What suppliers must not do
It's illegal for suppliers to impose minimum prices for the resale of their goods or services.
For example, suppliers must not:
- set minimum prices in formal policies or agreements
- offer retailers a discount if they sell at or above a minimum price
- refuse to supply retailers that sell below a minimum price
- punish retailers for selling below a set price, for example, by taking away a discount or sending a warning.
This is known as resale price maintenance.
Resale price maintenance is illegal because it stops retailers competing on price, increasing what consumers pay.
It's also illegal for resellers to ask suppliers to stop competitors selling below a minimum price.
Example of resale price maintenance
A jewellery wholesaler gives retailers a list of recommended prices.
It offers a 10% discount to retailers who pay their accounts on time, but the discount isn't available if the retailer sells the jewellery for less than the recommended prices.
The discount is taken away from the retailer if they sell the jewellery for less than the price recommended by the wholesaler. This is resale price maintenance and is illegal.
What suppliers are allowed to do
- Suppliers can recommend appropriate prices, for example, by providing a recommended resale price (RRP) list.
- Suppliers can set a maximum retail price.
- Suppliers can refuse to supply resellers that engage in
loss leader selling.