Resale price maintenance
Also called: RPM · Topic: Market Structures, Market Failure and Competition · NCERT: Beyond NCERT
Meaning
Resale price maintenance (RPM) is when a supplier fixes the minimum price, or an exact price, at which distributors or retailers must resell its product. It stops retailers from competing on price for that brand. Under Section 3(4) of the Competition Act 2002 it is a vertical agreement, meaning one between firms at different levels of the supply chain. So it is judged under the "rule of reason": it is illegal only if it is shown to cause an appreciable adverse effect on competition.
Example
Suppose a shoe brand tells its dealers not to sell a model below ₹2,999 and cuts off any dealer who gives discounts. That is RPM, because buyers lose the chance to find a lower price at another shop.
Don't confuse with
- MRP (maximum retail price): MRP is a legally required ceiling printed on packs, and shops may sell below it. RPM sets a floor or a fixed price that retailers cannot go below.
Related concepts
- Anti-competitive agreements
- Appreciable adverse effect on competition
- Horizontal agreement
- Bid rigging
- Vertical agreement
- Leniency programme
- Dominant position
- Relevant market
- Abuse of dominance
- Predatory pricing