Can suppliers dictate retail prices?
“A supplier’s ability to dictate prices is extremely limited,” says Matthew Woodford, head of the EU and competition law team at law firm Browne Jacobson. “It’s very difficult to justify any agreement or understanding between a supplier and a retailer on resale prices.”
The most common exceptions to this general rule are that a supplier may recommend a resale price or set a maximum resale price.
However, care is always needed as a recommended or maximum resale price must not amount in reality to a fixed or minimum price. For example, if a supplier imposes sanctions such as lower discounts or reduced supplies on its retail customers that do not observe its recommended prices, then this will be considered as an act of resale price maintenance.
Retailers must ensure their employees exercise caution in all discussions with suppliers concerning resale prices. If a supplier seeks to impose resale prices, then the retailer must reject the attempt. “A failure to do so could be interpreted as an agreement to fix prices,” warns Woodford. The penalties for engaging in resale price maintenance are serious. The EU and UK regulators can impose fines of up to 10% of a company’s worldwide group turnover. Other consequences include damage to reputation and share price.