Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Retail price maintenance prevents resellers from doing what?

1. Buying at wholesale prices

2. Setting independent prices

3. Offering sales and discounts

4. Stocking competing products

The correct answer is: Setting independent prices

Retail price maintenance is a practice used by manufacturers and suppliers to control the minimum price at which a product can be sold by resellers. By implementing this policy, retailers are restricted from setting their own independent prices below this established minimum. The rationale behind retail price maintenance is to ensure that retailers do not engage in price wars that could devalue the product or brand. It helps maintain a certain level of profitability for resellers and can also enhance the perceived value of the product in the eyes of consumers. This practice aims to create an environment where the product is sold consistently, preventing deep discounting that might undermine brand integrity. The correct answer highlights how this practice limits the ability of retailers to independently set their pricing strategies, which is crucial for maintaining price stability and brand reputation in a competitive market.