1. BSAD 113 LEGAL ISSUES Lars Perner, Instructor 1 LEGAL CONSTRAINTS ON CHANNEL CHOICES zMarket coverage zCustomer coverage zPricing policies zProduct policies zTermination policies zOwnership policies

2. BSAD 113 LEGAL ISSUES Lars Perner, Instructor 2 Antitrust Law: The Big Picture zPurpose: To enforce fair competition among firms zIssues: yCollusion yPredation yPrice discrimination yPrice maintenance yMarket share

3. BSAD 113 LEGAL ISSUES Lars Perner, Instructor 3 Competition zInterbrand: Between various brands made by different manufacturers zInterbrand: Between retailers or other channel members selling the same brand

4. BSAD 113 LEGAL ISSUES Lars Perner, Instructor 4 Some Threats to Competition zCollusion--explicit agreement among manufacturers, channels members, or a combination to limit competition zOther Anti- competitive practices yTerritorial restrictions yCustomer coverage restrictions yDiscriminatory pricing

5. BSAD 113 LEGAL ISSUES Lars Perner, Instructor 5 Territorial and Coverage Restrictions--Arguments zFor: yImproved service-- channel members can invest yImproved interbrand competition zAgainst yHigher prices paid by consumers yDominance by selected sellers or channels

6. BSAD 113 LEGAL ISSUES Lars Perner, Instructor 6 Determining What is Legal and What is Not zPer se illegality (e.g., collusion to fix prices horizontally) zModified rule of reason (assumed to be illegal unless evidence is rebutted by defendant--e.g., droppage of one distributor after complaint by another) zRule of reason--broad inquiry into policy and facts--impact and purpose (e.g., tying) zPer se legality (explicitly legal--e.g., different airline ticket prices to different end consumers )

7. BSAD 113 LEGAL ISSUES Lars Perner, Instructor 7 Pricing Issues zPrice maintenance: yMaximum yMinimum xManufacturer may announce that it will not sell to retailers selling below price; retailer cannot explicitly agree (collusion) zPrice discrimination yMay not charge competing firms different prices unless xjustified by actual cost savings xneeded to meet competition yEnd consumers are not competing firms yMay charge non-competing firms differently (e.g., regional sellers)

8. BSAD 113 LEGAL ISSUES Lars Perner, Instructor 8 Product Line Policies zTying: May not exploit market dominance to get resellers or consumers to buy less desired product ye.g., car and radio ye.g., motherboard and CPU zFull line forcing: Distributor required to carry complete or large assortment to carry desirable parts