When it comes to the world of business, there are many agreements that businesses can enter into to benefit both parties. One such agreement is a resale price maintenance agreement, which is often used in the retail industry. In this article, we will explore what a resale price maintenance agreement is, and provide an example to help you better understand how it works.
What is a resale price maintenance agreement?
A resale price maintenance agreement is an agreement between a manufacturer or supplier and a retailer that establishes a minimum resale price for the supplier’s products. This agreement is designed to ensure that the supplier’s products are sold at a certain price point, thereby protecting the supplier’s brand image and reputation.
This type of agreement is often used in industries where the supplier has invested heavily in advertising and promoting their products. By maintaining a minimum resale price, the supplier can ensure that their products are not undervalued or undersold, which would negatively impact their brand image.
Example of a resale price maintenance agreement
To better understand how a resale price maintenance agreement works, let’s look at an example. Imagine that a supplier of high-end sneakers has just launched a new line of shoes. The supplier has invested a significant amount of money in promoting and advertising these shoes, and wants to ensure that they are sold at a certain price point to maintain their brand image.
The supplier enters into a resale price maintenance agreement with a retailer that agrees to sell the shoes at a minimum resale price of $200 per pair. The agreement stipulates that the retailer cannot sell the shoes for less than $200, and that the supplier will provide incentives and support to the retailer to help them achieve this price point.
Both parties benefit from this agreement. The supplier is able to maintain its brand image by ensuring that its products are sold at a certain price point, and the retailer is able to offer high-end, sought-after products to its customers, which can help to drive traffic and sales.
A resale price maintenance agreement is a useful tool for suppliers and retailers who want to ensure that their products are sold at a certain price point. By establishing a minimum resale price, a supplier can protect its brand image and reputation, while retailers can offer high-quality products to their customers.
If you are considering entering into a resale price maintenance agreement, it is important to seek legal advice and ensure that the agreement complies with all relevant laws and regulations. With the right agreement in place, both parties can benefit from a mutually beneficial relationship that drives sales and growth.