Resale Price Maintenance Agreement

A resale price maintenance agreement (RPM) is a contract between a manufacturer and its reseller that sets the minimum prices at which the reseller can sell the manufacturer’s products. This practice is also known as price fixing and has been a controversial issue in the business industry, with many companies and governments taking different sides on the matter.

The main objective of RPM is to maintain the resale price of a manufacturer`s goods at a predetermined price point, regardless of the reseller`s chosen price. This means that both parties agree to set a minimum price for the product, and the reseller is not allowed to offer the product at a price lower than the set minimum. In theory, this price setting would help the manufacturer protect its brand image, maintain a consistent price point, and prevent price wars among resellers.

However, there are both advantages and disadvantages to RPM agreements. From the manufacturer`s side, the RPM can lead to increased profitability by ensuring that all resellers are selling the product at a similar price point that is advantageous for the manufacturer`s profit margins. It also allows the manufacturer to control the product`s brand image and reputation.

On the other hand, critics of RPM argue that it may lead to anti-competitive behavior and limit consumer choices, as well as result in higher prices for consumers. Consumers cannot benefit from the competition among resellers, as the resellers must all sell the product at the same price. This lack of competition may harm small businesses and start-ups who cannot compete with larger companies that have established RPM agreements.

The legality of RPM agreements varies from country to country. In the United States, RPM agreements are illegal per se under Section 1 of the Sherman Antitrust Act. As such, manufacturers and resellers who engage in these agreements risk being fined or even imprisoned. However, there are some exceptions, like when the RPM agreements promote the product`s quality or when the agreements are part of a vertical integration strategy.

In conclusion, the use of resale price maintenance agreements still remains controversial in the business industry. While it can provide benefits to manufacturers, it may restrict competition and lead to higher prices for consumers. As such, it is essential for both manufacturers and resellers to weigh the advantages and disadvantages carefully before entering into such an agreement. As a copy editor, it is important to understand the potential legal ramifications of RPMs when reviewing content related to these agreements.