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Hey! Why Isn't That Price Fixing? The Real Story of Manufacturer's Suggested Retail Prices
The Attorney General provides Consumer Alerts to inform the public of unfair, misleading or deceptive business practices, and to provide information and guidance on other issues of concern. Consumer Alerts are not legal advice, legal authority, or a binding legal opinion from the Department of Attorney General.
Hey! Why Isn't That Price Fixing?
The Real Story of Manufacturer's Suggested Retail Prices.
The Attorney General's Consumer Protection Division receives many inquiries about price fixing on a variety of products, from appliances and home stereo equipment to toys and health care products. A typical question is: "I was shopping for stereo speakers lately and the brand I like is priced exactly the same at every store. When I asked one of the sales clerks about it, he said the store won't reduce the price any lower because it would be below the manufacturer's suggested retail price. Isn't that price fixing?
While the question may seem simple, the answers are complex and specific to every set of facts. Illegal price fixing may occur under a number of different scenarios:
- While it used to be that manufacturers could only suggest a minimum retail price, the U.S. Supreme Court recently changed that rule. Now, manufacturers may, under appropriate circumstances, require a minimum retail price to be charged.
- A number of different manufacturers may not agree to set prices for their products. Agreements between manufacturers to set prices are illegal.
- Similarly, a number of different retailers cannot agree to set prices for their products. Agreements between retailers to set prices are illegal.
A manufacturer does have a legal right to set a suggested retail price (a manufacturer's suggested retail price or MSRP). The manufacturer also has the right to unilaterally terminate a retailer who prices below the MSRP. Frequently, when prices are identical for a product at every store, it is because each retailer has decided to adhere to the MSRP.
It is frequently difficult in antitrust enforcement to determine when a retail price is set based upon a manufacturer's unilateral pricing policies and when the retail prices are set based upon an illegal agreement. The basic rule of thumb is: if the manufacturer's decision to set a suggested retail price and the retailers choice to adhere to that price are independent decisions, then it is probably not considered price fixing under the law. But if manufacturers and retailers agree that a certain price will be charged, the agreement will be considered illegal.
For further information about manufacturer's suggested retail pricing policies, contact the Federal Trade Commission's Bureau of Competition at (202) 326-3300 or the Michigan Attorney General's Consumer Protection Division at toll-free (877) 765-8388.