These agreements have been highly controversial over the years, particularly after the 2007 Supreme Court decision in Leegin. If you are considering a resale price maintenance contract or want to question it, we may be able to help. More information about resale price maintenance contracts can be found in a blog post on The Antitrust Attorney Blog. The initial move to maintain the resale price in the 1880s reflected the success of brand promotion and the resulting increased competition among retailers. U.S. manufacturers have been given more specific authority than in other parts of the world; The so-called “non-signatory” clause of the National Fair Trade Act made contractual prices agreed between a manufacturer and a licensed distributor mandatory for all resellers. (See Fair Trade Act.) A few decades after Dr. Miles, scientists began to question the assertion that minimum resale price retention, a vertical restriction, was the economic equivalent of a bare horizontal agreement. In 1960, Lester G. Telser, an economist at the University of Chicago, argued that manufacturers could use minimum resale prices as an instrument to ensure that distributors participate in the desired advertising of a producer`s product through local advertisements, product events, etc. In the absence of such contractual restrictions, Telser says, no frills distributor could “liberate” the advertising efforts of full-service distributors, thereby undermining distributors` incentives to spend resources for advertising purposes.
For example, where one of the parties is a dominant retailer or producer, it is concerned that the resale price maintenance contract is being used to prohibit competition. When several manufacturers apply the practice or the retailer persists in the agreement, courts and agencies often suspect that the resale price maintenance agreement supports a cartel of manufacturers or distributors. On October 1, 2009, a new law will come into effect in the state of Maryland, making it illegal for producers, retailers, distributors, franchisees or merchants to agree on a minimum selling price for products or services. The new law is intended to clarify that under Maryland`s antitrust law, such rules (known as minimum rates) are inherently illegal and are not taken into account mitigating factors. Maintaining the resale price (RPM) or, occasionally, maintaining the retail price is the practice by which a producer and its distributors agree that distributors sell the manufacturer`s product at specified prices (maintenance of the resale price), below or above a price floor (price system imposed) or under or under a price cap (maximum maintenance of the resale price).