Legal Developments in Marketing Channels

1. Legal Developments in Marketing Channels Teacher – ShahedRahman

2. Introduction • Channel relationships always expose each participants to various types of risk – Economic, Psychological or Social • Legal risks are also involved • Firms that want to manage their channel relationships with the highest efficiency must understand the law that apply to their particular marketing activities. • Even making a strategy for the channel you need to know the laws.

3. Theory of Battle • Best moment to fire a round • To attempt to escape enemy fire • Destroy the enemies • Where and when to strike • Weakening one sector of their force • Calculate the risk and then make a plan

4. Antitrust laws • Antitrust Laws seek to inhibit or prohibit certain undesirable channel member behaviors • Also attempt to shape channel structure along what the government views as more competitive lines • To introduce sound economic analysis and rationality into the legal decision making process

5. Per Se Rule Versus the Rule of reason • Per se rule – Illegal ( Fixing prices, restricting or pooling output , sharing market on a predetermined basis) • Plainly anti competitive practices • Rule of Reason • Why the practices were implemented and the effect the practices had on competition in and outside of the channel are also considered.

6. Traditional Legal Issues in Channel Relationships • Price Discrimination • Resale Price Maintenance • Vertical Integration and Mergers • Dual Distribution • Tying Arrangements • Refusal to deal and Resale Restrictions

7. Price Discrimination • Involves the sales or purchase of a good or service at a differing price levels when the differing prices are not related to differences in the Sellers's cost • Buying and selling firms can each engage in price discrimination • Recent interpretations suggest the Act functions to equalize buying power so that larger channel members do not receive better deals than smaller channel members • UNFAIR METHOD OF COMPETITIONInjury to competition will not be inferred when the price differentials are too small to have any significant effect on sales or market shares • Functional Discount ( Grey Area )

8. Resale Price Maintenance(RPM) • When a manufacturer sets the price at which its product can be sold by independent wholesalers and retailers • Minimum RPM – when the producers set only minimum resale prices, allowing distributors to charge higher prices • Maximum RPM- when producers set only maximum resale prices, allowing resellers to charge lower prices

9. Vertical Integration and Mergers • Vertical Integration occurs when a firm owns and manages organizations at more than one channel level. • It emerges through the forward integration of manufacturers, backward integration of retailers. Or though out the intermediary’s up – or downstream expansion. • More control over channel member behavior and prices and /or economic scale • Integration can also be achieved when one firm acquires the stock or assets of another company operating at a different ( vertical ) or the same horizontal level

10. Dual Distribution • When a manufacturer of a branded good sells that brand – or essentially the same product under a different brand name – to the same market through two or more competing channels • Its not illegal but critics allege that dual distribution negatively affects independent distributors

11. Tying Arrangements • Under a tying contract the purchaser of some good – say, a machine – agrees, as a condition of purchase , to buy the seller’s supplies of some other commodity, such as raw materials processed by the machine. • Eg. – printer and paper • Full line forcing – is a related issue. Known as full line pricing – when dealers must carry suppliers entire line in order to obtain distribution right of a single item. • Exclusive Dealing Arrangements – an intermediary agrees to devote its efforts exclusively toward distributing the product line of a particular manufacturer

12. Resale restrictions Manufacturers attempts to designate to whom iand in what geographic areas their products may be sold.

13. Emerging Legal Issues in Channel Relationships • Slotting Allowances • Parallel Import Channels • International Business Law

14. Slotting allowances • Shelf space rental fees paid by the manufacturers to retailers. • Cash gifts, payment in kind, such as cases of free goods to secure a space on a shelf, end of aisle display or special merchandising considerations. • Help balance supply and demand of scarce shelf space • Controversies because manufacturers and retailers quibble over how to divide the economic gains resulting from their channel transactions.

15. Parallel Import Channels • Also known as grey market • It was possible for American consumers to buy a new Mercedes Benz in Europe, pay to ship it home, and still save money. • Come into a domestic market through a unauthorized channel. • It creates the rivalry for the authorized distribution channel

16. International Business Law • International Market – 500 Kg Guerilla • Ministry of Commerce • Terms and Condition • International Comity

17. Ethical Channel Management • Aim to compete strongly and to succeed but only within the bounds of sound ethical principles • Sense of Fairness and justice • Goal continue to profitability but only within the bounds of sound ethical principles • Sensitive to legal issue during channel decision making • Corporate codes of ethics