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The list price, also known as the manufacturer's suggested retail price (MSRP), or the recommended retail price (RRP), or the suggested retail price (SRP) of a
product Product may refer to: Business * Product (business), an item that serves as a solution to a specific consumer problem. * Product (project management), a deliverable or set of deliverables that contribute to a business solution Mathematics * Produ ...
is the
price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the c ...
at which its
manufacturer Manufacturing is the creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation. It is the essence of secondary sector of the economy. The term may refer to a ran ...
notionally recommends that a retailer sell the product. Suggested pricing methods may conflict with competition theory, as they allow prices to be set higher than would be established by supply and demand.
Resale price maintenance Resale price maintenance (RPM) or, occasionally, retail price maintenance is the practice whereby a manufacturer and its distributors agree that the distributors will sell the manufacturer's product at certain prices (resale price maintenance), a ...
—fixing prices—goes further than suggesting prices, and is illegal in many countries. Retailers may charge less than the suggested retail price, depending upon the actual
wholesale Wholesaling or distributing is the sale of goods or merchandise to retailers; to industrial, commercial, institutional or other professional business users; or to other wholesalers (wholesale businesses) and related subordinated services. In ...
cost of each item, usually purchased in bulk from the manufacturer, or in smaller quantities through a
distributor A distributor is an enclosed rotating switch used in spark-ignition internal combustion engines that have mechanically timed ignition. The distributor's main function is to route high voltage current from the ignition coil to the spark plugs ...
. The suggested price is sometimes unrealistically high, so the seller can appear to be offering a discount. List price often cannot be compared directly internationally as products may differ in detail, sometimes due to different regulations, and list prices may or may not include taxes.


India and Bangladesh

India and Bangladesh do not use list prices but instead have a
maximum retail price Maximum retail price (MRP) is a manufacturer calculated price that is the highest price that can be charged for a product sold in India and Bangladesh. About However, the retailers may choose to sell products for less than the MRP. MRP differs ...
.


United Kingdom

In the United Kingdom, the list price is referred to as a recommended retail price or RRP. In 1998, the
Secretary of State for Trade and Industry The secretary of state for business, energy and industrial strategy, is a secretary of state in the Government of the United Kingdom, with responsibility for the Department for Business, Energy and Industrial Strategy. The incumbent is a memb ...
prohibited the placing of RRP on electrical goods under the "Domestic Electrical Goods Order", but this ruling was lifted by the
Competition Commission The Competition Commission was a non-departmental public body responsible for investigating mergers, markets and other enquiries related to regulated industries under competition law in the United Kingdom. It was a competition regulator under t ...
in February 2012.


United States

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 Manufacturing is the creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation. It is the essence of secondary sector of the economy. The term may refer to a ran ...
was able to impose a fixed price for items. The fixed prices could offer some price protection to small
merchant A merchant is a person who trades in commodities produced by other people, especially one who trades with foreign countries. Historically, a merchant is anyone who is involved in business or trade. Merchants have operated for as long as indust ...
s in competition against larger retail organizations. These were determined to be in
restraint of trade Restraints of trade is a common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business. It is a precursor of modern competition law. In an old leading case of '' Mitchel v Reynolds'' (1711) Lord S ...
. 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.


Automobiles

A common use for MSRP can be seen in
automobile A car or automobile is a motor vehicle with Wheel, wheels. Most definitions of ''cars'' say that they run primarily on roads, Car seat, seat one to eight people, have four wheels, and mainly transport private transport#Personal transport, pe ...
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 list price, also known as the manufacturer's suggested retail price (MSRP), or the recommended retail price (RRP), or the suggested retail price (SRP) of a product is the price at which its manufacturer notionally recommends that a retailer ...
", the price of a
vehicle A vehicle (from la, vehiculum) is a machine that transports people or cargo. Vehicles include wagons, bicycles, motor vehicles (motorcycles, cars, trucks, buses, mobility scooters for disabled people), railed vehicles (trains, trams), wa ...
as labeled by the manufacturer, is clearly labeled on the windows of all new vehicles, on a
Monroney sticker The Monroney sticker or window sticker is a label required in the United States to be displayed in all new automobiles and includes the listing of certain official information about the car. The window sticker was named after Almer Stillwell "M ...
, 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 The invoice price is the actual price that the end-customer retailer pays to the manufacturer or distributor for a product. However, in many industries, the "invoice cost" actually varies from the "net purchase cost," or the actual price of a produ ...
." 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.


United States

Fixed pricing established between a distributor and seller or between two or more sellers may violate
antitrust Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust l ...
laws in the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
. In '' Leegin Creative Leather Prods., Inc. v. PSKS, Inc.'', 127 S. Ct. 2705 (2007), the Supreme Court considered whether federal antitrust law established a ''
per se Per se may refer to: * ''per se'', a Latin phrase meaning "by itself" or "in itself". * Illegal ''per se'', the legal usage in criminal and antitrust law * Negligence ''per se'', legal use in tort law *Per Se (restaurant) Per Se is a New Ameri ...
'' ban on minimum resale price agreements and, instead, allow resale price maintenance agreements to be judged by the rule of reason, the usual standard applied to determine if there is a violation of section 1 of the
Sherman Act The Sherman Antitrust Act of 1890 (, ) is a United States antitrust law which prescribes the rule of free competition among those engaged in commerce. It was passed by Congress and is named for Senator John Sherman, its principal author. Th ...
. In holding that vertical price restraints should be judged by the rule of reason, the Court overruled '' Dr. Miles Medical Co. v. John D. Park & Sons Co.'', 220 U.S. 373 (1911). 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, “ 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, “ 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.


United Kingdom

In the UK in September 201
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.


Australia

In Australia any sort of attempt at setting minimum advertised pricing or any retaliation against such a reseller is against the Competition and Consumer Act. It is also illegal for resellers to ask their suppliers to use recommended price lists to stop competitors from discounting. In most cases, a supplier may specify a maximum price for retail. There is an exception to this where the reseller is engaging in a
loss-leading A loss leader (also leader) is a pricing strategy where a product is sold at a price below its market cost to stimulate other sales of more profitable goods or services. With this sales promotion/marketing strategy, a "leader" is any popular artic ...
exercise.


Rack rate

'Rack rate' is the
travel industry Tourism is travel for pleasure or business; also the theory and practice of touring, the business of attracting, accommodating, and entertaining tourists, and the business of operating tours. The World Tourism Organization defines tourism ...
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 can be lower than the maximum rate that the
hotel A hotel is an establishment that provides paid lodging on a short-term basis. Facilities provided inside a hotel room may range from a modest-quality mattress in a small room to large suites with bigger, higher-quality beds, a dresser, a ref ...
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" (in Europe usually: "walk-in 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.


See also

*
Maximum retail price Maximum retail price (MRP) is a manufacturer calculated price that is the highest price that can be charged for a product sold in India and Bangladesh. About However, the retailers may choose to sell products for less than the MRP. MRP differs ...
*
Rate card A rate card is a document containing prices and descriptions for the various ad placement options available from a service sector such as a media outlet. Like the rack rate at a hotel, this is generally the maximum price that one may pay. Most a ...
* Dropshipping


References

{{Reflist


External links


FTC Illegal Business Practices


* ttps://web.archive.org/web/20081203024024/http://msl1.mit.edu/classes/esd123/vyas.pdf MSRP and a real value of a car Anti-competitive practices Competition (economics) Pricing