LEGAL CONSTRAINTS ON
CHANNEL CHOICES
Market coverage
Customer coverage
Pricing policies
Product policies
Termination policies
Ownership policies
BSAD 113
LEGAL ISSUES
Lars Perner, Instructor
1
Antitrust Law: The Big
Picture
Purpose: To enforce
fair competition
among firms
Issues:
Collusion
Predation
Price discrimination
Price maintenance
Market share
BSAD 113
LEGAL ISSUES
Lars Perner, Instructor
2
Competition
Interbrand: Between
various brands made
by different
manufacturers
Interbrand: Between
retailers or other
channel members
selling the same
brand
BSAD 113
LEGAL ISSUES
Lars Perner, Instructor
3
Some Threats to
Competition
Collusion--explicit
Other Antiagreement among
competitive practices
manufacturers,
Territorial restrictions
channels members, or
Customer coverage
restrictions
a combination to limit
Discriminatory pricing
competition
BSAD 113
LEGAL ISSUES
Lars Perner, Instructor
4
Territorial and Coverage
Restrictions--Arguments
For:
Against
Improved service-channel members can
invest
Improved interbrand
competition
BSAD 113
LEGAL ISSUES
Higher prices paid by
consumers
Dominance by
selected sellers or
channels
Lars Perner, Instructor
5
Determining What is Legal
and What is Not
 Per se illegality (e.g., collusion to fix prices
horizontally)
 Modified rule of reason (assumed to be illegal
unless evidence is rebutted by defendant--e.g.,
droppage of one distributor after complaint by
another)
 Rule of reason--broad inquiry into policy and
facts--impact and purpose (e.g., tying)
 Per se legality (explicitly legal--e.g., different
airline ticket prices to different end consumers)
BSAD 113
LEGAL ISSUES
Lars Perner, Instructor
6
Pricing Issues
Price discrimination
Price
maintenance:
May not charge competing
firms different prices unless
Maximum
Minimum
Manufacturer may
announce that it
will not sell to
retailers selling
below price;
retailer cannot
explicitly agree
(collusion)
BSAD 113
justified by actual cost
savings
needed to meet competition
End consumers are not
competing firms
May charge non-competing
firms differently (e.g., regional
sellers)
LEGAL ISSUES
Lars Perner, Instructor
7
Product Line Policies
Tying: May not
exploit market
dominance to get
resellers or
consumers to buy
less desired product
Full line forcing:
Distributor required to
carry complete or
large assortment to
carry desirable parts
e.g., car and radio
e.g., motherboard and
CPU
BSAD 113
LEGAL ISSUES
Lars Perner, Instructor
8