What do you do when distributor sells for cheaper than RRP?

Question

Hi to everyone,

I have difficulty to settle my European policy on prices, and I thought I would ask what people do.

Having RRP, I am not able to enforce them.
What are the actions I can take when a European distributor is deciding to sell products 25% cheaper than RRP ?

Answer

Without full details of the facts is very difficult to comment. However I would point out that it is important that you look to the content of your distributorship/commercial agreement. This will usually set out specifically the relationship that exists ie whether agent or distributor. It will also set out the respective rights, obligations and liabilities of the parties. If your distributor or agent is in breach of the agreement between yourselves, you then need to look to see whether the breach is what we call repudiatory and/or if the breach be remedied? In those circumstances, you may look to take steps to terminate the agreement in accordance with the provisions of your agreement and seek the remedies open to you in law and in contract.

If there exists no formal written contract, then it is important you carefully determine the exact nature of the relationship and then look to the relevant regulations. One such regulation could be The Commercial Agents (Council Directive) Regulations 1993 which provides certain protection for agents. Again we would caution of the importance and obtaining professional advise and assistance. We are able to assist if required.

From a commercial perspective however, it may be worth attempting to resolves your differences by ascertaining the reasons for the sale of the goods below the RRP and trying to arrive at an understanding between the parties if at all possible. It is important that you document the understanding you have reached.

Answer

I am a bit surprised that no-one has mentioned EU competition law. My understanding is that the law prohibits suppliers from fixing or setting minimum prices. RRP’s are ok, but must not be enforced as a minimum price. This guidance may be helpful:

http://www.pinsentmasons.com/PDF/recommending_retail_prices_how_far_can_you_go.pdf

Answer

Thank you very much for the answers its been really helpful.

We don’t have an agreement in writing and it is a “gentleman’s agreement”.
Indeed it creates issues with neighboring countries, and it is difficult to enforce.
Different European countries have different taxes in place which don’t suit all economies.
Retailers in France wants 100% margin when in UK and Germany 50 % is a lot, as an example.

Can i stop selling to a customer ? Delay shipping ?

Once again thank you for your answers. Kind regards, Samuel

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