What is resale price maintenance in economics?

Resale price maintenance involves agreements between manufacturers and downstream distributors that set the downstream price of the product, either at a minimum price or a maximum price. Antitrust law, until recently, condemned these vertical price arrangements as illegal per se.

Who determines the price in resale price maintenance?

The agreement requires the reseller to sell the goods or services at, or above, a specified price or margin, which is usually decided by the supplier. RPM is usually unlawful and a breach of Section 4 of the Competition Act 2002, as amended. RPM arrangements prevent retailers from setting their prices independently.

Why is resale price maintenance important?

Advantages of Resale Price Maintenance It eliminates price competition at the retail level, as uniform price will be set. It ensures price stability. 3. It prevents quality deterioration.

Why is resale price maintenance regarded as an anti competitive activity?

Restriction of Intrabrand Competition. RPM is likely to reduce intrabrand competition and thereby discourage retailers from carrying out competition-stimulating sales activities. It also renders readily identifiable a change in resale price set by a particular retailer, easily causing collusion.

Is resale price maintenance Legal?

One important caution about the legality of resale-price-maintenance agreements is that even though they are no longer per se antitrust violations under the federal antitrust laws, many states still consider them per se illegal under their state antitrust laws.

Is resale price maintenance price fixing?

Under the Indian Competition Act, Resale Price Maintenance (RPM) is defined under Section 3(4) (e) of the Act as including any agreement to sell goods on the condition that the prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower …

Is resale price maintenance legal in India?

The concept of Resale Price Maintenance (“RPM”) is defined in the Competition Act, 2002 (“the Act”). The concept itself is not illegal but is considered a violation of the Act under circumstances detailed out below.

What is resale price maintenance What are the legal provisions for its regulation in India?

What is resale price maintenance Australia?

Resale price maintenance (RPM) occurs if a supplier pressures a business not to sell products below a certain price. not sell below a certain price. only discount to an extent that is ‘agreed’ or not discount at all. comply with a recommended retail price (RRP) or not price a certain percentage below it.

Is resale price maintenance legal in Australia?

Resale price maintenance It is illegal for suppliers to: put pressure on businesses to charge their recommended retail price or any other set price, for example by threatening to stop supplying to the reseller. stop resellers from advertising, displaying or selling goods from the supplier below a specified price.

What is resale price maintenance ACCC?

Resale price maintenance is illegal. It occurs when a supplier prevents, or attempt to prevent, a business such as an independent retailer or distributor from advertising or selling products below a specified minimum price. Example: A jewellery wholesaler issues a list of recommended prices for its products.

Is retail price maintenance illegal in Australia?

Although RPM is prohibited per se in Australia, it is possible for parties to seek authorisation of their conduct.

What is resale price maintenance (RPM)?

Resale price maintenance (RPM) 1 The logic of resale price maintenance is that: It helps retailers to be more profitable. 2 Criticisms of RPM. It artificially inflates prices, leading to a decline in consumer surplus and gives consumers less discretionary income to spend on other goods. 3 UK history of RPM.

Should resale price maintenance be made illegal?

If nothing else, the internet has made it almost impossible to enforce anyway. In 1955, the UK recommended that resale price maintenance when collectively enforced by manufacturers should be made illegal, but individual manufacturers should be allowed to continue the practice.

What is the practice of firms temporarily reducing prices called?

The practice of firms temporarily reducing prices in order to eliminate competition is called: a. competitive pricing. b. predatory pricing. discount pricing. d. strategic pricing. 3. Officers of five large building-materials companies meet and agree than none of them will submit bids on government contracts lower than an agreed-upon level.

What is the impact of an easy-to-run business model on efficiency?

RPM enables an easy profit margin in domestic markets, but the result is that inefficient manufacturers may stay in business and lose the market incentive to cut costs and become more efficient.