Resale price maintenance is the practice whereby a manufacturer requires distributors of their product to sell at certain prices, or set a minimum price. These rules prevent resellers from competing too fiercely on price and thus driving down profits. The manufacturer may do this because it wishes to keep resellers profitable, and thus keeping the manufacturer profitable. Such contracts are usually legal under US law but have sometimes been stopped since they formally restrict free trade. Manufacturers defend resale price maintenance by saying it ensures fair returns, both for manufacturer and reseller and that governments do not have right to interfere with freedom to make contracts without very good reason.

Resale price maintenance and UK law

In 1955 in the UK the Monopolies and Mergers Commission's report Collective Discrimination - A Report on Exclusive Dealing , Aggregated Rebates and Other Discriminatory Trade Practices recommended that resale price maintenance when collectively enforced by manufacturers should be made illegal, but individual manufacturers should be allowed to continue the practice. The report was the basis for the Restrictive Trade Practices Act of 1956, this specifically prohibited collective enforcement of resale price maintenance in the UK. Restrictive agreements had to registered at the Restrictive Practices Court, and were considered on individual merit. In 1964 the Resale Prices Act was passed, which now considered all resale price agreements to be against public interest unless otherwise proved in court.

See also

• Competition policy