclusive line of designer handbags to adhere to a strict pricing policy. They mandate that the "Signature Tote" must be sold for no less than $1,200. Elegance Apparel regularly monitors sales and warns any boutique that discounts the bag below this price that their distribution agreement could be terminated or their allocation of popular items reduced.

  Elegance Apparel is engaging in resale-price maintenance by compelling its retailers to maintain a minimum price for its handbags. This prevents boutiques from offering competitive pricing to attract customers, artificially inflating the price and restricting the market.

• Example 3: Specialty Tools with Fixed Pricing

  "ProBuild Tools," a manufacturer of specialized construction equipment, enters into agreements with various hardware store chains like "ToolBarn" and "HardwareHaven." These agreements stipulate that ProBuild's premium cordless drill sets must be sold at a fixed price of $250.00. ProBuild conducts regular audits of product pricing in these stores and warns any chain found selling below the agreed price that their supply contract will be reviewed or potentially terminated.

  This demonstrates resale-price maintenance because ProBuild Tools is enforcing a specific selling price for its drill sets across multiple retailers. By doing so, it eliminates price competition between ToolBarn and HardwareHaven for these products, which is illegal under antitrust laws designed to protect competition and consumers.