Does Minimum Advertised Price Violate Antitrust Laws?
Manufacturers or suppliers sell or license products to distributors, who in turn sell products to consumers. As part of a distribution agreement, manufacturers can require distributors to adhere to certain policies and practices. These requirements may serve to protect the company’s brand image–certain products cannot be marketed in certain ways, such as selling kids’ products alongside lewd content, for example. Manufacturer requirements can protect customers; for example, a manufacturer’s suggested retail price (MSRP) printed on the label can stop customers from getting price gouged by distributors selling above market value. Such agreements can also harm customers, however, such as by setting a required minimum sale price.
Do minimum advertised price policies violate antitrust laws? Read on for more about minimum advertised pricing, and call a seasoned California consumer protection and antitrust attorney if you’ve been harmed by a company’s illegal sales practices.
Resale Price Maintenance (RPM) is Often Illegal
Resale price maintenance (RPM) refers to manufacturers requiring distributors and resellers to sell products at a certain price, or below/above a certain price (minimum RPM or maximum RPM). In the 1900s, RPM agreements were per se (automatically) illegal under federal antitrust law. In the late 1990s and early 2000s, the Supreme Court decided that RPM agreements should not be per se illegal but should instead be analyzed individually using the rule of reason.
California’s Cartwright Act is more restrictive than federal antitrust law. Per California law, vertical price restraints are unlawful, including RPM agreements. The California Supreme Court has yet to conclusively rule that RPM agreements are still per se illegal despite the U.S. Supreme Court decisions, but courts in the state seem inclined to hold to the old per se rule. Even if not per se illegal, RPM restrictions will be heavily scrutinized.
What About Minimum Advertised Price?
Minimum advertised price (MAP) policies are different from RPM agreements. MAP restrictions require a reseller only to advertise products at or above a certain price. Unlike an RPM agreement, a MAP policy does not prevent the distributor from actually selling the product below a set minimum price; they are limited only with regard to the advertised price. Resellers can typically display the lower price in-store as well. Manufacturers will often pair a MAP policy with rewards for distributors, such as cooperative advertising funds.
MAP policies do not alone violate the antitrust laws, necessarily. A MAP policy may affect only advertised prices and not in-store prices, leaving the retailer free to sell for a lower price in-store. The implementation of a specific policy, however, could violate state or federal antitrust law.
If a manufacturer is too heavily involved with setting the prices of distributors, it’s basically an RPM agreement by another name. If a MAP policy operates in practice like an RPM agreement, then it may be ruled illegal like any other RPM agreement.
California is extremely wary of any agreement between buyers and sellers, including manufacturers and distributors, about the price at which the buyer can resell (e.g., distribute to customers). An experienced antitrust attorney can evaluate a given MAP policy to determine if it crosses the line into impermissible vertical price fixing.
Don’t be a victim of unfair business practices that harm consumers
For help pursuing a consumer protection claim in California or nationwide, including antitrust violations, unfair competition, false advertising, fraud and more, call the Kalfayan Law Firm in Del Mar (San Diego) for a free consultation. Our zealous class action law firm serves local residents and nationwide classes with diligence and passion. We’ll see your case through to the end and seek both justice and compensation for all victims of corporate misconduct.
