Minimum Advertised Price
Minimum advertised price or MAP (also known as resale price maintenance, or RPM) is the practice of a manufacturer providing marketing funds to a retailer contingent on the retailer advertising an end customer price at or above a specified level. Such agreements can be illegal in some countries when members and terms in the agreement match predefined legal criteria.
Fixed pricing established between a distributor and seller or between two or more sellers may violate antitrust laws in the United States.
In Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 S. Ct. 2705 (2007), the Supreme Court considered whether federal antitrust law established a per se ban on minimum resale price agreements and, instead, allow resale price maintenance agreements to be judged by the rule of reason, the usual standard applied to determine if there is a violation of section 1 of the Sherman Act. In holding that vertical price restraints should be judged by the rule of reason, the Court overruled Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911).
Because the rule of reason applies, minimum RPM agreements may still be unlawful. In fact, in Leegin, the Court identified at least two ways in which a purely vertical minimum RPM agreement might be illegal. First, “ dominant retailer ... might request resale price maintenance to forestall innovation in distribution that decreases costs. A manufacturer might consider it has little choice but to accommodate the retailer's demands for vertical price restraints if the manufacturer believes it needs access to the retailer's distribution network." Second, “ manufacturer with market power ... might use resale price maintenance to give retailers an incentive not to sell the products of smaller rivals or new entrants.”
In both of these examples, an economically powerful firm uses the RPM agreement to exclude or raise entry barriers for its competition.
In addition, federal law is not the only source of antitrust claims as almost all of the states have their own antitrust laws. Leegin dealt only with a claim arising under Section 1 of the Sherman Act.
In the UK in September 2010 an investigation was launched by the Office of Fair Trading into breaches of competition law by online travel agents and the hotel industry in relation to the advertised pricing of hotel rooms. As of April 2011 this was an administrative priority of the OFT.
Read more about this topic: Suggested Retail Price
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