The list price
, also known as the manufacturer's suggested retail price
), or the recommended retail price
), or the suggested retail price
) of a product
is the price
at which the manufacturer
recommends that the retailer sell
the product. The intention was to help standardize prices among locations. While some shops/stores always sell at, or below, the suggested retail
price, others do so only when items are on sale
Suggested pricing methods may conflict with competition theory
, as they allow prices to be set higher than would otherwise be the case, potentially negatively affecting consumers. However, resale price maintenance
goes further than this and is illegal in many regions.
Much of the time, shops/stores charge less than the suggested retail price, depending upon the actual wholesale
cost of each item, usually purchased in bulk
from the manufacturer, or in smaller quantities through a distributor
In certain supply chains, where a manufacturer
sells to a wholesale distributor, and the distributor in turn sells to a reseller, the use of SRP is used to denote Suggested Reseller Price. In that case, the list price is used to convey the manufacturer's suggested retail price.
Concepts similar to the list price exist in many countries, but equivalents of the list price often cannot be compared directly internationally since products and services may differ to meet different legal requirements, and price figures communicated to consumers must include taxes and duties (for example) in the EU but not in the US.
In the United Kingdom
, the list price is referred to as a recommended retail price or RRP.
In the United States
, the list price is referred to as the manufacturer's suggested retail price or MSRP.
Under earlier US state Fair Trade statutes
, the manufacturer
was able to impose a fixed price for items. The fixed prices could offer some price protection
to small merchants
in competition against larger retail organizations. These were determined to be in restraint of trade
. Many manufacturers have adopted MSRP, a price at which the manufacturer suggests the item be priced by a retailer. The term "suggested" can be misleading because in many cases, the MSRP is extremely high compared to the actual wholesale cost, opening the market to "deep discounters
", who are able to sell products substantially below the MSRP but still make a profit. The discount stores benefit from exorbitant MSRPs because the discount offered increases the perceived value to customers.
A common use for MSRP can be seen in automobile
sales in the United States. Prior to the spread of manufacturer's suggested retail pricing, there were no defined prices on vehicles, and car dealers
were able to impose arbitrary markups
, often with prices adjusted to what the salesperson thought the prospective purchaser would be willing to pay for a particular vehicle.
Currently, the MSRP, or "sticker price
", the price of a vehicle
as labeled by the manufacturer, is clearly labeled on the windows of all new vehicles, on a Monroney sticker
, commonly called the "window sticker." It is different from the actual price paid to the manufacturer by the dealer, which is known as the "invoice price
." There are now numerous sources, such as online appraisal tools, that can be used to find the MSRP and invoice price.
Minimum advertised price
A minimum advertised price (MAP) is the practice of a manufacturer providing marketing funds to a retailer contingent on the retailer advertising an end customer price at or above a specified level. Such agreements can be illegal in some countries when members and terms in the agreement match predefined legal criteria.
Fixed pricing established between a distributor and seller or between two or more sellers may violate antitrust
laws in the United States
Because the rule of reason applies, minimum RPM agreements may still be unlawful. In fact, in Leegin, the Court identified at least two ways in which a purely vertical minimum RPM agreement might be illegal. First, “[a] dominant retailer ... might request resale price maintenance to forestall innovation in distribution that decreases costs. A manufacturer might consider it has little choice but to accommodate the retailer's demands for vertical price restraints if the manufacturer believes it needs access to the retailer's distribution network". Second, “[a] manufacturer with market power... might use resale price maintenance to give retailers an incentive not to sell the products of smaller rivals or new entrants”.
In both of these examples, an economically powerful firm uses the RPM agreement to exclude or raise entry barriers for its competition.
In addition, federal law is not the only source of antitrust claims as almost all of the states have their own antitrust laws.
In the UK in September 2010 an investigation
was launched by the Office of Fair Trading into breaches of competition law by online travel agents and the hotel industry in relation to the advertised pricing of hotel rooms. As of April 2011, this was an administrative priority of the OFT.
'Rack rate' is the travel industry
term for the published full price of a hotel room, which the customer would pay by just walking into the hotel off the street and asking for a room. In some jurisdictions, a customer may be entitled to overstay a reservation by paying the rack rate. While the rack rate is lower than the maximum rate that the hotel
may be allowed to charge under local laws, it is higher than the rate most travel agents can book for their customers. Sometimes the terms "run of the house" or "walk-up rate" are used to refer to the same highest rate.
The term "rack rate" is also used by travel-related service providers, such as car rental companies or travel mobile phone rental companies, to refer to the same highest rate that customers would be charged with no prebookings.
- ^ Competition Commission, CC lifts Domestic Electrical Goods Order, published 1 February 2012, archived 25 July 2013, accessed 3 June 2021
- ^ "How much is my car worth? Free car value appraisal | Edmunds". Edmunds.com.
Last edited on 3 June 2021, at 18:23
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