Final answer:
A minimum resale price maintenance agreement requires dealers to sell a product at or above a specific price, reducing competition by setting a price floor. It is generally illegal due to its anti-competitive effects, but manufacturers can suggest prices and refuse to supply dealers who sell below these suggestions. It can sometimes be acceptable to maintain product quality or within selective distribution networks.
Step-by-step explanation:
A minimum resale price maintenance agreement is an agreement that requires a dealer who buys from a manufacturer to sell the product for at least a certain minimum price. This practice can reduce competition among dealers because it sets a price floor, preventing dealers from selling the product at a lower price to attract more customers.
It is generally illegal for manufacturers to enforce minimum resale price maintenance as it restricts competition. However, manufacturers may "suggest" minimum prices and cease selling to dealers who regularly sell below these suggested prices. The legality of these practices often depends on the subtlety of how they are implemented and the specific laws in the jurisdiction.
Minimum resale price maintenance may sometimes be seen as acceptable to maintain the perceived quality and premium status of a product, or when it is part of an agreement within a selective distribution network focusing on specialized service and support for the product.