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Legal Constraints

Legal Constraints. Chapter 11 with Duane Weaver. Outline. Market Coverage Policies Customer Coverage Policies Pricing Policies Product Line Policies Selection and Termination Policies Ownership Policies. Market Coverage Policies.

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Legal Constraints

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  1. Legal Constraints Chapter 11 with Duane Weaver

  2. Outline • Market Coverage Policies • Customer Coverage Policies • Pricing Policies • Product Line Policies • Selection and Termination Policies • Ownership Policies

  3. Market Coverage Policies • Selective and Exclusive market coverage policies termed:TERRITORIAL RESTRICTIONS • Anti-Trust Legal concerns about how the restriction of intrabrand competition may restrict interbrand competition

  4. CUSTOMER COVERAGE POLICIES • Controlling to whom you may or may not resell to. • E.G.: House Accounts (direct sell) • Prevention of Grey Markets (unauthorized resellers (perhaps unqualified)) • Different accounts to different resellers to minimize consumer confusion and reduce intrabrand competition

  5. PRICING POLICIES • Price Maintenance – RPM: controlling lowest or highest sale price • Price Discrimination • Commodities (not services) • Of like grade and quality (generic private vs. brand) • Substantially lessens competition (difficult to prove, yet critical to complainant winning) • Defensible arguments: • Cost justification • Meeting Competition • Availability

  6. PRODUCT LINE POLICIES • Exclusive Dealing – do not compete with sellers products • Tying – must include buy with a tied in product • Full-Line Forcing – must buy entire line to carry any one item • Designated Product Policies – exclusive distribution agreements by specific products (e.g.: high-end products)

  7. SELECTION AND TERMINATION POLICIES • May refuse to deal with a channel member if: • The decision to delete the member was a unilateral decision by the manufacturer • There are legitimate business reasons for the change (conflict of interest, incompetence, unqualified…etc.) • Laws vary from country to country…important to have a formal set of evaluation/performance criteria that are part of a legal contract.

  8. Ownership Policies • Impacts of Vertical Integration –e.g.: forward by producer or backward by retailer • Integration by Merger – regulators look to make sure this does not limit competition and may disallow the enactment. • Integration by Internal Expansion – only limited by monopoly laws. • Dual Distribution

  9. Thanks

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