Resale Price Restraints in Vertical Agreements

Summary

One of the most common questions you will hear when counseling manufacturers or distributors about product distribution matters is, “What can I do about resellers that are reselling my product at discounted prices?” Some corporate sales managers or marketing executives may recollect from a business law class that it is illegal to set a reseller’s resale price. They are not altogether wrong, but there are some legal tools that businesses can use to influence the prices that their resellers charge. Courts and scholars use the label “resale price maintenance” (RPM) to describe practices and agreements that manufacturers use to try to influence a reseller’s price (the actual selling price, not the advertised price). For decades, RPM agreements were considered per se violations of the Sherman Act. In response, manufacturers adopted unilateral pricing policies (UPP) that allowed them to take unilateral action against resellers discounting below MSRP. The Supreme Court’s holding in Leegin ...