2. What negative effects do “restrictions on resale prices” imposed by suppliers have on market competition?
When an upstream supplier imposes a resale price restriction, it virtually deprives the downstream businesses of their freedom and right to determine the prices of their products or services. Consequently, price competition in the distribution stage is restrained and the effects on market competition are negative, especially with products that are highly differentiated or monopolistic or oligopolistic in essence. For this reason, restrictions on resale prices are prohibited in most countries. Only restrictions on the resale prices of publications or daily commodities in certain markets where competition is particularly fierce may be exceptionally approved. However, legislation in most countries in recent years indicates that the ranges of such exceptional approvals in major countries have gradually become smaller.
Relevant article(s) of law: Fair Trade Act, Article 19