What is Retail Price Maintenance: A Controversial Practice

What is retail price maintenance? Learn how this pricing strategy impacts businesses, consumers, and market competition in this guide.

If you’re a business owner or just curious about pricing strategies, you’ve probably heard of something called Retail Price Maintenance (RPM). It might sound a little technical, but it actually has a big impact on retail pricing in business models, how companies operate, how we shop, and how markets shift over time.

I remember the first time I ran into RPM at work. I was at a small retail startup, and one of our suppliers sent over a contract saying we had to sell their product at a fixed price, no discounts, no promotions. At first, I didn’t really think much of it, but when I dug deeper, I realized there were some major legal and ethical questions around this. RPM isn’t just about pricing rules, it’s really about finding the balance between protecting a brand’s value and encouraging fair competition.

In this guide, I’ll break down everything you need to know about RPM and share what I wish I had understood when I first came across it. By the end, you’ll have a clear understanding of how retail pricing works, how it affects businesses and customers, and what steps you can take to manage it successfully.

What Is Retail Price Maintenance (RPM)?

Let’s break this down simply. Retail Price Maintenance (RPM), also called Resale Price Maintenance, is when suppliers set a minimum price that retailers must sell their products for. It’s not just about pricing; it’s about control. Suppliers use RPM to protect their brand’s image and avoid price wars that could make their products look cheap.

For instance, think about buying a luxury watch. If one store sells it at a huge discount, it could make the watch seem less exclusive. That’s what RPM is designed to prevent.

But there’s a flip side. By fixing prices, suppliers limit competition. Retailers can’t offer better deals, and shoppers end up paying more. So, while RPM might sound like a good idea for maintaining brand value, it often clashes with what’s best for consumers and the market.

Why Is RPM So Controversial?

The debate around RPM comes down to one big issue: competition.

Suppliers say RPM is helpful because it keeps pricing consistent and protects brand value. But critics argue it’s bad for competition, hurts small retailers, and makes products more expensive for shoppers.

When I first heard about RPM, I pictured it as a tug-of-war. Suppliers are on one side, trying to control pricing, while retailers and regulators are on the other side, pushing for free-market fairness.

Here’s where things get interesting:

• People who support RPM say it stops a “race to the bottom,” where retailers lower prices so much that products lose their value, especially for high-end or niche items.
• But those against RPM say it’s unfair and anti-competitive. By setting a minimum price, suppliers stop retailers from offering discounts, which ends up being bad for shoppers.

Legality of RPM: A Global Perspective

When it comes to RPM, the law isn’t black and white. It’s more like fifty shades of gray, with different jurisdictions adopting different stances.

United States

In the U.S., RPM has had a tumultuous legal history. For decades, it was considered per se illegal under antitrust laws. But in 2007, the Supreme Court’s decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc. changed everything.

The court ruled that RPM should be evaluated under the “rule of reason”, meaning it’s not automatically illegal. Instead, each case is assessed based on its actual impact on competition.

Here’s an analogy: Think of RPM like speeding. It’s not always dangerous, sometimes it’s necessary to get somewhere faster. But if you’re speeding recklessly and causing accidents (i.e., harming competition), you’ll get penalized.

European Union

Across the pond, the European Union takes a stricter approach. RPM is generally seen as a violation of competition law, and companies caught engaging in it can face hefty fines.

Specific Countries

Even within countries, the rules can vary. For instance, in the U.S., states like California and Maryland treat RPM as per se illegal, regardless of federal rulings.

Examples of RPM

Let’s bring this to life with some real-world cases.

1. FTC’s Lawsuit Against Southern Glazer’s

In 2024, the Federal Trade Commission (FTC) sued Southern Glazer’s, the largest U.S. wine and spirits distributor, for offering exclusive discounts to large retailers like Costco while smaller stores were left out. This wasn’t traditional RPM, but it highlighted how pricing practices can distort competition.

2. CMA’s Action Against Light Fittings Supplier

In the UK, the Competition and Markets Authority (CMA) fined a supplier £2.7 million in 2017 for restricting retailers from setting their own prices for domestic light fittings. The CMA argued that this harmed consumers by keeping prices artificially high.

When I read about these cases, I couldn’t help but think about the small retailers I worked with early in my career. For them, RPM wasn’t just a policy, it was a roadblock. It limited their ability to compete and, in some cases, forced them out of the market entirely.

Impacts of RPM on Businesses and Consumers

For Businesses

Here’s the paradox: RPM can both help and hurt businesses.

• Large Retailers: Big players like Amazon or Walmart often have the leverage to negotiate exceptions to RPM agreements. This gives them a competitive edge.
• Small Retailers: For smaller businesses, RPM can be a nightmare. They’re bound by minimum prices but can’t compete with the marketing budgets or economies of scale that larger retailers enjoy.

When I think back to the startup I worked with, RPM felt like a double-edged sword. On one hand, it protected our margins. On the other hand, it tied our hands when competitors were offering discounts.

For Consumers

At the end of the day, RPM often means higher prices for consumers. But there’s a flip side: It can also ensure consistent quality and service. For example, if every store sells a luxury product at the same price, you’re less likely to encounter poor service or counterfeit goods.

Best Practices for Suppliers and Retailers

If you’re a supplier or retailer navigating RPM, here are some tips to stay on the right side of the law and market dynamics:

1. Avoid Direct Price Mandates: Instead of enforcing minimum prices, consider recommending them. This gives retailers more flexibility while still guiding pricing strategies.
2. Educate Your Team: Make sure your sales and marketing teams understand RPM and its legal implications. Ignorance isn’t a defense in court.
3. Focus on Value, Not Price: Instead of obsessing over pricing, invest in creating value, better products, exceptional service, or unique experiences.

Debates Around RPM: Is It Good or Bad?

This is where things get philosophical. Is RPM a necessary evil or a harmful relic of outdated business practices?

The Case For RPM

Supporters argue that RPM protects small brands from being devalued. It also creates a level playing field for retailers, ensuring consistent pricing across the board.

The Case Against RPM

Critics say RPM is anti-competitive and harms consumers. By fixing prices, it takes away retailers’ ability to differentiate themselves through discounts or promotions.

Personally, I see merit in both arguments. The key is finding a balance, allowing flexibility without compromising brand value or consumer trust.

Key Takings

• Retail Price Maintenance (RPM) is a strategic issue, not just a legal or economic one. 
• For suppliers, RPM helps protect the brand; for retailers, it impacts competitiveness. 
• Initially, RPM might seem like a barrier, but it can be an opportunity to rethink pricing strategies. 
• It fosters stronger supplier relationships and adds more value to customers. 
• Pricing isn’t just about numbers, it’s about trust, perception, and balancing competition with control. 

Useful Resources

1. Retail Price Maintenance: Stay Competitive: Explains how RPM prevents price wars among retailers and ensures consistent pricing.
2. Resale Price Maintenance (RPM): Discusses the benefits of RPM, including eliminating intra-brand competition among retailers.
3. Retail Price Maintenance Policies: A Bane for Retailers, but a Boon for Consumers: Highlights how RPM agreements can reduce the likelihood of costly price wars.
4. The Economics of Resale Price Maintenance: Provides a detailed analysis of RPM agreements and their economic implications.