Good To Know: The Difference Between Maximum Retail Price & Market Operating Price

MOP and MRP are two different concepts, the difference between which has generated considerable controversy of late.

MOP is the market operating price. It is the price at which a product was made available to a retailer by the manufacturer. Therefore, it is the lowest price at which the retailer can sell the product. The MOP is set by the manufacturer or the brand and is either lower than or equal to the selling price set by the retailer, who seeks to sell the product at above the MOP to make a profit.

MRP is the maximum retail price. It is the maximum price at which the product can be sold to the customer and it is inclusive of all taxes.

According to the Department of Consumer Affairs’ Standards of Weights and Measures (Packaged Commodities) Rules, 1977, “‘maximum price’ in relation to any commodity in packaged form shall include all taxes local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing forwarding and the like, as the case may be.”

Selling at above the MRP is prohibited, though this is a rule that is rarely followed in India.

In the most basic terms, MRP is the sum of MOP and profit. While MOP is set by the manufacturer, the MRP is set by the government or regulatory body. The retailer is free to fluctuate his selling price as long as it is below or equal to the MRP and above or equal to the MOP.

The controversy

Offline and small retailers have been hit hard by the pricing policies of e-commerce outlets and big retailers. Small businesses accuse these large conglomerates of “predatory pricing”, which involves selling your product at extremely low prices – often at a loss – so as to put your competition out of business and then increase your selling price again.

E-commerce outlets have a habit of selling their products at large discounts, often at MOP (or even below: it is difficult to know the case for all products as, unlike MRP, the MOP is not publicly displayed on the product). This ensures more business but puts offline and smaller retailers at risk of elimination from the market. These small retailers cannot afford similar discounts and soon lose their customers to the larger retailers.