E-THOUGHT FOR THURSDAY DECEMBER 10, 2009

Good day fellow vending enthusiast, Everyday I am learning more and more how the industry works along with the do's and dont's of what is considered to be "honest" practices of suppliers and distributors.
Recently(as you can imagine) I have been looking into the United States Anti-Trust laws and how they pertain to our industry. As we start to deal with larger and larger companies out there, there is a different set of rules that all must follow.
So I decided this E-Thought I would share with you guys a little bit about what I have learned.

It is unlawful for a supplier (or its salesperson) to sell the same product at the same time to different competing customers at different prices, unless there are legitimate cost savings in doing business with the favored customer, or the supplier is meeting the lower price made or offered by a competitor to that customer (15 U.S.C. § 13(a)). Even these exceptions are riddled with their own exceptions. Deviating from the price list can be a risky business then.

Can management give the sales force greater flexibility when it comes to doling out the company’s promotional largess? No. The law requires the proportionately equal provision of promotional services and allowances to all competing customers and is subject to no significant exception.

A supplier may be required to make merchandising programs (such as in-store advertising) available even to small customers if it makes other merchandising programs (such as newspaper advertising) available to large customers. Similarly, a supplier may not normally provide rebates, kickbacks or so-called "brokerage" payments to selected customers (15 U.S.C. § 13(c),(d) & (e)). This is called "Predatory Pricing" this happens when a "supplier" sells goods at below cost.

In the continuing interest of promoting distributor harmony, sometimes a supplier will allocate specific territories or customers between them on an exclusive basis. The effect of this is to prevent its distributors from competing against each other at all in selling the supplier’s product.
There are numerous considerations bearing on the question of when a territorial or customer allocation practice is lawful and when it is not. Briefly, the more significant the supplier, i.e., the higher its percentage share of a given relevant market, the less likely it will be able to restrict its distributors’ resales of its products with impunity (15 U.S.C. § 1). For example, a supplier with 10% of the defined market may be able to restrict its distributors from selling outside a specific territory, but a supplier with 35% of that market may not have that right. It follows that how the relevant market is defined is critical to this type of claim. Relevant market definition can be a tricky proposition.
Price fixing and predatory pricing along with territorial restrictions are just a few of the issues that are illegal under the law, although in our industry these are the most relevant issues that face us all.If you want to learn more or would like to read all of the Act, you can find it at www.libraryofcongress.gov

Regards
Curt Wokal