Resale Price Maintenance - United Kingdom Law

United Kingdom Law

In Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd AC 847, an English contract law case, the House of Lords held that Dunlop Tyres (a tyre manufacturer) could not enforce an agreement between a tyre dealer and a tyre buyer to pay £5 per sale under a liquidated damages clause if tyres were sold (other than to motor traders) below the list price. But this had nothing to do with the legality of resale price maintenance clauses, which was not in any question at the time: the decision was based on the doctrine of privity of contract as Selfridges had bought Dunlop's goods from an intermediary. In the case of Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd AC 79 the House of Lords upheld the enforceability of the requirement in the resale price maintenance clause, to pay £5 damages per item sold below list price, on the basis that it was not a penalty clause (which would be unenforceable) but a valid and enforceable liquidated damages clause.

In 1955 in the UK, the Monopolies and Mergers Commission's report Collective Discrimination - A Report on Exclusive Dealing, Aggregated Rebates and Other Discriminatory Trade Practices recommended that resale price maintenance when collectively enforced by manufacturers should be made illegal, but individual manufacturers should be allowed to continue the practice. The report was the basis for the Restrictive Trade Practices Act 1956, this specifically prohibited collective enforcement of resale price maintenance in the UK. Restrictive agreements had to be registered at the Restrictive Practices Court, and were considered on individual merit. In 1964 the Resale Prices Act was passed, which now considered all resale price agreements to be against public interest unless proven otherwise. In 2010 in what could be a landmark case The Office of Fair Trading started to investigate allegations of resale price maintenance in the hotel industry. The investigation will focus on allegations that there could be agreements and concerted practices resulting in fixed or minimum resale prices.

In relation to competition, Article 81 and Article 82 of the EC Treaty are paramount over all member states' national laws relating to competition. The ECJ and the Commission have both held that Resale Price Maintenance is generally prohibited. UK law must apply this interpretation when dealing with inter member-state agreements between undertakings.