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