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onsidering their impact on sales strategies and profitability, manufacturer pricing policies
often go unremarked upon. They’re just part of the business relationship between manufacturers and distributors, typically surfacing in updated agreements, policy letters, or emails that outline how products can be advertised and, in some cases, sold. But the effects of those policies can be wide-ranging. For foodservice equipment and supplies distributors, manufacturer pricing and territory policies shape how they advertise, what they can say about price, and where they can sell. A change to a resale or distribution policy can affect margins and online promotions in meaningful ways.
For these reasons, federal and state antitrust laws govern the way manufacturers write, communicate, and apply these agreements. Today’s rules around manufacturer pricing policies primarily stem from a 2007 Supreme Court decision, Leegin Creative Leather Products v. PSKS, that required courts to evaluate such policies under a rule-of-reason approach — that is, evaluating whether the effects of a given practice are more anticompetitive or procompetitive.
In the majority opinion for Leegin, Justice Anthony Kennedy determined that a single manufacturer’s use of a vertical price restraint encourages retailers to invest in services or promotional efforts that aid the manufacturer’s position against rival manufacturers. By having an enforceable minimum price policy, manufacturers
“Absent vertical price restraints, the retail services that enhance interbrand competition might be underprovided. This is because discounting retailers can free ride on retailers who furnish services and then capture some of the increased demand those services generate.”
— Justice Anthony Kennedy Lawyer and former Associate Justice of the Supreme Court of the United States
prevent situations where a buyer researches a product or piece of equipment at a store staffed by highly- paid experts but then completes the purchase from a no-frills retailer that offers the same item at a lower price. “Absent vertical price restraints, the retail services that enhance interbrand competition might be underprovided,” Kennedy wrote. “This is because discounting retailers can free ride on retailers who furnish services and then capture some of the increased demand those services generate.” The Leegin ruling remains the guiding federal framework, with the Federal Trade Commission (FTC) and other regulators reviewing how companies apply resale price and territory policies on a case-by-case basis. Still, some states, such as Maryland, California, and New York, have passed laws that restore the pre- 2007 antitrust standard that prohibited most manufacturer pricing policies. These states treat minimum price rules as “illegal per se,” meaning they are
considered unlawful without the need for further analysis of their competitive effects. Companies that follow a minimum sale price agreement in those jurisdictions can face civil suits and criminal penalties. With manufacturer pricing and territory policies continuing to shape how distributors advertise, price, and sell equipment, understanding the legal boundaries of these agreements is essential. This guide helps distributors responsibly manage pricing rules while avoiding costly antitrust risks.
Vertical vs. Horizontal Agreements: What’s
the Difference?
In the foodservice equipment and supplies sector, most pricing policies move “vertically.” That means a manufacturer sets the terms and applies them to its dealer network on a dealer- by-dealer basis. Federal guidance allows that structure when the manufacturer acts independently — as in, it makes the decision on its own. The manufacturer
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