A growing area of regulatory risk for SaaS resellers and SaaS suppliers involves the requirement and enforcement of resale price maintenance in SaaS Agreements. Under Nigerian competition law (the “FCCP Act”), contractual clauses which stipulate the price which any goods or services must be resold are generally void and unenforceable. Parties to the such contract can also be the subject of a regulatory investigation and a potential imposition of fines by Nigeria’s competition regulator (the “FCCPC”). Resale price maintenance can also be considered to be a form of price fixing, which itself is a specific offence against competition under the FCCP Act.
SaaS Suppliers & Resale Price Maintenance (RPM) Analysis
SaaS Suppliers and SaaS Resellers will generally come under the purview of the FCCPC because the section of the FCCP Act which prohibits resale price maintenance relates to the supply of any goods and services. On this basis, the supply of software services under SaaS Agreements or other software licensing or user agreements would often require an RPM analysis.
What is Resale Price Maintenance?
Resale price maintenance arises within the context of a SaaS Agreement when a SaaS supplier restricts the resale price of its services by requiring the reseller not to below a specified price. Resale price maintenance is usually directly enforced through contract terms but can also be indirectly enforced where a SaaS Supplier restricts the ability to offer discounts or offers financial incentives to a reseller to adhere to a set price. Resale price maintenance is generally considered illegal because it undermines a reseller’s ability to set independent prices, potentially leading to higher costs for consumers and reduced competition. Both SaaS suppliers and SaaS resellers can face substantial penalties for breaching competition laws, including fines, legal action and imprisonment.
Amongst others, the FCCP Act prohibits SaaS suppliers (and suppliers generally) from withdrawing or terminating the supply of services because a reseller has resold or intends to resell a service for less than an agreed resale price. A SaaS supplier who treats a SaaS reseller less favourably than it treats other resellers with respect to delivery times, methods of delivery, prices and other contractual terms, is considered to have legally withdrawn the supply of services to a SaaS reseller and therefore in breach of the FCCP Act. It is useful to note that being worried about losing a supplier’s business is not a defence to a resale price maintenance finding by the FCCPC. Additionally, the use of online price monitoring software to enforce resale price maintenance can be considered illegal.
Best Practices for Mitigating Regulatory Fines?
Instead of dictating resale prices for services across any sales channels or including minimum advertised prices in reseller agreements, SaaS resellers and SaaS suppliers can opt for price recommendations, provided that those recommendations comply with local competition law. Generally, making provisions for recommended resale prices will not amount to resale price maintenance where the SaaS reseller can still resell at whatever price it wants to.
