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Can suppliers dictate retail prices?

QIs it possible for a supplier to dictate the price at which I can sell its goods?
AThe simple answer is no. UK and EU competition laws are clear that suppliers must not fix or set minimum resale prices with their retail customers. This is referred to as resale price maintenance and is illegal. In essence, retailers should be free to set prices at their absolute discretion.

“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.

Readers' comments (4)

  • In the U.S., however, a Minimum Resale Price can make it easy for a shopper to find the lowest price on an offer. Any two non-competing sellers can make one for easier shopping. There should be an article about that.

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  • No one seems to police this, I work in a wood burning stove shop and our suppliers continually tell us not to discount so much or even that we can not sell on the internet.
    One supplier will put out account on hold if we discount too much.

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  • What a naive article/response to what is a very good question. In my opinion the suppliers are the biggest driver of retails on branded goods. Of course they cannot dictate but if as a buyer you start to sell a product below the level a supplier would like the supplier will cut off supply to you which in effect is the same as them dictating the retail price.

    I ask you this:

    -Why are apple goods virtually all the same retail in the UK?
    -Why are virtually all luxury goods the same price across the UK?
    -Why are luxury watches all the same price in the mainstream retail chains?

    and the list goes on....its less of an issue in food and the big 4 are genuine good guys here in driving prices down.....the real culprits are in general merchandise where the brands have massive control on what goes on.

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  • What is classed as price fixing DOES go on in the UK retail market - anyone saying different does NOT work in the industry FACT.
    If you look at the big 4 for example when its a supplier funded activity be it half price / bogof as 2 marketing examples suppliers fund it , this is in agreement that it has focal place etc etc...just look at tesco with its rebates from suppliers its a tool kit suppliers use to flood the market with product be it P&G or Rickett...look at JML - ANOTHER price led by suppliers to suit ITS tv advert..get the idea...the list goes on.

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