Can We Undercut Suggested Retail Pricing on our Websites?

Last Update: February 07, 2017

I'm in the guitar niche. I purchase most of my guitar gear at a local guitar shop. I told the owner what I was doing as an Affiliate Marketer and suggested that we work out a business relationship. I would advertise his site on my guitar website and he would give me a cut if someone bought equipment from him from the advertisement on my website. He does not participate in an affiliate marketing program, but was interested in working with me.

I thought I could advertise some of his products at under the manufacturer's suggested retail price (MRSP) to draw folks to his guitar shop. But he said that was illegal. He told me that he cannot legally advertise any of his products through any marketing approach for less than the manufacturer's suggested retail price, or he could get in trouble.

I don't know the exact legal position regarding this, but my friend has been in business for more than 25 years and I trust that he knows the legal position regarding this issue. My hunch is that this legal protection has to do with fair competition laws.

My concern is jeopardizing my friend's business. I want to help him, not hurt him. If you are posting any prices for products of a business, or even your own business products, for under MRSP prices, you might want to check into the legal implications of advertising prices below MRSP. This isn't just a legal issue. It's an ethical issue as well.

Please share your thoughts and/or experience regarding this issue. Thanks!

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HCM Premium
So are you saying if I sell on my site and I undercut the MSRP I could get into trouble??
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Rbobejr1960 Premium
The keyword is suggested Retail Price.. so yes you should be able to sell for less than the MSRP as long as your not taking a lose. How the whole concept of e-commerce works you undercut your competition. If you can buy it for say 5 bucks and sell it for a dollar under the lowest competitor you have and still make a profit then, by all means, do it. Now I bet this guy who owns the shop has a contract with his supplier that says he can not sell for less than x amount probably because the supplier also sells the product retail and does not want to be undercut. But that's capitalism, buy as cheap as you can and make as much profit off what you buy as possible without turning off your customer.
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martycanaday Premium
Yes, the owner of the local guitar shop would not allow me to post his products at a cost that is lower than suggested retail price. I know from personal experience with him that he sells some products for less than suggested retail. But he said he could not advertise that or he would get into trouble. He said this is a legal issue. It's against the law. He did not suggest at all that it was a contract issue with suppliers.
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AlexEvans Premium
You have raised an interesting point Marty, in the online world there seems to be this race to the bottom where the main marketing strategy seems to be I will do it cheaper no one wins.
For your friend he may have a supply agreement with his supplier which places pricing restrictions on him good practice everyone wins.
Better to sell ten items with a margin than fifty at a discontinued price with zero margin.
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martycanaday Premium
Good point, Alexander. I'm wondering if he has a supply agreement, as well as state or federal restrictions. I need to talk with my lawyer about this.
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MKearns Premium
A comparative global situation. Take the
safe route regardless!
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martycanaday Premium
Yes, I agree, Mike. It's best to be safe than sorry.
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Jaclow Premium
Yes, it's not right, we have the same practice over here and if the manufacturer come to know about this undercut, your friend will really get into trouble.
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martycanaday Premium
You're in Japan, right? Its interesting to learn about the different cultural expectations, laws, and ways of living in so many different countries around the world. One of the neat things that I like about WA is that we are an inclusive community and get to interact with folks from the entire world.
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Jaclow Premium
Nope, I am from Singapore but visit Japan frequently since young. Now my son is studying in Japan Uni so I visit offen.
I just love to travel. :)
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GautamWorld Premium
I'm in India. Nobody cares!
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martycanaday Premium
Ha! No regulation, right! Every country has different rules and regulations. Truth is, there are many issues regarding the use of the Internet that haven't been defined, and that can be good and bad. Here's one issue: How many affiliate marketers at WA have a business license?
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GautamWorld Premium
There are no laws here. They take at least ten years to dispose of court cases. Tax evasion is no big deal. If you get caught, pay a fine (or a bribe!); you will be fine!
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martycanaday Premium
Wow! That's certainly not how it is here in the United States of America.
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GautamWorld Premium
Of course not! I'm aware how stringent laws are over there. Again, to an extent, there's corruption EVERYWHERE.
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