resale price maintenance

Agreement between a supplier, usually a manufacturer or wholesaler, and a retailer not to sell a product below a specific price. The idea behind this type of agreement is to maintain profits and to discourage competition. If a manufacturer signs an RPM agreement with all the retailers they supply they can, to a certain degree, guarantee their profit margins. However, the detrimental effect this type of agreement has on competition has led to it becoming illegal in many countries, including the UK where suppliers may propose a recommended retail price but cannot legally enforce it.