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
• Selective and Exclusive market coverage
policies termed:
TERRITORIAL RESTRICTIONS
• Anti-Trust Legal concerns about how the
restriction of intrabrand competition may
restrict interbrand competition
 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
 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
 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)
 SELECTION AND TERMINATION
POLICIES
• May refuse to deal with a channel member if:
1. The decision to delete the member was a unilateral
decision by the manufacturer
2. 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.
 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
Thanks