A Resale Price Maintenance (RPM) clause requires a buyer or distributor to sell products at a minimum price set by the supplier, preventing them from discounting below that threshold. This clause attempts to control the final retail price of goods throughout the distribution chain. The supplier uses RPM to maintain brand image, protect profit margins across all channel partners, and prevent price wars that might devalue the product or create channel conflict. However, RPM clauses are heavily restricted under antitrust law in most jurisdictions (including the U.S. under the Sherman Act) because they can constitute illegal price-fixing, reduce consumer choice, and limit competition. Courts generally view RPM with suspicion unless the supplier can demonstrate legitimate business purposes and the arrangement qualifies for narrow legal exceptions.
Avoid including RPM clauses in distribution or resale agreements unless you have specific legal counsel confirming compliance with your jurisdiction's antitrust laws. If price protection is a business priority, consider legal alternatives such as: (1) setting suggested retail prices without enforcement mechanisms, (2) implementing MAP (Minimum Advertised Price) policies that restrict advertising rather than actual sales, or (3) using selective distribution agreements that limit resellers to qualified partners. Document any pricing guidance as non-binding recommendations rather than mandatory requirements, and ensure the clause does not restrict a buyer's independent pricing decisions.
Frequently Asked Questions
What does this clause mean in simple terms?
A Resale Price Maintenance (RPM) clause requires a buyer or distributor to sell products at a minimum price set by the supplier, preventing them from discounting below that threshold.
Why should I care about this clause?
This clause attempts to control the final retail price of goods throughout the distribution chain.
What are my options?
The supplier uses RPM to maintain brand image, protect profit margins across all channel partners, and prevent price wars that might devalue the product or create channel conflict.
How does this affect small businesses?
However, RPM clauses are heavily restricted under antitrust law in most jurisdictions (including the U.S.